Update on Open Trades Expiring In January (18th)

With 22 days remaining to expiration the filled NDX and RUT Bull Put trades are very safe with distances of 307, 207 and 81 points from the closing index values last Friday. Click on any of the Trade Alert Dates (first column) to display the actual trade.

I have also posted 2 new trades this weekend. The NDX Bear Call completes our first Iron Condor for this expiration period. With both sides of the NDX IC trade filled the return is 5.3%. The SPX Bull Put trade is the first side of a SPX Iron Condor trade I want to complete later next week. My goal this month is to complete at least 2 Iron Condor trades.

The markets should trade normally in January unless events in Pakistan get worse. The Fed meeting is not until the end of the month and the quarterly and year end earnings reports will start publishing after the 18th. This should be a very good month for Iron Condor trading.

All December Trades Expired Worthless Friday the 21st!!!!!

All Bull Put and Bear Call Spread trades expired worthless on Friday December 21st. This is the 4th month in a row that all trades have expired. What's most impressive is that these trades expired during a very volatile period with the markets going up and down 100-300 points at a time. At times the market was Bullish going up every day and other times Bearish dropping every day. This key factor contributing to this positive track record is the selection of very safe credit spreads to trade. The short options for these spreads must have a 90% or more probability of expiring worthless at the time the trades are filled. The trade off is that the returns will average 3% per trade. This is why completing an Iron Condor trade is so important. We consistently earn 5% or more when both a Bull Put and Bear Call trade is filled on the same index.

This month we earned an additional credit ($65 per contract) by rolling up the NDX Bull Put 1725/1700 spread trade to the NDX 1950/1925 Bull Put spread trade. Some subscribers collected another net credit rolling this NDX 1950/1925 Bull Put spread trade to the January 2008 NDX 1825/1800 Bull Put spread trade. With the markets rising again I fully expect this January trade to expire worthless.

The total return this month was 9.9% ($330/$3,325). All credit premiums collected totaled $330 (135-40-70-65-15) and $3,325 (2,365+960) margin was required per contract. If you traded 10 contracts per spread your credits totaled $3,330, 20 contracts $6,600. This month we had one Iron Condor trade completed on the NDX Index. I plan on executing many more rolling trades in 2008 so that we can achieve 6% to 9% returns on some of the Iron Condor trades.

New trades expiring in January will be posted to the members page later this weekend.

Update on Open Trades Expiring In December (21st)

With just 6 days remaining to expiration the open NDX and RUT trades are very safe with distances of 347,122,253,228 and 113 points from the closing 12/14/07 values. Even with the market dropping our Bull Put trades are still very safe for the remaining days. Having distances of 100 points or more is a very comfortable position to be in during the last week of expiration.

This market continues to move up and down on good and bad news but this does not effect any of our trades because that are based on a neutral trading strategy. We do not care what direction the market moves in and we can handle swings of 100 points or more. I really like this stress free trading strategy. We only had to adjust trades a few times in 2007 and I expect only a few adjustments in 2008. Adjusting trades is not a big deal as long as you can break even and protect your cash flow.

I hope many subscribers had a chance to roll up the original NDX Bull Put trade last week. Those who did collected a very nice net credit and increased the return on the NDX Iron Condor to one of the highest all year. I plan on executing many more rolling trades in 2008 so that we can achieve 6% to 9% returns on some Iron Condor trades.

New trades expiring in January will be posted to the members page next weekend following expiration Friday.

Improvements to my Advisory Service !!!!!

This month I have improved my advisory service many ways:

1) Member’s Area: All the new trades and weekly updates are now posted to a members page that is accessible 24/7. Once logged into the members area subscribers can also download flash movies that illustrate how to select, order and close credit spread trades. New movies are being added weekly. I still create email alerts and blog post to notify subscribers when I have added a new post to this page.

2)I have started creating audio streams that I am adding to my web pages, member page and emails. I feel talking to subscribers is a better way to communicate. These audio streams will be 30 seconds to 5 minutes in length and cover my new trades, my weekly updates and common questions about my trading strategy.

3) Auto Trading will be available later this month. I am finalizing an auto trading arrangement with OptionsHouse later this month. They are charging the lowest trading fees of all the brokers and all my orders are getting filled quickly. The majority of new subscribers this month are setting up their trading accounts with this broker and I have many established subscribers who will be setting up auto trading accounts once this service is available.

4) I will be reaching the maximum number of active subscribers in early 2008 that I can support. I can only support a fixed number of subscribers in order to provide the high level of professional service everyone expects. My monthly subscription fee will also be increasing to $59.95 later this month. This increase is justified because of the additional services I am adding this month and will be adding in 2008.

Update on Open Trades Expiring In December (21st)

With just 14 days remaining to expiration the open NDX and RUT trades are very safe with distances of 405,195, 170 and 145 points from the closing values last Friday. Even though the market continues to rise I feel our Bear Call trades are safe for the remaining days.

We have an opportunity next week to roll up the NDX Bull Put trade to a new NDX Bull Put trade expiring in 14 days. The NDX index has reached a very high level and is projected to keep increasing after the Fed lowers interest rates next Tuesday. This new trade is posted on the members page. When we can roll one side of an Iron Condor trade we significantly increase the return because we now have collected 3 credits and incurred on small debit.

Later this month the monthly subscription fee is increasing to $59.95 to slow down my growth. I am will be reaching the maximum number of subscribers that I will support for this service in 2008. This new rate will only apply to new subscribers who subscribe with PayPal after the new rates takes effect.

Update on Open Trades Expiring In December (21st)

With 21 days remaining to expiration the NDX Bull Put and Bear Call trades are very safe with distances of 300+ and 200+ points from the NDX closing value (2089) last Friday. The RUT Bull Put trade is also very safe with a 100+ point distance.

Many subscribers have not been able to get the original NDX Bear Call trade filled. I will post on the members page an alternative NDX Bear Call spread trade later today. I want all subscribers to complete a NDX Iron Condor trade this month to realize a 5% + return.

I will continue to research RUT Bear Call trades next week in order to complete a 2nd Iron Condor trade this month.

The members area is live now. Your logon ID is your e-mail address and your initial password is the word “password”. At the request of many subscribers I will send an email each time I added a new trade, or update report, to the members page. I will also add a post on my blog for subscribers checking my blog each day with an RSS feed.

It's Time To Start Thinking About Taxes - Option Index Trades and Taxes

Short-term gains from most types of stock and option investing are taxed at the same rate as ordinary income. Long-term gains on stock and option investments held for more than 12 months are considered long-term and taxed at 15% in most cases. If your tax bracket is below 25% then long term gains are taxed only 5%.

The good news is that the gains from the stock index options trades we are trading are taxed differently than gains on individual stock options and stocks. Gains on our stock index spread trades are considered ITC Section 1256 contracts. This means any gains made in these trades are taxed under a 60/40 rule. This rule states that gains are treated as 60% long-term capital gain income and 40% short-term capital gain income (ordinary income) regardless of how long the investment was held. So when we hold a index spread trade for 30 days (our average holding period), 60% of the profit made from that trade is treated as long-term capital gain income and taxed at 15% or 5%. Please do not take this information as tax advise. Do your own research with a tax advisor like H&R Block.

Update on Open Trades Expiring In December (21st)

With 27 days remaining to expiration the NDX Bull Put and Bear Call trades are very safe with distances of 303 and 297 points from the NDX closing value (2028) last Friday. The RUT Bull Put trade is also very safe with a 115 point distance. Even though the markets had some wild up and down swings last week our trades were not effected.

Many subscribers have not been able to get the NDX Bear Call trade filled. I will email an alternative Bear Call spread trade early next week if the NDX has some down days. If the NDX continues to rise from Friday's close the bid/ask values will increase so we might still be able to get .50 cents, or $50 per contract, so it's prudent to keep this NDX Bear Call order open with your broker.

I will be researching RUT Bear Call trades and a even a few SPX trades next week. If there are any safe trades with 3% or better returns, I will execute the trade, or trades, and send emails (PDFs). I would really like to complete a 2nd Iron Condor trade this month. I want to end the year with another 5% monthly return like we experienced in November.

The members area will be live later this weekend. I will be sending all subscribers an email when the area is live. During this transition I will continue emailing my PDF files to insure every one receives all my new Trade Alerts and Updates. I will be eliminating the HTML emails.

