Sample Options Trading Recommendation

January 2006 OPTIONS CYCLE
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After a strong start to year 2005, we ended the year weak with almost no activity in December. We only went into a bull put spread position but ended with a loss. Instead of entering into a position that is too close to money, we decided to give December a skip by entering into a core trade for January 2006 early. Looking back on the year, we had a wonderful run of consecutive profitable months but ended the year with 3 small losing months - which effectively took all our Sept 2005 profits. We had $54k in Jan 2005 and closed the year with $126k in Dec 2005. That is still over 130% return on investment for the year. Not too bad for one year.

As for credit spread on equity options, we have scrapped these plays in future and will be replacing it with just straight calls and puts recommendations. These are risky plays and may not be suitable for everyone. If you are not comfortable, just skip these plays and stick to our core trades. Because these plays are risky, we will allocate 2% of our portfolio to each of these recommendations at any time. If you are interesting in participating for these plays, please check your email before 10:30am ET.

Let's start another run of profitable winning months in the New Year.

Merry Christmas and Happy New Year!

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Options Trade Recommendations

EXIT PLAN
CDIS Jun 35 Call - Set stop loss at $10.60.
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19th January 2006 - Another day and another surprise from CDIS. We were expecting a pull back but CDIS continues to prove us wrong. Nice! We will continue to move our stop loss upwards to protect our profit. At the current ask of $11.00, we will move our stop loss to $10.60. If we are stopped out at this price, we have a very healthy return on investment of 89.28% for this trade. In NBR, we have a small profit but we will not be setting any stop loss on this yet. Let’s hope that we have another CDIS in the making.

19th January 2006 - Yesterday, we were filled at $4.30 for Mar Call 80. But we did not manage to get into CVH. We will not chase this one. We are still in CDIS as our stop loss was not triggered yesterday. All our positions on SPX and OEX are looking good to expire out-of-money.

17th January 2006 - The market turned south yesterday after a long weekend. This almost confirms our profit in our SPX Jan Bear Call of 1320/1330. CDIS surprised us yesterday by continuing its run while the general market was down. It is trading now at $9.80. We will move our stop loss up to $9.60. A slight pullback today will get us out of position. At $9.60, we will see a nice profit of 71.42%. With earnings season kicking off this week, we will move into 2 new positions today. Both stocks are fundamentally strong with a nice uptrend for the year. We will enter into these orders as day orders.

15th January 2006 - With 3 trading days left before expiration, it is looking really good on our positions this month. The overall market remains bullish. It will take something special for it to continue its run. Let’s review our positions. Our bull put in SPX looks really safe with our position at 1200/1190. That is a big buffer of 87 points. Our bear call of 1320/1330 looks good as well with a buffer of 33 points. Unless the market moves up north rapidly on Tuesday, we have no cause for concern. In OEX, we have a 30 point buffer with our position sitting solid at 555/545. These 3 positions on Indices are the most important as we have 80% of our portfolio invested in them. As for stock options, we have 1 position in CDIS. We have a respectable profit of 58.9% here. We expect to be out of this position this week with our stop loss tightened at $8.90. Hopefully, it will pleasantly surprise us by moving higher. If not, we don’t mind a 58% return.

12th January 2006 - A pullback in CDIS is due. It might be time to get out of this trade. Let’s move our stop loss to $8.90.

11th January 2006 - We are having a good run with CDIS.  At the moment, the natural ask is $8.90 per contract.  Let’s move our stop loss to $8.40 to protect our profit.  At this level, we will exit our trade with a 50% return on investment.

9th January 2006 - We came very close to our profit target for CDIS on Friday. We were 4 cents short of our exit price. Since the overall market looks bullish, we will remove our target of $40.60 and see how high this stock will run. To protect our profit, we will move our stop loss to $7.40.

3rd January 2006 - SPX is looking good with yesterday's close at 1268. It is almost in the middle of our Iron Condor. Today, it may attempt to break the previous high but we remain doubtful. Even if it does, we have plenty of upside buffer with our bear call spread sitting pretty at 1320/1330. If SPX decides to move south, we still have a 68 point allowance with our bull put spread comfortably at 1200/1190. As for OEX, our bull put spread at 555/545 has a healthy downside buffer of 29 points with yesterday's close at 579. We are looking at a bear call spread at 600/610 but the premium offered is too low for us to consider a trade. Currently, the natural premium offered is only $0.05. So, we have to pass on this trade. CDIS had a wonderful day moving 10%in our favor. The market price is at $7.00 giving us a decent profit of $1.40 per contract. Since we have some profit, let's protect it by moving our stop loss to $6.00 for our Jun 35 Call. If CDIS continues to run today, we will look to exit CDIS when the stock hits $40.60.

28th December 2005 - We will enter into a bullish play today in a fundamentally strong company with good track record for the past few years. It has good uptrend but a slight pull back signals the right time for our entry. We will purchase some Jun calls (max 2% of our portfolio) to buy us some time and to delay the damage that time can do. We will of course be getting out when there is a healthy return on our investment. Once we are in position, let's set a stop loss at $34.

27th December 2005 - We were finally filled on our OEX play. Although there was a steep drop yesterday, we are still mildly bullish about the market. We will now try to get into a bear call spread if the conditions are right. As for our other play, SPX is looking healthy - almost right in the middle of our trading range. Of course that might change quickly but for now, we are sitting pretty - waiting for time to do its job.

22nd December 2005 - Some of us have managed to get into the OEX bull put play. We will continue to cover this play until the position is closed. However, we will not be reporting this in our January 2006 performance because we did not manage to get in.

21st December 2005 - It can be frustrating to not get into position sometimes (especially the last few attempts). We were again not filled on our bull put spread yesterday. The market just decided to take off when the bell rang. One thing that we refuse to do is to chase the market. Seems like the bulls are no longer in full control of the direction and it would be best that we continue to keep our order opened without adjustment to the strike price and premium demanded. If we are not filled for OEX, it is ok because we can never lose money this way. Well, we will also not profit but better not profit than lose. Currently, we have 40% of our portfolio invested for Jan options cycle. And we are looking for another 40% to be allocated into OEX. If we can’t get what we want, the worse case is we look for opportunities in Feb probably in OEX or RUT. So, hang on and let see if OEX will head south a little today for us to be filled.

20th December 2005 - We were expecting some volatility to have us filled for our OEX trade but that did not happen the last 2 trading days. Overall the market is still bullish with slight pullback. Since the put spread is providing more premium, we will cancel our OEX Condor Spread and will attempt to enter into a bull put spread for OEX with a minimum premium of $0.50. We should be able to get into this position when the market opens. We will attempt to get into a bear call spread for OEX, if the opportunity presents, to complete our Condor Spread.

18th December 2005 - With 40% of our portfolio already committed in SPX for January 2006 – and looking good, we are ready to commit another 40% into OEX especially when the general market looks like it is getting back into a trading range. We would like to have our trade in OEX filled before Christmas. So, we are entering it with a slightly lower premium demand.