Option expiration April 2009

All April options expired today, and i have one May put option left. I left just one contract of this put option as a lottery ticket.

The monthly profit is the net credit of the portfolio, and the remaining long option.

Apri P&L = $1,270 + 1 contract of Rut May 380 put.

Closing all call position

The market is very strong. Investors are buying on every dip. To eliminate the risk associated with big upward movement, I just closed the last Apr/May 460/480 call for a credit of $5.1.

Total credit for the current portfolio = $1270

Right now, I don't have any upside risk, but i should have a black swan risk that is very unlikely to happen.

April 13, 2009 action

The upcoming earnings will have a big impact on the movement. To reduce the impact, I closed one contract of May 380 put at $4.3, and closed 4 contracts of Apr/May 460/480 call at $6.4

Total credit today = $2990

Total credit for the portfolio = $2990 - 2160 = $830

[edit] I sold another Apr 470 call and 2 Apr 480 call at a debit of $0.7

Debit for the trade = $70

Total credit for the portfolio = $760

I am trying to close all RUT options by the end of the day.

position adjustment

Since we are closer to the expiration, we have to start managing gamma risk. Yesterday the momentum was very strong and so i made an adjustment to sell 1 contrat of RUT Apr 380 put for $2.10. Friday price action will determine how i should adjust my position next week.

Credit to account today = $210

Total Debit for the portfolio = $1980

New position

i just bought 5 contracts of RUT diagonal 460/480 call at a debit of $2.0.

Total debit to the account : $1000

position adjustment

sold 40% more RUT Mar 460 call at 0.45, and sold 20% of April 490 call at 0.7. Trying to achieve 2:1 short long ratio.

After the adjustment, i have:

short Mar 460 call ratio 1.4
short Apr 490 call ratio 0.2
long Apr 480 call ratio 1.0

Study of Russell 2000

Lets look at Russell 2000 from a longer-term perspective. There is a lot of symmetry in the chart.

1. There is a top at 519 on 1/6, and there are 3 shoulders at the left with only 2 shoulders at the right. It is questionable the one at 2/13 is S3. Assume it is not, we should have a rally back to create a S3 in the near future. S3 should be at around 433 level, that is also 50% retracement between S1 and the recent low.

2. The height from 1/6 to the low of 1/20 is almost the same as the height from S1 (1/28) to the recent bottom (around 394.58). Based on the Fibonabbi extension, the 100% down leg is almost fulfilled, and a rebounce is expected.

In conclusin, the first target should be 433, and this analysis is confirmed wrong when RUT drops below 392 for more than 2 days.