I am in the process of setting up auto trading partnerships with OptionsHouse and MF Global Securities. I have waited a long time for these brokers to offer auto trading accounts. Once I have these brokers setup I will consider others like Think Or Swim and OptionsXpress.

All October Trades Expired on Friday November 16th!!!!!

All Bull Put and Bear Call Spread trades expired worthless on Friday November 16th. I am very committed to ensuring this expiring trend continues. My trading strategy is very conservative resulting in safe credit spread trades earning 3%-8% each. I will strive and complete safe Iron Condor trades earning 5%-8%. My goal for the remainder of 2007 and the 1st quarter of 2008 is to earn a respectable 5% each month. This was accomplished this month.

The total return this month was 5.1% ($270/$5,290). All credit premiums collected totaled $271 (100+60+75+35) and $5,290 (2,400+1,925+965) margin was required per contract. If you traded 10 contracts per spread your credits totaled $2,700, 20 contracts $5,400. This month we had one Iron Condor trade completed on the NDX Index. This trade required margin for one side and generated a return of 6.6% (160/2,400).

New trades expiring in December will be emailed later this weekend. I will continue to focus on selecting very safe trades. I have another NDX Iron Condor trade and RUT Bull Put trade identified. The NDX 25 point Bull Put and Bear Call and RUT 10 point Bull Put spread trades have been very profitable and safe these past few months. With the markets continuing to rise and fall by 100 point and more I will be executing new trades with lots of distance.

Update on Open Trades Expiring in 4 days

With just 4 trading days remaining to expiration the 4 Bull Put and 1 Bear Call filled trades are still safe and out of the money now and should easily expire worthless with short option strike prices 109, 72, 52 and 316 points away from the current index values. If the markets keep trending down next week we will have to adjust one or more of the Bull Put trades. I will be pro-active and email adjusting trades when the Index price is within 20 points. The NDX and RUT indexes are slower moving than the DOW and SPX so with a few up days next week our Bull Puts should be expiring.

Members Area Almost Ready

I am very close to turning on a new "Members Area". It should be operational by the end of this month. After logging on subscribers will be able to view and print my current trades. Prior trades will also be available as well as a summary of the monthly and YTD performance history. I will still be sending all my trades (PDF Files) to subscribers requesting this service. This Members Area is long over due and will help all subscribers insure that they are getting all my trades.

Update on Open Trades Expiring In November (16th)

With just 13 days remaining to expiration the 2 Bull Put filled trades are still way out of the money now and should easily expire worthless with short option strike prices 288 and 97 points away from the current index values.

Two new trades were emailed this weekend and both are conservative and safe:

1) The NDX 25 point Bear Call spread completes an NDX Iron Condor trade so now our total return is 6.6%. A big benefit of getting this Bear Call order filled next week, assuming you have the Bull Put trade filled, is that the option brokers will not require any additional margin.

1) The RUT 10 point Bull Put spread trade safe and has a 3.6% return for just 13 days. RUT Bear Call spreads are risky with small premiums so I will not be able to complete an Iron Condor trade on this index this month.

Update on Open Trades Expiring In November (16th)

With 20 days remaining to expiration the 2 Bull Put filled trades are way out of the money now and should easily be expiring. The market continues to rise even though oil is approaching $100 per barrel and turmoil exists between Turkey and Iraq. I will be researching Bear Call spreads very carefully next week after the Fed meeting. Their decision on rate changes could have a significant effect on the market and cause it to spike in either direction. I hope the impact has a neutral effect on the NDX and RUT Indexes. I will also research safe SPX Bull Put and Bear call trades. I really want to complete one or two iron Condor trades this month.

All October Trades Expired Worthless Friday 10/19/2007

All Bull Put Spread trades expired worthless on Friday October 19th. Although we had no completed Iron Condors I am very pleased with the 3.2% average return achieved on these Bull Put trades. The Indexes were rising just about every trading day until the 19th when the Dow dropped 366 points. Bear Call spreads for the 3 Indexes I trade were very risky and could not be traded because of this risk. My trading strategy is very conservative resulting in safe credit spread trades earning 3%-5% each. My monthly goal is to complete safe Iron Condor trades earning 5%-8%. My goal for the remainder of 2007 is to earn a respectable 5% each month.

The total return this month was 3.2% ($390/$12,110). All credit premiums collected totaled $390 (40+125+90+50+85) and $12,110 (960+4,875+2,410+1,450+2,415) margin was required per contract. If you traded 10 contracts per spread your credits totaled $3,900, 20 contracts $7,800. These are the minimum returns and cash flows I expect to receive consistently each and every month. The return will be higher in months when Iron Condors can be completed on each Index.

New trades expiring in November be emailed later this weekend. I will continue to focus on selecting very safe trades. I already have a few new Bull Put trades identified. To complete Iron Condor trades I will wait until next week to trade a Bear Call spread. I want to see what direction the markets trade on Monday and Tuesday. Friday's 366 drop is being called a correction. We will see early next week. Their is also a Fed meeting and rate reduction expected in November. A rate reduction will cause the markets to rise

Trade Alerts

I normally email new Trade Alerts 40-30 days prior to expiration. Then each weekend I will analyze additional spread trades searching for those with high probabilities of expiring. During the 2 weeks prior to expiration I am looking to make adjustments for certain spreads to earn additional credits. All my Trades and adjustments are emailed in the evening or on weekends when the markets are closed. I am always placing my own trade orders when I send these emails. It is a boring strategy and requires very little effort for my subscribers. The majority of months all we do is open our Iron Condor trades on the SXP, NDX and RUT indexes and wait for them all to expire and then repeat the process over and over each month. I will email a minimum of 3 to 4 very safe FOTM Iron Condor trades each month. These will have a 90% or better probability of expiring worthless. The returns will range from 3% - 8% but on average you can expect to earn between 4.5% and 5% monthly before commissions.

CBOE's Virtual Trading System

Click the link or the right side of this blog to access CBOE's virtual trading system. This system is free to use by anyone and no brokerage account is needed. Paper trading is the best way to learn how to execute, track and manage stock and option trades. For both new and experienced options traders this system allows you execute trades associated with all the option strategies. I am recommending to all my new subscribers that they use this system during their 60 free trial to paper trade all my credit spread trades.

Also, the system CBOE is using is OptionsXpress's actual virtual trading system which is one of the best available on the internet for paper trading option strategies.

Update on Open Trades Expiring In October (19th) - Only 5 Days Remaining

With only 5 days remaining to expiration all filled and open Bull Put trades will be expiring with lots of distance on Friday the 19th. Because we had no Bear Call spreads filled this month we had no trades to adjust. The market continues to rise every week with no end in sight. Bull Put trading is the only safe strategy this month and probably next month. If the market does settle down to a normal trading pattern we should be able to complete one or two Iron Condor trades next month. It's always better to receive 2 credits for one margin requirement. This is how we can achieve a 5% - 8% return. When we cannot complete an Iron Condor trade our returns will average 3% to 4%. This is the case this month. All the open Bull Put trades expiring this week have returns ranging from 2.6% to 4.2%. If we could have completed Bear Call spread trades the returns would be 5% to 8%. This is a very unusual month and until the market stops rising Bull Spread trading will be the norm. My strategy is conservative and safe so please be patient about earning higher returns. The markets will return to a neutral trading pattern and when they do both the Bull Put and Bear Call trades will be be safe again.

Update on Open Trades Expiring In October (19th)

With just 12 days remaining to expiration all our filled Bull Put trades will be expiring with lots of distance. The market is continuing to move in just one direction (UP) making Bear Call spread trades very risky and very unsafe. With a market like this I will not be able to complete any Iron Condor trades this month. It just to risky to trade on the Call side this month. I have also sent a new NDX 25 point Bull Put spread trade this weekend. Subscribers who did not get last week's replacement NDX 25 point trade filled should be able to get this new trade filled this coming week.

This weekend I have started sending the PDF file email to all subscribers. This is in addition to the automated HTML email. If you do not want to receive the HTML or PDF email just send me a reply email. Many subscribers have had trouble receiving my Trade Alerts and Updates due to various email system issues but they seem to receive one of the 2 emails I send.

