Update on Open Trades Expiring In September (19th)

The markets were up and down again last week. The indexes we have open trades with are hovering and not causing any concerns. All our Bull Put trades have lots of distance and are very safe this weekend. We also have a hedge trade in place in case the market crashes. It would make sense to hedge the call side if the market starts moving up on a consistent basis. But this market continues to go up and down with the net effect of not changing very much. Our hedge on the Put side is very necessary because a market crash could occur at any time causing the market to drop 8%-12% in just a few days. This is also why we should have contingent stop loss orders in place to automatically close our Bull Put trades. We should be able to manually sell the Put options for a big profit after the market drops. The markets will never rise 8% to 12% over a few days but it could over a few weeks. At the beginning of an uptrend we would buy some call options if we have any Bear Call trades open.

We are doing very well collecting multiple credits on the NDX index this expiration period. I really like this index because these 100 companies are making profits and not losing billions due to the credit and mortgage crisis.

Update on Open Trades Expiring In September (19th)

Our replacement NDX Bear Call trade filled this week so now we have a completed NDX Iron Condor trade filled earning 7.3%. These markets are still volatile and very sensitive to news and oil prices but moves in both directions so the net effect is neutral. A neutral effect is perfect for credit spread and Iron Condor trading. Our hedge trade has not changed in value this week but is in place to grow in value in case the market crashes. If the market does not crash but drops 3% or more in September we might be able to sell this Put option the week of expiration to break even or earn a profit.

Trading Capital Allocations

This is a hypothetical example of allocations that conservative options traders might consider:

1) Total Investments: $1,000,000 (IRA’s, Mutual Funds, 401K’s)

2) 10% Amount Allocated to Credit Spread Trading: $100,000

3) 65% of my Credit Spread Trading Account Allocated to new trades each month: $65,000

4) 35% of my Credit Spread Trading Account Account kept in reserve for possible adjustments: $35,000

September NDX and RUT Trades - Allocation of $65,000:

77% to NDX 25 point Bull Put Trade (20 contracts): $50,000 (77% of 65,000)
23% to RUT 10 point Iron Condor Trade (15 contracts: $15,000 (23% of 65,000)

I place all my new orders on the Saturday following expiration Friday. So I would have placed and order for 20 NDX 25 point contracts and 15 RUT 10 point contracts.

The percentages above are averages but very close to my actual experience. Some months when I feel the markets are trading in a more neutral pattern I will use 80-90% of Credit Spread account for new trades. I also use 10% of my collected credits to hedge my trades. I like buying QQQQ or SPY short term puts and calls for $1 to $2 per contact for insurance in case the market crashes or increases by 10% quickly.

Weekend Trade Alert Update - September Trades

The markets moved widely again this week. Our open trades are very safe this weekend even after these big moves up and down.

The good news is now we have a hedge trade in place. Today we had our QQQQ put orders filled when the markets rose. These $2 contracts will be worth $5 to $10 each if the market drops and our stop loss prices are reached. If the market does not crash due to a black swan event these $2 options would expire worthless. Over a 12 month period these hedge trades will expire 6 times (months) and be sold for a profit 6 times. But in the event of a big crash they will increase in value very fast and be sold quickly for a windfall profit that should more than offset any losses incurred closing any open Bull Put trades.

All August Trades Expired Last Weekl

All our Index Bull Put trades expired worthless on Friday the 15th. We earned 4.3% this month on all these trades. So far for all of 2008 (8 months) our total return for all 32 trades is 22.8%. My goal is to finish the year with a total return of 40%. This can be achieved if we earn an average of 4.3% in each of the next 4 months (Sept, Oct, Nov Dec).

Our 2 ETF Iron Condor trades expired worthless on Friday the 15th. I will be refunding all paid subscription fees received during this trading cycle (7/19 to 8/15) next week. We had to close the rollover ETF Bear Call trade for a loss which was not offset by the credits received on the 2 Iron Condor trades.

The weekend I will be emailing and posting to the members page new trades expiring in September.

Subscriber Limit Reached - Fee Increasing To Limit Growth

The Index and ETF Subscriber bases are limited and these limits will be reached later this month. The subscription fee is being increased later this month to $95 to limit this growth. Existing subscribers will always pay the lower fee they subscribed to. I limit the number of members due to the fact that too many subscribers trying to execute the same trade at the same time creates heavy volatility in the option price. I also want to keep the subscriber base at this level to insure I achieve these important goals:

1- Providing the best customer service possible.
2- Making each subscriber feel like the only subscriber.
3- Helping subscribers attain the goal of financial freedom.