EOT Position Update – September 24, 2008
September 24, 2008
NOTE: I just issued a new Trade Alert this afternoon. Check your inbox or our websitefor details.
Market Snapshot
The Dow Jones Industrial Average just closed at 10,825. The Dow set a record for volatility last week. The index dropped by 1,000 points then jumped up 1,000 points, all in a week. All that volatility’s starting to show up in the VIX.
Just look at this chart.
The last time the VIX was over 30 was at the start of the credit crisis. Before then you’d need to go all the way back to the beginning of 2003.
If you don’t know, the VIX is a measurement of the puts and calls being traded on the exchanges. It’s also referred to as a “fear gauge”. It’s often used to determine the sentiment in the market. Right now investors are afraid. As that fear dissipates (and it always does) the VIX should fall – and the market should climb.
The other big news for the week – the Federal Bailout.
Treasury Secretary Paulson recently submitted a plan to congress to gather and eventually dispose of the bad debt in the market place. They are working towards a Resolution Trust Corporation (RTC) type of vehicle which was successfully used during the S&L crisis back in the 1980s.
All the news organizations are focused on how congress is going to delay/mess-up this rescue plan. Short term, news of the “Bailout” should buoy the markets. Longer term, the details of the plan will determine the winners and losers. It’s something I’m going to watch closely.
Now for the trade updates.
Position Updates
Just a quick note: Remember, we won’t update every open position every week. I try to focus on the positions that have some significant news or price movement.
MS November 2008 $35 Calls (MSKG)
This is a brand new trade. It was just released a few hours ago. Review the Trade Alert either on our website or in your e-mail inbox. Support level will be around $22.50. Resistance is at $31 and $35.
CHD January 2009 $70 Calls (CHDAN)
This is another new trade released last Friday. Just yesterday the option was trading as high as $1.90 showing a nice profit. Support is at $60 and $57.50. Resistance will be around $65 and $70.
GT January 2009 $15 Puts (GTMC)
Goodyear Tire finally collapsed over the last two weeks. It all started with an article put out by the Associated Press about higher costs and a drop in production. The stock’s down to $15 a share. We were a bit early on this one, but the options traded above our buy-up-to price just a few days ago.
Parting Shots…
As many of you know I also write for The Dynamic Wealth Report. Today I published an article about the recent anti-shorting provisions the SEC has put in place.
I recommend you take a few moments to review that article – The Worst Idea Ever
It’s important you understand how these restrictions will impact your options trading account. The changes might seem small at first, but in some instances they can impact your profitability.
Rest assured these changes won’t impact our recommendations for Elite Option Trader(we’ll never recommend you exercise an option).
Category: EOT Update