Update on Open Trades Expiring In October (19th)

With just 19 days remaining to expiration we need get all our Bull Put Trades filled. Last week only the RUT Bull Trade was filled. The NDX Index started rising on Monday and did not slow down until Friday. By then our Bull Put trades could not be filled using the minimum credits. I have emailed 2 NDX replacement trades this weekend and one new SPX 15 point Bull Put trade. Bull Put trades are the safest trades so far this month. It is going to be a challenge to complete Iron Condor trades on these 3 indexes if the market keeps rising and it is projected to keep rising. If we would have traded Bear Call trades last weekend we would possibly be adjusting them prior to expiration.

My trading plan requires that I only select safe and conservative spread trades that have a 95% or better chance of expiring. This is only possible with Bull Put trades this month because the market is to bullish to trade Bear Calls. I hope we see a reversal next week for 2 reasons: First, a one or two day drop will allow our 3 Bull Put Trades to be filled and second, the Bear Call spread trades will be safer and tradable. If we can complete an Iron Condor trade the return will double to 6% or 7%. My goal each month is to complete 3 Iron Condor trades, one for each index.

September Trades Expired on the 21st

All new trades and one roll trade expired worthless on Friday the 20th. I am very excited that our first 50 point NDX Iron Condor Trade expired worthless. This was a very safe and conservative trade requested by many subscribers who wanted very long distances between the short options and the index value. Of the 3 September roll trades we had to roll the SPX and NDX trades again to new NDX Bull Put trades expiring in October. These new roll trades are certain to expire worthless on Friday October 19th because the NDX 100 Index should achieve new highs for the year after all the 3d quarter earnings are reported from these tech companies. I really hope the market settles down now that the Fed has started lowing interest rates.

New trades expiring in October will be emailed on later today and on Sunday 9/23/07.

Update on Open Trades Expiring In September (20th)

With just 5 days remaining to expiration all filled trades are out of the money expect the Bear Call NDX Roll Trade which was closed and rolled to an October NDX 25 point spread last week. The 50 point NDX Iron Condor trade is very safe with short options 400 and 175 points away from the current index value. The SPX and NDX Bear Call trades will be monitored carefully next Tuesday. The market is expected to rise if the Fed increases rates by 50 basis points. If the increase is only 25 basis points the market could go lower due to investor disappointments. It will be another very volatile trading week with the market making wild swings based on the Feb decision.

New trades expiring in October will be emailed on Saturday 9/22/07 after these September trades expire on the 21st.

Update on Open Trades Expiring In September (20th)

With just 11 days remaining to expiration all filled trades are out of the money. The 50 point NDX Iron Condor trade is very safe with short options 358 and 217 points away from the current index value. I will continue to have a monthly 50 point NDX Iron Condor trade for those subscribers desiring a very safe and conservation trade with 200-300 point distances. The markets continue to be very volatile making my credit trading strategy very challenging so I must be extra conservative in choosing Bull Put and Bear Call options spreads to trade.

Update on Open Trades Expiring In September (20th)

With 20 days remaining to expiration all filled trades are out of the money. Our Bull Put trades are getting safer each week. I have never had short options over 300 points away with only 20 days remaining.

Those subscribers who have the 2000/2025 NDX Bear Call trade open will have to close and roll this trade to a new trade expiring in October. A new Trade Alert will be emailed this weekend detailing this adjusting trade. We will have to keep rolling this trade until it expires.

I am still researching RUT and SPX Bear Call spreads but the current market volatility makes these Call trades risky. This is another challenging month so I want to insure all trades are safe.

August Trades Closed and Expired

Only the NDX Bear Call Spread trade expired worthless on Friday August 17th. All 3 of the Bull Put trades (RUT, SPX and NDX) were closed out early and rolled to new trades expiring in September. Subscribers who did not close out their Bull Put trades were blessed with a very lucky and unusual event on the morning the Index set prices were set. The Fed action on Friday was long overdue but a real shock that immediately caused the stock futures and opening values to sore in value. In fact the 3 Indexes increased so much that all the Bull Put trades actually expired worthless for those who still had the trades open. This is a very rare event that is like a gamblers success or like winning the lottery. Closing the Bull Put spreads early and rolling to new trades was the correct strategy.

The problem for many subscribers last week was that their stop loss orders were executed during the day on Wednesday and Thursday. This left very little time to execute the new September trades. This is the first month ever that I had to close and roll 3 of 4 open trades. The total return this month was .006% ($85/$13,235). This break even return will only be realized when the RUT, SPX and NDX roll trades expire worthless in September. Since many subscribers had trouble rolling and covering their losses on closing the spreads in trouble I will be refunding all subscription fees collected from July 22 through August 17 next week. The MSFT Put option trade was profitable for the second month in a row. These 27.5 Put options were sold when the bid was .09 cents. These options brought for $3 a contract earlier this month were sold for $9 a contact.

New trades expiring in September will be emailed early next week. I want to see what direction the markets takes on Monday and Tuesday next week. I will continue to focus on selecting very safe trades.

New Trade Expiring in September

This new trade satisfies many requests from subscribers for a very conservative and safe trade to execute during this very volatile period. This is one trade you can execute and forget about for 41 days. It’s a boring trade with low trading costs. Being more than 200 points away on any credit spread trade is a huge safety net. We can only achieve these distances by trading a 50 point spread on the NDX index. I will send an update on this trade next weekend after the August trades expire. In a weeks time this trade should still be safe and have a 4% return.

The goal of this Iron Condor is to have short options 200 or more points away from the current index value. The 4.2% return is an outstanding return for 41 days. The margin requirements for this trade is $5,000 per contract, so 2 contracts will require $10,000 and earn $400 (4.2%). What is nice about this trade is that only a few contracts earns you a very decent credit premium and return. This means your trading costs are low.

The current probabilities at expiration that the NDX Index prices will finish below the short option, or above the long option, is 2% and 10% based on the current volatility of the NDX Index. Also, both of these short option strikes are more than 2 standard deviations away from the projected NDX index value at expiration in September. Both credits are the midpoints with cents shaved off so your orders could take a 1 to 5 days to be filled. If one side is not filled in a weeks time a replacement trade will be emailed.

The NDX index has to fall or rise by more than 17% and 13% to reach these strikes. This means the NDX Index can make a 10% correction and our trades will still be out of the money and safe.

Update on Open Trades Expiring Next Week Aug 17th

With 7 days remaining to expiration all filled trades are out of the money and have a good chance of expiring. The Federal Reserve finally took action last week to calm the markets and will continue taking action as needed. We could have an interest rate cut in September which will cause the market to stabilize, be less volatile and possibly start rising again. I will continue to closely monitored the open Bull Put trades next week.

The MSFT Put option trade is still profitable. These 27.5 Put options have a bid of .12 cents. These options brought for $2, or $3, a contract earlier this month can be sold next week for $12 a contact. Please sell these early in the week because the time value of these options will dwindle quickly as each day goes by.

New trades for September will be emailed next weekend after expiration Friday. I will be emailing a new very safe 50 point NDX Iron Condor trade this weekend at the request of a few subscribers who want to be more than 200 points OTM. This is only possible with the NDX index by trading these 50 point spreads.

Weekend Trade Alert Update - August Trades 8-5-2007

With 12 days remaining to expiration all filled trades are out of the money but have to be closely monitored these next 2 weeks. One or more of the SPX and NDX Bull Put trades will need to be adjusted if the market continues to drop. Last weeks drop completed a 10% market correction that many projected the market needed when it was making new highs week after week. Now all the indexes are very oversold. The major event next week is the Fed meeting. Their action (lower rates) and comments will influence investors to buy or sell. I wish they would start lowering interest rates help the struggling housing market and mortgage industry.

Last week the RUT Index price was 27 points away from our short option, and 17 points from our stop loss price. This is why I sent a Trade Alert last weekend detailing the adjusting trade that closed this spread and opened a new 20 Point RUT Bull Put spread expiring in September. I received emails from many subscribers who completed these trades. I have also received emails from subscribers who have not rolled this trade. I have new September RUT trades to roll to this weekend so please send me an email for the details. The RUT index is already 10% down and is very oversold so the Bull Put is a safe trade. But so is the Bear Call.

GOOD NEWS !!!! The MSFT Put option trade is still very profitable now. These 27.5 Put options have a bid of .16 cents. These options brought for $2, or $3, a contract earlier this month can be sold next week for $16 a contact.

