First post of the year!
This is the first post of 2007. I’m sorry to miss out an update for last week. There were so many things going on for the New Year. We had revamped our pricing structure so that our subscribers only pay a maximum of $50 for any month. Even if our advisory service made 100%, our subscribers still pay $50. We believe that this new billing structure will ensure our subscribers profit together with us.
The market has been as erratic as ever. Intra-day action was (how should I put it?) exciting. In the morning it was rallying, by mid day it dropped to lowest in recent days and then just before the close, it started to rally again. The SPX has been behaving this way lately. Wide moves during the day but closed only a whisker higher or lower. (see chart 1.) This kind of market condition is perfect for our trade set ups. However, this kind of indecisive market will not last too long. There could be a big move brewing in either direction, waiting for the right time to pounce. Because everybody is not sure which direction the market will go, everyone is being careful with their entries. That may be the reason why it is difficult to get a good fill lately.
I closed up the experimental calendar spreads that I put up on 14 Dec 06. I thought that this would be a good lesson to learn on calendar spreads. When we put up the spreads (buy 1 SPY Feb 144, sell 1 SPY Jan 144 for $0.65 and buy 1 SPY Feb 142, sell SPY Jan 142 for $0.75.) IV was at the lowest point in recent times. VIX stood at 9.8. With IV so low then, it was a great time to buy a calendar. Although IV did increase over the next few trading sessions, it wasn’t enough to make up for the loss incurred by the slipping of price. On 3 Jan 07, I closed up the positions for a small loss. Sell 1 SPY Feb 144, buy 1 SPY Jan 144 for $0.50 and Sell 1 SPY Feb 142, buy 1 SPY Jan 142 for $0.65.
Good trading,
Gary
