Monday, 17 December 2007

Closed the Dow option trade

Closed out my Dow option trades that I put on on Thursday, for a profit of $3,072.

I'd sold a Jan 13100 Call for 619 that I bought back for 451, in $10/point, so $1,680.

I'd used that premium for the call to buy a Jan 12800 Put for 129 that I sold back today for 158, in $48/point, so $1,392 profit.

5 Day Dow Chart

The Dow had sold off nicely in the 3 trading days since I put it on, and whilst I'm still very bearish on stocks over the medium-term, the newsflow has been very negative lately and whilst stocks deserve to be lower, it's at points like these where stocks can seemingly rally out of nowhere, I guess as many market participants are short the market and so it squeezes higher. Plus, the premium on the 12800 Put will suffer quite badly from time decay over the Xmas period, so any reduction in volatility over the coming week or so would have hurt the position.

I'll wait for another entry point to put a similar trade on.


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