I am only researching Bear Call spreads this weekend and next week. I hope many subscribers had last weeks very safe NDX 25 Bear Call spread filled. The RUT and SPX Bear Call spreads expiring in August are on my watch list could be good candidates later next week.

Weekend Trade Alert Update - August Trades

With 21 days remaining to expiration all filled trades are out of the money but have to be closely monitored these next 3 weeks. One or more of these Bull Put trades will need to be adjusted if the market continues to drop. If the sell off is over we should know early next week but no one really knows what direction the market will take. Last week investors sold their holdings and stopped buying due to concerns with the sub prime lending market, high crude prices and the lack credit availability for some of the companies buying other companies. Since this is very "oversold" market now, the hope is that investors will return next week bargain hunting and buying the equities that lost 10% or more of their value.

The RUT Index price is only 27 points away from our short option, and only 17 points from our stop loss price. I am sending a Trade Alert this weekend detailing the adjusting trade that closes this August spread trade and opens a new 20 Point RUT Bull Put spread expiring in September. The cost to make this adjustment should be very minimal depending on your trading costs. I will be sending additional Trade Alerts to adjust the NDX and SPX Bull Trades if and when the index prices are 20-25 points away from our short option prices. Many subscribers have requested these adjusting trade alerts be emailed earlier. Having a plan of action to adjust a trade in trouble is a conservative risk management strategy.

GOOD NEWS !!!! The MSFT Put option hedge trade is very profitable now. These Put options have a bid of .15 cents. These options brought for $2, or $3, a contract earlier this month can be sold next week for $15 a contact. This is a very respectable return in a very short period of time. I know one subscriber who is buying 500 contracts as a hedge each month. These 500 contacts are very profitable now and will help offset future losses, previous hedging costs and trading commission costs. Many subscribers are buying 50-100 contracts using 5%-10% of their collected credits as a hedge.

I am researching Bear Call spreads very carefully this weekend and have one very safe NDX 25 Bear Call spread I will be emailing shortly. The RUT and SPX Bear Call spreads I have on my watch list could be good candidates later next week.

All July Trades Expired on Friday the 20th!!!!!

All Bull Put and Bear Call Spread trades expired worthless on Friday July 20th. This is the 4th month in a row that all spread trades have expired. I am very committed to ensuring this expiring trend continues for the remainder of 2007. My trading strategy is very conservative resulting in safe credit spread trades earning 3%-8% each. I will strive and complete safe Iron Condor trades earning 5%-8%. These trades complement single Bull Put and Bear Call trades earning 3%-5%. My goal for the remainder of 2007 is to earn a respectable 5% each month. This was accomplished this month.

The total return this month was 5.8% ($302/$5,198).  All credit premiums collected totaled $302 (35+40+85+57+85) and $5,198 (925+2,358+1,915) margin was required per contract. If you traded 10 contracts per spread your credits totaled $3,020, 20 contracts $6,040. These are the returns and cash flows I expect to receive consistently each and every month. In July we had two Iron Condor trades completed on the NDX and RUT Indexes. These trades required margin for one side and generated returns of 6.0% (142/2,358) and 8.1% (75/925).

New trades expiring in August will be emailed later this weekend. I will continue to focus on selecting very safe trades and I already have a few Bull Put trades identified. The NDX 25 point Bull Put, RUT 10 point Bull Put and SPX 20 Bull Put spread trades have been very profitable and safe these past few months. With the markets continued to rise I will be executing only new Bull Put trades this weekend. I will only consider the Bear Call trades to complete Iron Condors once the markets have settled down.

New Options Broker with Significantly Less Trading Commissions

A new option's broker, OptionsHouse, now has the lowest commissions of all the option brokers. They are charging only $9.95 for each trade and nothing for each contact. If you trade 10 contracts, 20 contracts or 100 contracts per leg your total commissions is only $9.95 and nothing more. A credit spread trade is two option legs and costs only $19.90 no matter how many contracts are traded. This is a significant savings if you are trading 5 or more contracts. When you are paying only $19.90 per credit spread trade, or $39.80 per completed Iron Condor trade, you can easily afford the $29.95 subscription fee. I am very pleased that this broker has come along because I want my subscribers to earn a maximum net profit on each trade.

I am setting up a trading account with this new broker this month and will be creating Flash movies to illustrate how to order, protect and close Bull Put and Bear Call credit spread trades on the NDX, SPX and RUT stock indexes.

Update on Open Trades Expiring In July (20th)

With only 7 days remaining to expiration all filled trades should be expiring worthless on Friday July 20th. We have one open trade with a short option price that is close the Index price. The NDX Bear Call spread is 33 points away from the closing 7/13/2007 NDX Index price. I will be sending Trade Alerts next week along with updates in case we have to close and roll this trade. I have been reading market commentaries after last weeks record close. The majority say the Bulls stepped in and overtook the Bears but the Bears should return. If the Bears return next week and cause a market sell-off our Bull Put Trades will still be very safe and will expire on Friday.

Update on Open Trades Expiring In July (20th)

With only 14 days remaining to expiration all filled trades are safe and should be expiring worthless on Friday July 20th.

We now have two Iron Condor completed on the NDX and RUT index's. Completing the 20 point SPX Iron Condor trade is difficult with the SPX index rising week after week. I will continue to research safe Bear Call trades next week and if the SPX index has a few down days I should be able to order and email a safe trade. If I can complete 3 Iron Condors I will achieve a 6% total return for the month. The projected return on al l open trades listed below is 5.7% ($302/$5,323 required margin).

Update on Open Trades Expiring In July (20th)

With 21 days remaining to expiration all filled trades are safe and should be expiring worthless on Friday July 20th.

We have 4 trades open and one Iron Condor completed on the NDX index. A new Bear Call Rut trade was ordered and emailed this weekend and will complete a second Iron Condor trade with a 8.1% return. I hope to complete the 20 point SPX Iron Condor trade later next week. My goal this month is to have a 6% total return by completing 3 Iron Condor trades. The projected return on al l trades listed below is 5.7% ($302/$5,323 required margin).

Update on Open Trades Expiring In July (20th)

With 28 days remaining to expiration all filled trades are safe and should be expiring worthless on Friday July 20th.

With the market moving dramatically up one day and then down the next it makes it very hard to get credit spread orders filled. This month we had difficulty filling the NDX Bear call spread to complete an Iron Condor trade. I am emailing a replacement NDX Bear Call spread trade this weekend. Hopefully the market will cooperate next week and this Bear Call spread order is filled.

I have also ordered a new 20 point Bull Put SPX trade that has a 4.4% return. If I can complete a safe 20 point Bear Call SPX I should have a 7% or better return for the entire Iron Condor. I could not find a safe 10 or 15 point SPX trade. The only spread distance that is safe this month is 20 points.

All June Trades Expired on Friday the 15th!!!!!

All Bull Put and Bear Call Spread trades expired worthless on Friday June 15th. All April and May trades expired and now now all the June trades expired. I will work hard to ensure this expiring trend continues for the remaining 6 months of 2007. My trading strategy is very conservative resulting in safe credit spread trades earning 3%-8% each. I will strive and complete safe Iron Condor trades earning 5%-8%. These trades complement single Bull Put and Bear Call trades earning 3%-5%. My goal for the remainder of 2007 is to earn a respectable 5% each month. This was accomplished this month.

The total return this month was 5.3% ($225/$4,275). All credit premiums collected totaled $225 (30+130+35) and $4,275 (970+2,370+935) margin was required per contract. If you traded 10 contracts per spread your credits totaled $2,250, 20 contracts $4,500. These are the returns and cash flows I expect to receive consistently each and every month. The return will be even higher in months when additional Iron Condors can be completed on each Index. In June we had two Iron Condor trades completed on the NDX Index. These trades required margin for one side and generated returns of 5.5% (130/2370) and 6.9% (30+35/935).

New trades expiring in July will be emailed later this weekend. I will continue to focus on selecting very safe trades and I already have a few Iron Condor and Bull Put trades identified. The NDX Bull Put and Bear Call 25 and 10 point spread trades have been very profitable and safe these past few months. The Bull Put RUT trades have also been very profitable. The SPX index continues to be a very difficult index to trade safely.

