SURVIVING THE GAME
FEBRUARY 16, 2009
2009 – 13

FILLS:

A few fills for the model portfolio on Friday. Bought the DIA JUN $92 calls at $100 each to close position. Bought the USO APR $45 calls at $10 each to close position. Buy back the Soybean APR 1000 straddle in the night session for 97. Currently trading at 73 for puts and 24 for calls. It was sold on Feb. 9th for 118. You will be flat in that position now. Soybeans declining and moving away from middle of straddle, now at 950, volatility declining as well. Profit of $5250 for that trade.

OPEN POSITIONS:

Encana at $54.11, butterfly at 652. Hold

DIA MAR 90/100/110 butterfly basically a write-off. Closed at $19 each.

DIA MAR 84 straddle. Closed at $775. Move exit stop to $900.00.

DIA JUN 87 straddle. Closed at $1358. New exit stop at $1600.00. Close JUN 87 put Tuesday. See new trades below.

DIA SEP 87 straddle, short 92 calls. New exit stop on straddle at $2000. Close 87 put Tuesday. See new trades below. New exit stop on 92 calls at $250.

USO positions. Closed APR $45 calls Friday at $10 each. Hold all 3 positions.

SPY, XIU, SU, CAT, AA and AAUK. Hold, stops as indicated. Positions showing profits despite market declined due to premium erosion in options.

SPY APR 85 straddle. Sold Feb.11 at $1075 per straddle. Closed Friday at $1010. Market moving lower but volatility down as well. Hold.

MARKET COMMENTARY:

It sure looks like many traders are throwing in the towel. DOW closed at lowest level since huge down day on November 20th and market is sinking overnight. S&P 500 holding up better but close to breaking low of Jan 20th this year at about 806. I think people are just disappointed that there is still no miraculous plan to bail out the banks. I’m not sure what they were expecting but nothing is clearly not it. The question is how low will we go? I expect we are simply creating a new trading range. If we break the lows of Nov. 20th, watch out. That low has been touted as “ a line in the sand “ that must hold or DOW 6000 is right around the corner. I am adjusting the model portfolio so that if markets continue lower, you will be out of your long positions quickly, taking profits in some positions and small losses in others. You will also be short extra DIA calls to keep the portfolio more “delta neutral“. It is time to be very cautious, if things fall apart you want to be out quickly, not riding this thing down.

NEW TRADES:

Buy back the 30 DIA JUN $87 puts, leave the short $87 calls. Stop on the $87 calls at $250 each. Sell 25 each SPY JUN $83 straddles. Should net approx $1420-1450 per straddle. Exit stops at $65 and $101 on SPY.

Buy back the DIA SEP $87 puts, leave the short $87 calls. Stop on the $87 calls at $400 each. Sell 25 each SPY SEP $83 straddles. Should net approx $1810 - $1850 per straddle. Exit stops at $61 and $105 on SPY.

This leaves you with 4 straddle positions. DIA MAR 84. Stop very close at $900. If hit, will exit position with small gain of approx $3000.00. SPY APR $85 straddle. SPY JUN $83 straddle and SPY SEP $83 straddle. You also have extra short DIA JUN $87 calls, DIA SEP $87 and $92 calls. All these extra short calls have exit stops very tight so if market rallies, you will be out quickly. A rally is good for the portfolio in general. The extra short calls also act as a hedge if market continues to decline, offsetting some of the losses incurred in the long equity and short straddle positions. The extra short calls make the portfolio more delta neutral.

Options Guy
Editor
Surviving The Game

optionsguy@shaw.ca