Friday, August 27, 2010

Income trades for September

On Wednesday with the SPX approaching the lower end of the recent range near 1040, I decided to get cautiously bullish by selling some OTM puts on names I would like to own on a pullback, assuming the pullback doesn't turn in to a crash. I also sold some upside calls on VXX as without another new shoe to drop in the next three weeks (which absolutely can happen) this too is a pretty conservative gamble. I was just looking to put on what I consider to be some low risk trades to generate some income while I have my mind on a job search here in Chicago. The  plan is to continue bringing in something to contribute towards expenses while I find a job and the get more aggressive deploying capital once I'm comfortable psychologically.

Below are the trades and charts, best case scenario on these is roughly $1100 assuming setting GTCs at .05 and commissions. Worse case scenarios are theoretically unlimited. I'm also scalping the ES for peanuts when I'm bored and have a few victories this week. Initial BP used for all is about $12,500, but I consider these cash secured puts which is a commitment to use $155,500 on the three puts, and unlimited on the VXX calls should we crash.

Sold (10) AKAM 40 puts at .45
Sold (10) MCD 67.50 puts at .25
Sold (10) PM 48 puts at. 31
Sold (10) VXX calls at .26

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