Update on Open Trades Expiring Next Week in June (15th)

With only 4 days remaining to expiration all filled trades are very safe and should be expiring worthless on Friday June 15th. We have 2 NDX Iron Condors and 1 RUT Bull Put Spread trade active. With the market acting so volatile last week it's hard to say if the bulls or the bears have the upper hand. I hope this tug of war causes the market to trade within a range. This would be a good environment for completing many Iron Condor trades.

I will email new trades expiring in July next weekend. June will be the 3rd month in a row that all fill trades have expired worthless.

HEDGING - The Only Way to Fully Protect Your Trading Balance and Accumulated Credits

My first hedge order was filled last week. Each month I will have one Trade Alert detailing my hedge trade. Please remember that this trade will only be profitable when a major event causes the market to drop by 8%, or 10%, or more. You can expect this event to occur at least once every 24 to 36 months.

Hedging with these stocks during earnings season can be very interesting if one of their reports includes a negative surprise. Your .02 cent or $2 options could rise to .10 and $10 very quickly. This is the other time you sell your Put options. Making an $8 profit per contract helps offset the cost of the creating these monthly hedges.

Please send me an email if you have any questions about this hedging strategy and the specific Put trade that expires in June.

Update on Open Trades Expiring In June (15th)

With 14 days remaining to expiration all filled trades are safe and should be expiring worthless on Friday June 15th.

We continue to have trouble getting the NDX and RUT Bull Put Trades filled. I have added color highlighting to the summary report. You can now easily identify my trade alerts that have been filled (blue), trades that have not been filled and cancelled (red), and new trades that have orders placed (green). This is the fist month I have had these many replacement trades for earlier trades that were not filled and cancelled. With all the Indexes rising to new records each week it makes completing safe Bull Put trades very difficult. All we can do is keep ordering replacement trades with higher short and long option strikes. We only need one or 2 down days for these replacement orders to be filled next week.

My credit spread strategy works best when the market is hovering, trading neutrally or just rising very slowing. Today's market is a giant Bull Market and no one knows when the market will reverse. Even when China's market retreated 6% last week the US market increased over 100 points the next day. In February when China's market was down 5% the US market dropped over the 500 points the two days day after this event.

HEDGING - The Only to Fully Protect Your Trading Balances and Accumulated Credits

I have received many emails asking how we can best protect our trading balances and accumulated gains (credits) during an event like the one that occurred in February. My credit spread trading strategy now includes hedging to protect Bull Put spread trades. I do this by buying for $75 - $200, 25-75 Put contracts on an individual NDX/SPX stock. The contracts are trading in pennies and the ones I buy only cost $1-$3 (.01-.03 cents per share) per contract. This is like buying insurance. The other costs you have to include are your trading expenses. What is really nice about these hedges is that you can re-coup your monthly costs buying these Puts and also cover any losses closing the current month Bull Put Spreads.

If the market drops 500 points, like it did in February, these Put options will rise very quickly to $5, $10, $20 or much more. You potentially have a very large return on these contracts that only cost $1-$3 each. The money I spend each month for hedges is only a small % of the total credits I earn selling Bear and Put credit spreads. I know that someday the market will drop very fast again and I will re-coup all my hedging costs. I did not have a hedge in place in February but I only had to close the SPX Bull Put trade and this debit was covered by rolling to an NDX Iron Condor in the next month. The February RUT and NDX Bull Puts trades I had in place during the drop off never had to be closed.

I have ordered and emailed my first hedge trade this weekend to subscribers. Please send me an email if you have any questions about this hedging strategy and the specific Put trade that expires in June.

Benefits of Index Spread Trading

Benefits of Index Spread Trading

1) Credit spread trading is a simple, safe, and stress-free type of trade that does not require a great deal of monitoring. You just place the trade, collect the credit, and wait for the options premiums to decrease or expire worthless. Minimum time is required to process and track these credit spread trades.

2) You receive the proceeds of each credit spread trade immediately when your order is filled and you keep these proceeds no matter what happens.

3) The credit spread has two primary advantages as an income generating strategy. First, the position benefits from time decay. Since options decay in value with the passage of time, the value of the credit spread will in turn decay over time. By writing a credit spread, you are selling a decaying asset and receiving a credit or a premium up front. If the underlying market remains stable until expiration, the spread expires worthless, allowing you to keep the premium received. In a sense, you profit from the passage of time.

4) The credit spread also allows you to benefit from market movement. If one writes a bullish credit spread using puts, the value of the spread would rapidly decline as the market moves higher. The converse is true for bearish call spreads. With this flexibility you can inject an element of trend following into your trading program to increase your odds of success.

5) Gains on stock index spread trades are considered ITC Section 1256 contracts. This means any gains made in these trades are taxed under a 60/40 rule. This rule states that gains are treated as 60% long-term capital gain income and 40% short-term capital gain income (ordinary income) regardless of how long the investment was held. So when we hold a index spread trade for 30 days (our average holding period), 60% of the profit made from that trade is treated as long-term capital gain income and taxed at 15% or 5%.

6) Trading capital is only used to support margin requirements when trading credit spreads. Most option brokers allow you to invest your trading capital elsewhere to be used as collateral for spread trading. Trading capital can be invested in closed-end funds that pay dividends monthly and are diversified across munis, preferreds, REITs, corporate bonds, floating rate loans, convertible bonds and other fixed instruments. Between the dividend yield and capital appreciation you can earn 7%-10% annually. Most brokers allow you to margin 100% of cash amounts, 90-95% of t-bill amounts and 50% of the stock amounts like closed-end funds.

Update on Open Trades Expiring In June (15th)

With 21 days remaining to expiration all filled trades are safe and should be expiring worthless on Friday June 15th.

We are having trouble getting the RUT Bull Put Trades filled but the replacement 750/740 trade I emailed 5/24/07 still has the potential to be filled next week if the RUT has a down day. When this Bull Put trade is filled I will research a safe RUT Bear Call Spread trade to complete an Iron Condor.

I now have 2 very safe and financially rewarding NDX Iron Condor trades in play. The 25 spread trade has been filled and has a 5.5% return. The new 10 point NDX Iron Condor trade has an even better return of 6.4% and only requires $1,000 margin per contract. Each month I will research both the 25 and 10 NDX spread trades and more than likely trade both. In previous months the premiums offered on the 10 point NDX spreads were very low. For some reason the premiums this month are very good and with only 21 days remaining I expect this to be a very safe expiring trade.

Objectives of My Trading Strategy

• Investopedia defines a credit spread is defined as “An options strategy where a high premium option is sold and a low premium option is bought on the same underlying security.” The result of this transaction is to receive the difference in premium between to two options. Your goal would be to have both options expire worthless, allowing you to profit from the premium received.
  
  
• 1) Earn consistent cash profits month after month averaging a 3% (2%-5%) net return. Earn these profits in bull and bear markets.
  
  
• 2) Establish the appropriate stops to protect each spread trade from realizing a loss. When trades are in trouble close and roll to a new trade to offset any loss on closing the trade in trouble.
  
  
• 3) Enter Bull Put Credit spread trades on the SPX, NDX and RUT Indexes that have a very high probability of expiring worthless. This is a low risk options trading strategy.
  
  
• 4) Complete Iron Condor trades to double the return on the required margin capital that only covers one side of the Iron Condor.

All May Trades Expired on Friday the 18th!!!!!

All Bull Put and Bear Call Spread trades expired worthless on Friday May18th. All April trades expired and now now all the May trades expired. I want to continue this expiring trend the remaining months of 2007. My trades will always be conservative and safe and earn 3%-5% each. A 3% return for 30 days is not a bad return and is the average for a single Bull Put or Bear Call trade. When we complete an Iron Condor the return improves to 5%.

The total return this month was 4.3% ($190/$4,385). All credit premiums collected totaled $190 (30+40+75+45) and $4,385 (970+960+2455) margin was required per contract. If you traded 10 contracts per spread your credits totaled $1,900, 20 contracts $3,800. These are the returns and cash flows I expect to receive consistently each and every month. The return will be higher in months when additional Iron Condors can be completed on each Index. In May we had one Iron Condor completed on the NDX Index. This trade required margin for one side and generated a 4.9% return (75+45/2455).

