Sunday, March 7, 2010

Sweating it out...

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Friday was the release of the February employment report which was better than expected. This saw a bullish move on the OEX which resulted in the OEX closing above my current OEX Call BWB's short strike of $515 and upper expiration breakeven of $520.

This move translated to a paper loss on the current position as the OEX is outside the "mouse trap"

My options for repair are as follows:

1) Close March Call BWB position for loss and re-open another March Call BWB using higher strike prices

Close 505/515/530 March Call BWB
Open 520/530/545 March Call BWB

2) Roll March Call BWB position to April using same strike prices or higher strike prices

Close 505/515/530 March Call BWB

Open 505/515/530 April Call BWB
or
Open 520/530/545 April Call BWB

3) Sweat it out and wait for a pullback to bring my position back into profit:

- The OEX is currently showing as overbought
- Volume remained light showing that traders are still uncertain at buying into the current rally
- Lack of market moving economic data to be released in the upcoming week
- VIX is at 17.42. This puts the VIX back at support, which resulted in some selling back in mid-January
- VIX Fix at 0.71 (strong bearish signal)
- Tuesday is the 1 year anniversary of March 09 market lows. Traders may look for profit taking.
- Greece sovereign debt issues are still in the news with no clear bail out support from EU government.

I may also look at moving the March Put BWB's closer to the money in order to reset the mouse trap.

Wait and see. As always I will look at the risk first.

randomjaywalking

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