Tuesday’s Levels
Tuesday Recap:Â On Friday the
markets essentially left for an early weekend. The cash Dow started the day
near the flat line, moved lower to test the 10180 level then traded back and
forth in a coil fashion essentially between 10180 and 10200 for the balance of
the day. On the day the Dow closed down some 16 points to end at 10188. The
S+P had a slightly stronger pattern on Friday, trading on both sides of the flat
line and making a strong run to 1122 near the end of the day. The cash S+P
ended the day down a slight .6 to end at 1120.68.Â
Over the weekend a hostage situation in Saudi
Arabia unfolded that has roiled oil traders. It wasn’t so much the actual act
that has traders concerned as much as it was the Saudi response and how three of
the terrorists escaped the scene by simply walking out of the building and
hopping in a car to getaway. Traders are concerned because the terrorist
getaway says one of two things about Saudi security: either Saudi security is
complicit in allowing the terrorists to escape or they are completely
incompetent by not establishing a security perimeter around the scene and
allowing the terrorists to escape.  Either of these situations has traders
concerned.Â
^next^
Prediction for Tuesday:Â We
could test the S+P’s 50-day moving average on Tuesday. This could prove as an
important test. A break and hold under this level would indicate a move lower.Â
A hold of this level would indicate a move to challenge the 1125 level. I think
the S+P could lead the market one way or another on Tuesday. If we hold the
50-day MA, most major indices move higher; if we fail at this level all markets
move higher.Â
Portfolio Strategy:Â Right now
we’re delta positive. When the S+P tests the 50-day MA if it resolves the test
to the downside we may change the delta of our portfolio.Â
Previous Trading Day’s Results and
Current Portfolio Status
Daily Loss: $25, Weekly Profit $385
Â
10100 June Mini Dow Put Option: We are short one put option. Yesterday it
closed at 88, up 8. Loss yesterday with this position was $80.
Â
9700 June Mini Dow Put Options: On 5/24/04 we sold one put option for 70.Â
Yesterday this option closed at 16, down 8. Profit yesterday with this position
was $80.
10600 June Mini Dow Call Option: We are short one
call option. Yesterday it closed at 12, up 5. Loss yesterday with this
position was $25.
Mini Dow Futures: We came into the day flat the
mini Dow future.Â
Trading Method:Â Mark Melin strategically short
sells options and then directionally trades within this short options portfolio,
always hedging one position against another to generate consistent profits.
Â
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Past performance is not necessarily indicative of future results.
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