New trades expiring in June will be emailed later this weekend. I will continue to focus on selecting very safe trades and I already have a few Bull Put trades identified. The NDX 16XX Bull Put and 19XX Bear Call 25 point spread trades have been very profitable and safe these past few months. The Bull Put RUT trades have also been very profitable.

Update on Open Trades Expiring Next Week

With only 4 trading days remaining to expiration all open trades are safe and will be expiring worthless on Friday May 18th. Even the new RUT Bull Put Trade filled last week is safe with only 4 days remaining. The market appears to be returning to a neutral trading pattern when is perfect for Iron Condor trading.

I really look forward to next weekend when I will be executing new trades expiring in June. The NDX 25 point spread trades are continuing expire month after month. The RUT 10 point Bull Put spreads are also expiring each month. My total return this month will be 4.3%. This is a slight improvement from April's 4.2% total return. My goal for the June trades will be to achieve a 5% or better return for the month by completed at least 2 Iron Condors.

What is truly amazing about this conservative trading strategy is that we can achieve a 30 day return that equals the annual (APR) return being advertised for savings accounts with a minimum balance of $50,000.

Update on Open Trades Expiring in 12 days (May 18th)

All open trades are very safe and should be expiring worthless on Friday May 18th. The RUT and new SPX Bull Put trades were not filled last week. The market continues to rise to record levels each week preventing these Put trades from  executing at their midpoints.

I am not comfortable executing any Bear Call Spreads this month unless the market starts dropping in the next 2-3 trading days. No one knows how high this overbought market is going to rise. Bull Put spreads are the only safe trades for this trading strategy at this time. We need just a few consecutive down days for our Bull Put spreads to be filled.

Update on Open Trades Expiring in 20 days (May 18th)

All open trades are very safe and should be expiring worthless on Friday May 18th. The RUT Bull Put was not filled by anyone last week so a replacement trade will be sent this week. The market was rising every day last week preventing this Put trade from executing at the midpoint.

All short options are 84 or more points away from the current Index prices. This is a very safe position to be in with less than 20 days remaining.

I want will be executing the following 3 new trades expiring in May next week if possible:

1) RUT Bull Put and RUT Bear Call to complete an Iron Condor and 2) SPX Bear Call to complete an Iron Condor

All April Trades Expired Todayl

All Bull Put and Bear Call Spread trades expired worthless on Friday April 20th. Bull Put Spreads trades on the NDX and RUT Indexes were traded first followed by 1 Bear Call Spread trade on the NDX Index. This NDX Bear Call trade completed an Iron Condor. Bull Put and Bear Call Spreads on the SPX Index and Bear Call Spreads on the RUT Index were to risky this month for this strategy.

The total return this month was 4.2% ($245/$5,835). All credit premiums collected totaled $245 (40+80+80+45) and $5,835 (960+2420+2455) margin was required per contract. If you traded 10 contracts per spread your credits totaled $2,450, 20 contracts $4,900. These are the returns and cash flows I expect to receive consistently each and every month. The return will be higher in months when additional Iron Condors can be completed on each Index. In April we had one Iron Condor completed on the NDX Index. This trade required margin for one side and generated a 5.1% return (80+40/2455). I have posted all the trade details for each trade on my web site's performance page.

New trades expiring in May will be emailed this weekend. I will continue to focus on selecting very safe trades and I already have a few Bull Put trades identified. The NDX 16XX Bull Put and 19XX Bear Call 25 point spread trades have been very profitable and safe these past few months. The Bull Put RUT trades have also been very profitable.

Update on Open Trades Expiring Next Week

All open trades are extremely safe and will be expiring worthless next week on Friday the 20th.

All short options are100 or more points away from the current Index prices. This is a wonderful position to be in with only one week remaining. 50 points away is a very good safety net but 100 points away is even better.

I will be executing new trades expiring in May next weekend after the April options expire.

Update on April Trades Expiring in 14 Days.

All open trades continue to be very safe and have short options 100 or more points away from the current Index prices. I will be looking for a safe RUT Bear Call trade to complete an Iron Condor.The SPX index is not offering any safe trades yet but I am still looking. The SPX Bull Put trade I emailed last weekend was not filled by any subscriber or myself. This Index has been difficult to trade this month.

The NDX index continues to be the best one suited for my trading plan in 2007. The NDX Bull Put and Bear Call trades continue to expire each month. You you have an NDX Iron Condor (Bull Put and Bear Call filled) you are earning 5.1% (3.3% plus 1.8%). I will be looking closely at NDX Iron Condor trades earning 5% or more in future months.

Update on April Trades Expiring in 19 Days.

All open trades are very safe and have short options 100 or more points away from the current Index prices. This markets are trading up and down now with minimal weekly changes. With less than 20 days remaining I will be looking for a safe RUT Bear Call trade to complete an Iron Condor. I might even enter another NDX 25 point spread trade. The SPX index is not offering any safe trades yet but I am still looking.

Trade Update - Open Trades Expiring April 20th

The markets are behaving nicely now and seem to be back in a gradual Bullish rise again. So far the only safe Bull Put and Bear Call trades this month are on the NDX and RUT indexes. The first 2 Bull Put trades emailed this month are very safe now and should easily expire in 28 days. The new NDX Iron Condor trade email today (March 24th) has a 5.3% total return. I am researching safe SPX Iron Condor trades and a safe RUT Bear Call trade to complete an Iron Condor next week.

Update of Trades Closed and Expired in March 2007

All Bull Put and Bear Call Spread trades expired worthless on Friday March 16th including the SPX Bull Put spread that we had to close out early when the market dropped 500 over 2 trading days. The RUT and NDX Bull Put Trades had short positions very FOTM when ordered. Fortunately the NDX Bull Put and Bear Call recovery trades expired worthless last Friday. These were risky trades with very high premiums but the trades helped offset some of the losses incurred closing the SPX Bull Put Trade.

The total return this month was a (.07%) loss ($90 debit/$12,430). All credit premiums collected totaled $545 (25+160+230+25+60+45). This was more than offset by the $635 debit required to close the SPX Bull Put Spread, or a $90 debit (635-545). The margin required per contract was $12,430 (975+975+2340+2270++975+2440+2,455).

Because of this loss I have refunded all subscription fees collected between the February and March expiration dates. Look for emails notifications from PayPal about your credits. If you do not receive your refund by March 18th please send me an email.

April will be tricky with a Fed meeting next week, the sub-prime lenders shutting down and China’s recent Interest Rate hike. I will be starting with some very FOTM NDX 25 point spread trades again because these trades have been very profitable these past 3 months. The SPX index is the difficult one to trade. I will also look at 10 or 20 point RUT trades. New Trades will be emailed after the markets close on Monday the 19th. I am going to be very patient and choose very FOTM and safe Bull Put and Bear Call trades. I want to safe on the days the DOW rises and falls by 100-200 points.

Update of Open Trades Expiring This Week

I emailed this weeks HTML update on Saturday 3/10/07. If you are a subscriber and have not received this update please send me an EMAIL .

The markets returned to a normal trading pattern last week by rising and they are expected to keep rising. Those subscribers who have not closed the SPX Bull Put trades should be safe with only 4 trading days remaining. This market is also favorable for all the open Bull Put and Bear Call trades listed below. Subscribers who executed the NDX recover trades collected decent credits to offset their losses. Being FOTM with spread trades is so very important. The NDX and RUT Bull Put trades are still safe even after the massive drop in February. Only the SPX Bull Put trade was at risk and had to be closed early. Also, all Bear Call spreads will be expiring worthless next week which is why I really like completing Iron Condor trades. Only one side of
this trade normally causes any problems.

I also know that some receiving systems stop any emails with attachments so I will have to start sending all Trade Alerts without attachments. I have a separate mailing list to send printable PDF files to so if you would like to be added to this mailing just send me an EMAIL .

Because the SPX trade is costing subscribers $200 - $670
per contract to close I will be refunding all subscription fees collected
between the February and March expiration dates. Look for emails notifications
from PayPal about your credits. If you do not receive you refund by March 16th
please send me an email.

Subscriber Email Alert Process !!!!!!!!!!!!!!

I have been receiving emails lately from subscribers who have not been receiving my Trade Alert emails. After using 3 different automated emailing systems I need to have a process to alert all my subscribers that an email has been sent. I am concerned that my automated emails are being viewed as spam by many receiving systems.

