April 17th, 2009

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Option expiration may have helped bulls

A quietly bearish overnight session was quickly reversed on news of better than expected Citigroup earnings.  While Citigroup lost money last quarter, they lost about half of what most were expecting.  Futures immediately rallied off of the lows and despite a few day session pullbacks never really looked back. 

GE earnings also beat "the street" by reporting a profit of 26 cents per share.  Investors liked the numbers but remain concerned over sharp loan losses in the finance arm of GE.  The next earnings bombshell will be Bank of America that will report before the open of trade on Monday.  Their first call was a gain of a nickel a share...not a very challenging hurdle. 

In yesterday's newsletter we noted the possibility of follow through buying to 870, and what could be a last gasp rally to 872 (chart).  Going into the weekend, we still feel as though this may be the case.  Last week we had recommended selling the 940 calls and are still slightly profitable on the position, in the meantime we had recommended that our clients with multiple positions lighten up on Wednesday before the reversal.  If you are following/participating in this position, don't panic.  We feel as though things will come around next week.  This rally may be running out of steam and could trade back to the 820's before we know it. 

If you took the NASDAQ recommendation, I hope that you were able to lift the short futures contract Wednesday and ride the long call into yesterday's rally...or maybe even today's.  If so, you would have taken a nice profit on the futures and managed to recoup most of the money on your insurance (see  below). 

Sorry so short, have a nice weekend.

* Due to time constraints and our fiduciary duty to put clients first, the charts provided in this newsletter may not reflect the current session data.  However, market analysis and commentary does.

Please note: A mini S&P chart is used because it is better for charting purposes, but trade recommendations are based the full sized S&P unless otherwise noted.

S&P 500 Futures and Options Trading Recommendations

**There is unlimited risk in naked option selling and futures trading

Position Trade –

April 9 - We recommended to sell the April 940 calls for $8, but were getting filled between $7 and $7.75.

·         April 15 - We recommended that our clients with multiple positions lighten up by taking small profits with the intent of reselling them for better prices.

Please note: A mini-sized Dow chart is used because it is better for charting purposes, but trade recommendations are based the full sized Dow unless otherwise noted.

Dow Jones Futures and Options Trading Recommendations

**There is unlimited risk in naked option selling and futures trading

Position Trade –

Flat

Please note: A mini-NASDAQ chart is used because it is better for charting purposes, trade recommendations will denote whether a mini or full sized contract should be used.

NASDAQ Futures and Options Trading Recommendations

**There is unlimited risk in naked option selling and futures trading

Position Trade –

April 3 - If you followed our recommendation, you would be short a mini NASDAQ from 1337.

·         On April 9 we recommended to buy an April 1350 call against this position for about $375.

·         April 14 - You may have opted to take a profit on this position on today's dip, if not look to buy it back near 1275.

·         April 15 - Our clients were advised this afternoon to exit the NASDAQ recommendation below at or near 1296.  Assuming a fill at 1337 and 1296 the profit on the trade would have been $820 minus commissions and fees.  If you bought the 850 call for insurance, this works against your profit but hang on to it...it may pay off.

*Due to the volatile nature of the futures markets some information and charts in this report may not be timely.

There is substantial risk of loss in trading futures and options.

Past performance is not indicative of future results.  The information and data in this report were obtained from sources considered reliable.  Their accuracy or completeness is not guaranteed and the giving of the same is not to be deemed as an offer or solicitation on our part with respect to the sale or purchase of any securities or commodities.  Any decision to purchase or sell as a result of the opinions expressed in this report will be the full responsibility of the person authorizing such transaction.