SURVIVING THE GAME
DECEMBER 11, 2008
NUMBER 23

Need to do a few adjustments to orders.

Reduce exit stop on DIA DEC 95 calls from $150 each to $40. Closed yesterday at $33. Currently $21-24. These are left over from DIA 85/95/105 butterfly and we don’t want them to become a problem if we rally huge between now and next Friday. Also, enter order to exit the same at $10 or better to become flat.

We are entering the end game for our DIA DEC 84 straddle. Closed yesterday at $587-610. Our stop is currently at $900. Lower stop to $750. There are several ways to use a stop on this position. I actually use the DOW JONES mini futures contract, symbol YM. It is very liquid. 1 mini futures equals 5 options. If you are in this trade and need assistance with stops, please call me at 403-464-9998. As we get closer to expiry next Friday, will continue to tighten stop until we are forced out.

The UDN is spiking higher today as the $US crumbles. Options currently $185-200. Hold, no stop on this. Entry point was at $80 each, half already sold at $200.

The Encana butterfly is just sitting in the $390 range. Entered at $355 so up slightly. The stock is at $59. This expires in April so just set aside a we’ll see what happens.

The DIA JAN 86 straddle is doing fine. Entered at $1275, currently approx $1040. Nice profit starting to show there. Starting to look at DIA JAN 100-102 calls and 70-72 puts to purchase as insurance. Still a bit pricey but coming down fast. Will keep you informed when good time to buy.

Watching the DIA FEB 86-90 straddles. Currently in the $1400 range. I want to sell these as soon as possible. Will let you know when. The VIX has now pulled back to 53 from the 80’s. This shows that fear is slowly leaving the market and things are starting to calm down a bit. I know not many of you are doing these straddles. I can only encourage you to do so. Because of the high volatility, the premium received is extraordinarily high. Unfortunately this will not last forever. One year ago, you would only receive maybe $600 for a straddle with 2 months to expiry, not $1400 like the FEB positions are now.

I sent out the beginnings of my trading manual last night. I will continue to add to it and update existing sections over time. I realize much of this is new to many readers so I am trying my best to explain what is going on. I encourage you to try the straddle trades. They are relatively low risk with high probability of profit. I do not expect any measurable move up in the markets for quite some time. The straddle trades are a way to recoup some of the loses incurred this year even as we move sideways. Again, please call if you would like to attempt these trades and want some one on one time to go through the details.

Dave Knight
Editor
Surviving The Gme