My Blog posts will serve as my alert. I am encouraging all my subscribers to visit this Blog on a regular basis, if not daily, to learn about any new Trade Alerts being emailed. An email subscribers can always expect to receive is my weekly trade Alert Update. This weekly update will always be emailed at the same time each Saturday afternoon.

If you have not received a Trade Alert discussed in my Blog Post you must immediately send me an EMAIL. I will immediately send you the Trade Alert email and add you to a special mailing list.

All subscribers should have received my Trade Alert Update of Open Trades emailed on 3/4/2007 and again on 3/5/2007 at 6AM CST. Both emails were the same using 2 different email systems.

The Bull Market is over but will it continue going lower next week. No one really knows. How the market performs on Monday will set the tone for the week. Who will dominate the market after a 2 days weekend, the sellers or the bargain hunters? Investors have had 2 days to re-strategize. Will they sell shares or buy shares? After watching TV and reading newspapers all weekend I'm not really sure what will happen. That said I have received many emails from experienced subscribers about taking advantage of the uncertainty to recovery some of the cash used to close the SPX Bull Put Spread.

On Friday (3/2) I sent subscribers a Trade Alert to close the SPX Bull Put Spread trade. Included with this alert were 2 new NDX spread trades expiring in March. I have updated this Trade Alert (3/2/2007) to include more details on this NDX Iron Condor trade (highlighted in blue below) that generates significant cash per contract. Both short options are far enough away to make this Iron Condor a safe trade. The SPX Index has no decent bids for any March or April trades that are safe at this time.

Because the SPX trade is costing subscribers a loss per contract to close I will be refunding all subscription fees collected between the February and March expiration dates. Look for emails notifications from PayPal about your credits. If you do not receive you refund by March 16th please send me an email.

If the markets keep dropping this week I will be emailing Trades Alerts to close and roll the NDX and RUT Bull Put Spreads which are currently 51 and 25 points away.

Update on March Trades Expiring in 21 Days.

This weekend 2 new Bear Call Trade Alerts have been emailed for trades that when filled will complete Iron Condor trades on the NDX (4.4%) and SPX (5.3%) Indexes. The RUT index has been rising making it difficult to complete safe Bull Put and Bear Call trades. These are the only 2 trades I want to complete next week creating the 3rd and final Iron Condor trade expiring in March.

All the Bull Put and Bear Call spreads are safe and should be expiring in 21 days on March 16th. As in the past 2 months the NDX Bull Put and Bear Call short options are over 100 points away from the current Index Value. This is becoming my favorite index so next month I will be increasing the number of contracts sold by 50%.

Starting with this Update I am including 2 attachments. I have successfully created, with the help of an Adobe Engineer who is also a subscriber, a PDF file with links that work. You can open this file with your Adobe Reader and click on any trade link to reach the actual Trade Alert. You can also print this update using the PDF file to one 8x11 page. Many subscribers have been asking for a printable PDF file with working links. I have also attached the HTML file that you can open with any browser.

All February Option Credit Spreads Expired Worthless This Week!!!!!

All Bull Put and Bear Call Spread trades expired worthless on Friday February 16th. 4 Bull Put Spreads trades on the 3 Indexes were traded first followed by a Bear Call Spread trade on the SPX Index. The NDX Bear Call Spread was entered last month as part of a rolling adjustment and will not be counted as part of this month's return performance.

The total return this month was 2.5% ($160/$6,340). All credit premiums collected totaled $160 (20+30+20+20+70) and the margin required per contract was $6,340 (980+970+980+980+2,430). If you traded 10 contracts per spread your credits totaled $1,600, 20 contracts $3,200. This 2.5% return missed my goal of at least 3%. Only one Iron Condor trade was completed on the SPX index causing this lower than expected return. With at least 2 Iron Condors completed each month the return should be 3-4% and with 3 Iron Condors 4-5%.

Those subscribers who rolled the January NDX Bear Call trade to the February (1900/1925) were rewarded this week because the spread trade expired. The strategy worked perfectly and prevented realizing a loss on a spread trade in trouble. By closing and rolling this Bear Call spread we successfully extended the time frame for realizing a profit from the original trade filled in January.

This weekend I will be emailing new credit spread trades expiring in March. We are doing very well with Bull Put trades so I will be focused on these first for each index. If I can execute a safe Iron Condor I will certainly do this. Last month we started entering our limit amounts using 1/2 of the bid/ask midpoints. All my trades were filled at these higher limits amounts as were the trades for the majority of subscribers who sent me emails. I will continue this process for all future trades. In the instance our trades are not filled I will email a replacement trade.

If any subscriber would like a Flash movie illustrating the steps to order a credit spread trade please send me an email. I have Flash movies made using OptionsXpress, TradeKing, Interactive Brokers and Think Or Swim. I have a subscriber making the IB and TOS movies because I do not have accounts with these 2 brokers. This subscribe is also helping me to create a PDF movie file that should work on subscriber's computers who are experiencing problems running the HTML and .SWF files. For the PDF movie to run you must have Adobe Reader 8.0 which can be downloaded for free at Adobe's website.
Click to view more details of these
February trades.

Update on February Trades Expiring in 6 Days.

This week all the Bull Put and Bear Call spreads became a little safer and should all be expiring next Friday the 16th. The underlying SPX is now 37 points away from our Bear Call short strike of 1475. It would take a move of over 2% for it to breach our short strike. Certainly possible, but unlikely. Remember, since SPX is a European option so it settles at the opening price on Friday. This gives us only four trading days until option expiration.

Those subscribers who rolled the January NDX Bear Call trade to March (1900/1925) will be rewarded next week when this spread expires. The strategy worked perfectly and prevented realizing a loss on a spread trade in trouble. By closing and rolling this Bear Call spread we just extended the time frame for realizing a profit from the original trade filled in January. I am sure we will have to close and roll again sometime in 2007. To insure everyone is comfortable executing these rolling trades I will complement my Rolling Trade Alert with a Flash movie to illustrate the exact steps for processing each of the 2 required trades. This Flash movie with audio will be available on request and demonstrate the trades using TradeKing's and OptionXpress's trading systems.

Next weekend I will be emailing new credit spread trades expiring in March. We are doing very well with Bull Put trades so I will be focused on these first for each index. If I can execute a safe Iron Condor I will certainly do this. Last month we started entering our limit amounts using 1/2 of the bid/ask midpoints. All my trades were filled at these higher limits amounts as were the trades for the majority of subscribers who sent me emails. I will continue this process for all future trades. In the instance our trades are not filled I will email a new trade like I did this month. The RUT 710/700 Bull Put was emailed on 1/20/2007 but was never filled for the majority of subscribers. I emailed the new RUT 740/730 Bull Put trade on 1/30/2007 and this trade was filled.

This is tax time so I must share with all subscribers a message I received from a subscriber this weekend.

Brad, I tried to "mess around" with manually doing this but I discovered another way to handle this in Turbo Tax (just in case you ever get this question again from others). I used Form 6781. On that form only input the gains and losses for the year and the Turbo Tax program automatically takes the data and puts it on the correct lines according to the 60/40 rule automatically links it to line 4 and 11 of schedule D. So you were right and this is another great thing about trading options - save $$ on taxes. Dick

Update on February Trades Expiring in 14 Days.

The markets rose last week making all the open Bull Put trades much safer. I also executed a second RUT Bull Put spread because my analysis concluded this was a very safe trade also. If the markets keep rising and will execute a few more Bull Put spreads with just under 2 weeks remaining.

We completed an Iron Condor trade on the SPX index last week with a Bear Call spread trade. This trade, 1475/1485, has a short option that is now 27 points from the current SPX Index price. The SPX Index could keep rising to new heights, and if this continues into next week, I will be closing this February spread and rolling to a new spread expiring in March. By rolling to a March spread, with more time, the bid premium collected should offset all , or the majority, of the debit incurred to close the February spread. I will email a detailed Trade Alert outlining the specifics of this rolling trade should it be needed. Of course, the SPX index could reverse direction. Looking at the SPX chart you can see that the current price is touching any resistance trend line drawn. The SPX will either break through this resistance making new highs or reverse direction.

