Have you noticed? Almost all the indices and many stocks seem to have reached a resistance point and have topped – at least for now. Of course, ’tis the season, as they say, where we are more focused on the holidays than on the market. However, a quick look at a chart of the DOW for the last 10 years indicates this was only true in ’04 & ’05. The other years the market was in a very solid bear or bull run – especially last year!
With that in mind, my focus for January expiration is on Bear Calls (again) and some more Iron Condors. There are a few stocks that are blazing a bear or bull trail that make nice Bear Put or Bull Call spread candidates. One example is Express Scripts (ESRX) that I entered a Bull Call on Friday. In this case if the price is above 84 I will make money. If you look at its chart, you will see some huge moves and I can never find any news that accounts for that. Maybe it moves with the whims of the health care bill? Anyway, if it continues its bullish path this should be a good trade. A bearish play I am looking at is Goldman Sachs (GS) – definitely a favorite of mine. I decided to wait until next week before I commit to that one. Take a look at my In Play page to see the JAN plays I entered this week.
I spent some time on Wednesday, Thursday & Friday this week analyzing and closing my short Calls/Puts on my spreads. Why? I wanted to reduce my risk (and stress) for the Triple Witching Friday. What I do is buy back my short option if it’s worth a nickel or less. At TOS there is no commission to buy back short options if it’s worth $.05 or less – a very nice feature. I leave the long Calls out there – most of the time the commission costs more than the option is worth. On the other hand, if a position is in danger of going against me, I close the entire trade – shorts and longs – to eliminate the possibility of losing on expiration Friday.
This was a pretty good month. Although I wait until the end of the month for the official results, right now I’m up about $3,300. A huge majority of the gain was in my Spread Account with only $302 coming from the Conservative Account (if you recall this is from rolling the AT&T Naked Put up a few strikes). Figuring across both accounts, this is about a 4.3% gain for the month. If I was to just figure that against the Spread Account, it’s 7.14%. (The S&P 500 is currently at +0.58% for the month 
) Starting in 2010 I will be tracking the performance of these two accounts separately. Note: All the Naked Puts have a JAN expiration, so the performance of Conservative Account should get a New Years boost!
For 2010 there will be a few other changes, which I will announce after the first of the year – there is a lot of leg work to do before any of that happens. With the holidays coming up, I may not even post again this year, but you never know – sometimes I find it hard to keep my mouth shut – which is why a blog is such a good outlet for me.
Merry Christmas and Happy New Year to all of you.
- Jeff
