Charles Sachs has
utilized S&P 100 for the past 14 years, both as a trader and an advisor. He uses
24 proprietary indicators in order to structure options strategies which can
generate gains whether the market moves up, down or sideways.
The short-term market trend is up, and the
intermediate-term market trend is up.
The (XEO | Quote | Chart | News | PowerRating) (S&P 100) index traded higher on Wednesday up 1.58 points to the
582.25 level.
The XEO has remained in a very narrow trading range for over two weeks moving
between the 579 and 589 levels. Yesterday the index moved down to bottom of this
trading range, hitting the 579 support level, and then traded higher. The
expectation is that the index will remain in its trading range going forward.
From a longer-term perspective, the S&P 100 index has traded in a range between
the 543 and 589 levels for over a year, and between the 569 and 589 levels for
over 3 months. In total, the index is up only 2% since January 1, 2005.
While very little has happened in financial markets for over a year, this does
not mean that there were not excellent opportunities to profit with options.
Options have the unique characteristic of being able to earn profits when the
security underlying the options sits still by using the time depreciation
characteristic of the options. This means that by selling options, one can
profit when financial market conditions are static as they have been in the past
year.
Using the time depreciation characteristic of options, our recommendations have
accrued over 126% in profits (excluding brokerage fees) since July 2004, without
a single losing trade recommendation. We have achieved these results while
financial markets have been essentially unchanged.
Bottom Line:
It is likely that financial markets will remain in the trading range set forth
in the short-term chart above. This means that traders can look to execute long
positions when the S&P 100 index declines to the 569 level, and seek to take
profits, or enter short positions when the index rises to the 589 level.
Additionally, options traders should sell time premium to benefit from stagnant
financial markets. Tight stops should be used to ensure that financial markets
don’t break below the 569 level or rise above the 589 level on a sustained
basis.
Sincerely,
Charles Sachs
Chief Options Strategist
www.PatientTrader.com