I am creating Flash movie files with audio to illustrate my credit spread trades. If anyone has questions about how to process, close and adjust these trades please send me an email and I will do my best to send back a movie file illustrating the trade. I currently can illustrate these trades using TradeKing, OptionsXpress, and CBOE's Virtual Trading system. This file will be a zipped folder that must first be unzipped. Once unzipped you click the HTML file included in the folder. This HTML file should automatically be displayed in your internet browser. There is a set of play back control buttons at the bottom of the movie screen to control the video and audio.

Paper Trading Credit Spread Option Trades to Learn

Paper trading using one of the many virtual trading systems provided by option brokers, and now CBOE, is so important if you have never traded options. This is especially important trading credit spreads, like Bull Puts and Bear Calls and ultimately Iron Condors. These are special strategy trades that must that must be fully understood before trading with your own funds. You must practice entering, closing and adjusting Bull Put and Bear Call spread trades. You must fully understand an Iron Condor trade and the requirements for making sure your broker only applies margin to one side of this 4 legged trade. And most important you must practice closing these spreads and rolling to new spreads when trades go against you.

I paper traded for six months using OptionsXpress’s virtual trading system before using my own funds. This is the system now used by CBOE so new traders no longer need to apply for a brokerage account to paper trade using a virtual account.

To get started you should establish a virtual trading account with your broker or just use CBOE’s free system. You must practice all types of credit spread trades like:

1. Entering new trades using the current bid.

2. Entering new trades using limits that are higher than the bids, like ½ of the bid/ask or midpoint. Then shave 5-10 cents off this midpoint.

3. Enter stop loss orders to close profitable spread trades for 10 cents or less freeing up margin for new trades.

4. Practice adjusting Bull Put and Bear Call credit spreads. You should close and roll to new credit spread trades to collect another credit. This is the most important one to practice and master before committing your own funds.

The 4 types of trades above should be practiced many times over for a period of 2 to 3 months. Never enter into one of these specialty options trades using your own funds until you completely understand all the risks. You must have an exit plan and know exactly what to do when a trade goes against you.

Once of the huge advantages you have with option spreads is that you can breakeven when a spread trade has to be closed. This is accomplished by adjusting, or rolling, to a new spread trade to collect a new credit. Sometimes this new credit offsets, or exceeds, the debit you incurred closing your original spread. This is a key risk management procedure that you can master paper trading. Once you complete a few of these rolling trades you will really get excited about trading credit spreads and be able to protect your monthly cash flow so that you are always adding net credits to your account.

New subscribers to my advisory service can request Flash Movie files that illustrate how each of the 4 types of trades are processed at different brokers.

Update on February Trades Expiring in 20 Days.

All 3 Bull Put Spread trades emailed January 20 were filled by the majority of subscribers at limit prices higher than the current bids. This strategy of using higher limit prices has increased our returns an average 1/2 of a percent and will be continued on all future trades. All open trades, including the NDX Bear Call from earlier in the month, are very safe. I almost had a few Iron Condor trades ready to order this week but the market did not stabilize in any one direction. Their is still a lot of uncertainty whether this bull market will continue. Their are still many major earnings reports due next week which could influence the market direction.

A subscriber is providing me lots of guidance and professional help creating Flash Movie files that illustrate all the steps to select and process a credit spread order, close an open order and roll to a new order. I plan on creating these files to illustrate these processes for the upcoming Paper Trading Training course. I have been sending samples Flash files to subscribers to test on their computers and so far the feedback has been very positive.

January Credit Spread Trades - Performance

All Bull Put Spread trades and one Bear Call NDX trade expired worthless on Friday January 19th. The market was continuing to rise in a very Bullish pattern so I closed my NDX Bear Call spread and rolled up to a Feb NDX Bear Call Spread on 1/11/2007. I will roll this Bear Call again in February if the NDX Index keeps rising to protect my cash flow. The total return this month was 1.2% ($100/$8,720). All credit and debit premiums collected totaled $100 (25+20+125-600+530) and $8,720 (975+980+2,375+2,420+1,970) margin was required per contract. Those subscribers who completed both sides of the 12/16/2006 NDX Iron Condor trade realized a 3.9% return ($170/$4,330) or (25+20+125/975+980+2,375).\

The NDX Index prices retreated last week and settled well below the 1850 short so those subscribers who could not close and roll this Bear Call Spread had this spread expire worthless earning an additional $80 or more credit per contract. This was a lucky event because whenever the index price is within 10 points of your short option strike corrective action should be taken to close and roll the trade. Those subscribers who had trouble with their brokers closing and rolling this Bear Call Spread trade should send me an email to be included in the upcoming Paper Trading practice session.

Click to view details of these January trades.

Credit Spreads and Iron Condor Paper Trading

Paper trading using one of the many virtual trading systems provided by option brokers, and now CBOE, is so important if you have never traded options. Credit spread trading has special characteristics that must be fully understood before trading with your own funds. You must practice entering Bull Put and Bear Call spreads on one or more Indexes. You must fully understand an Iron Condor trade and the requirements for making sure your broker only applies margin to one side of this 4 legged trade. And most important you must practice closing these spreads and rolling to new spreads.

I paper traded for six months using OptionsXpress’s virtual trading system before using my own funds. This is the system now used by CBOE so you no longer need to apply for a brokerage account to paper trade.

I am encouraging all my new subscribers who have never traded options to paper trade all my trades during their 60 day free trial. And if they still want to paper trade longer I am extending their free trial another 30-60 days, or however long it takes. I am very committed to helping everyone learn the basics to this trading strategy before using their own funds.

Objectives of Index Spread Trading

• Investopedia defines a credit spread is defined as “An options strategy where a high premium option is sold and a low premium option is bought on the same underlying security.” The result of this transaction is to receive the difference in premium between to two options. Your goal would be to have both options expire worthless, allowing you to profit from the premium received.
  
  
• 1) Earn consistent cash profits month after month averaging a 3% (2%-5%) net return. Earn these profits in bull and bear markets.
  
  
• 2) Establish the appropriate stops to protect each spread trade from realizing a MAX loss.
  
  
• 3) Enter Bull Put Credit spread trades on the SPX, NDX and RUT Indexes that have a very high probability of expiring worthless. This is a low risk options trading strategy.
  
  
• 4) Complete Iron Condor trades to double the return on the required margin capital that only covers one side of the Iron Condor.

Benefits of Index Spread Trading

Benefits of Index Spread Trading

1) Credit spread trading is a simple, safe, and stress-free type of trade that does not require a great deal of monitoring. You just place the trade, collect the credit, and wait for the options premiums to decrease or expire worthless. Minimum time is required to process and track these credit spread trades.

2) You receive the proceeds of each credit spread trade immediately when your order is filled and you keep these proceeds no matter what happens.

3) The credit spread has two primary advantages as an income generating strategy. First, the position benefits from time decay. Since options decay in value with the passage of time, the value of the credit spread will in turn decay over time. By writing a credit spread, you are selling a decaying asset and receiving a credit or a premium up front. If the underlying market remains stable until expiration, the spread expires worthless, allowing you to keep the premium received. In a sense, you profit from the passage of time.

4) The credit spread also allows you to benefit from market movement. If one writes a bullish credit spread using puts, the value of the spread would rapidly decline as the market moves higher. The converse is true for bearish call spreads. With this flexibility you can inject an element of trend following into your trading program to increase your odds of success.

5) Gains on stock index spread trades are considered ITC Section 1256 contracts. This means any gains made in these trades are taxed under a 60/40 rule. This rule states that gains are treated as 60% long-term capital gain income and 40% short-term capital gain income (ordinary income) regardless of how long the investment was held. So when we hold a index spread trade for 30 days (our average holding period), 60% of the profit made from that trade is treated as long-term capital gain income and taxed at 15% or 5%.

6) Trading capital is only used to support margin requirements when trading credit spreads. Most option brokers allow you to invest your trading capital elsewhere to be used as collateral for spread trading. Trading capital can be invested in closed-end funds that pay dividends monthly and are diversified across munis, preferreds, REITs, corporate bonds, floating rate loans, convertible bonds and other fixed instruments. Between the dividend yield and capital appreciation you can earn 7%-10% annually. Most brokers allow you to margin 100% of cash amounts, 90-95% of t-bill amounts and 50% of the stock amounts like closed-end funds.