June 1, 2007 – Friday to look for July Calendars

Interesting day. Markets, opened big. Moving off it’s high. This market is not tiring. Crazy. But, go with it!
Here is what I’m looking at before going to the weekend. I would like to take some EK off today and maybe get a “premium” price before the weekend. I have only taken off 10% of my position since purchasing the position 2 weeks ago. It is up 175%. It is half way to it’s Max Gain, but price improvement from this time to expiration has moved in to breakevens of 24.19, and 25.97. As importantly, June Volatility has dropped below July. I purchased this spread with June well above July Vol. My trendlines are showing that the price can stay within the trend, which is why I am holding on to the position. From here on out I will be exiting the position with every .07-.10 gain in the spread.
UPDATE – I got out at a premium price on 1 unit, and I am holding onto the rest. Over the weekend (as planned). EK marched up to 25.95 (its upper resistance trendline). Any higher than 26 and it starts eating into my potential profit on the trade (and we won’t have any of that).
I was spooked a bit on the downward move in COGN. I only have 1 unit on. But after reviewing the risk and Vol graphs, I like it more than ever. July is 4% higher than Aug. I am trying to put on a few more units. I think I may have missed it. Bummer. Right now the COGN has nearly doubled. Hmmm. 6:1 reward to risk for a 49 day trade. Breakevens are 35.85 and 46.
Risk Graph

Implied Volatility

I am attempting to put on another few units of PALM. I haven’t been able to more of these on yet either. A good sign for my previous levels.
Another trade that I really like is AMTD. 20p Calendar. Again July vol is 4% higher than Aug. The breakevens are 18 and 23. 3:1 reward: risk for a 49 day trade.
Risk Graph

Implied Volatility

AIG is approaching a very nervous place. It’s recent double-top high. Bummer for shorts. In fact, it came within 1 cent of the previous highs. I believe it will drop back down to 72 if it falls below 72.50. I don’t know about this trade. It still falls within my rules, but sheesh. There are easier trades out there. Refer to any assortment of calendars I put on in the past two weeks.
It was interesting though. The S&P nearly hit 1540, and then retreated hard. Hmmm. Toppy? Am I willing to bet on it. Maybe in my papermoney acct. crazy.
I am bidding for a number of calendars at the mid point. AMTD, COGN, and PALM. I didn’t get filled on anything else going into the close.
All and all, a very good week. 1 tiny loser, 3 nice winners. Several good trade entries.
Have a great weekend. May you all be earning time decay!