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Wednesday, September 24, 2008

NDX NQ QQQQ QID trading (Bottom Area)

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Dear stock market traders and investors, stock blog readers, and followers:

The area of the bottom of NASDAQ-100 is around the corner. The top of volatily is also around the corner. NDX closed at 1648 today (Tuesday). QQQQ closed at 40.50 area, and VXN was at 35%.

The bottom of NDX and QQQQ are estimated at 1600 area, and QQQQ at 39.50 area. For volatilty the top is estimated at around the 38 area.

How to play This? In multiple ways and multiple stages. Now we are in stage one of the revisit of the bottom area. Since the bottom is a process, and Vol. should decline, we would like at first to sell volatility premium while we go slightly long.

At close Today (Tuesday), we sold 42 strike ITM puts on QQQQ (quarterly QQQQ options expiring in a week). They have some very juicy premium. We also sold 43 strike calls early in the day. We have sold (by legging) a straddle with a total premium of around $1.50 The area of profit is wide (from $39.00 to $44.50.

We plan to manage this position as QQQQ moves around.

This position is a small size and is not the full position. A larger size will be initiated in case we hit the 39.50 today (or on Thursday). If the market should a bottom earlier, then it is fine. We should be able to bank on the puts and also on the short volatility as vol. decreases on the way up.

We expect NDX and QQQQ to rise in the morning until around mid-morning. If it does so, we plan to take profits on the short 42 strike puts, and decide from there on selling a lower strike or waiting for the stock to retreat to re-enter the short put at strke 42 or lower.

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To your profits,


Thursday September 25: 1:03PM with NDX at 1704.ish, we are taking off the long NDX position established on Tuesday's close when NDX was at 1650. Profits: 55 NDX points.

Friday September 26: 12:06PM with NDX at 1644, we are taking off the short NDX position. Profits: 60 NDX points.

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Happy trading,


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