If We Don’t See Any Negative Surprises, Here’s The Level I See

  • August 17, 2004
  • Mark Melin

Monday Recap: In
yesterday’s prediction and in our prediction on August 11, we said that
the markets would start to move higher this week.  That process in fact
started yesterday, as the cash Dow started higher out of the gate and didn’t
look back.  The Dow broke and held 9900, broke 9925 and held that level on
a closing basis to end the day at 9954, up some 129 points on the day.

Oil moved lower yesterday, helping stocks.  It is my contention that right
now there is a huge terrorist premium in the market, with the oil market having
the largest terrorist premium – close to a $10-$15 premium. 

Prediction for Tuesday: We’re likely to move higher on Tuesday,
with a potential gap up in the morning.  However, at some point we could
come and fill that gap and test the 9950 or even the 9925 level, then bounce. 
Overall, so long as we don’t see any negative surprises we could get a move into
the 10200 level over the next week, then a move lower going into the start of
the Republican convention. 

Portfolio Strategy:  We are close to delta neutral with a
slight positive bias.  We may move to add to our positive bias. 

Previous Day’s Results and Current Portfolio Status: 

Daily Profit: $0

10100 Sept. Mini Dow Call Options

Long 3.  

Yesterday these options closed at 99, up 28. 

Loss yesterday on this position was $420.

These options expire September 17.

10300 Sept. Mini Dow Call Options

Short 6. 

Yesterday these options closed at 39, up 14. 

Loss yesterday with this position was $420.

These options expire September 17.

Charts from www.stockcharts.com

For questions e-mail, subscriptions@dowoptionstrader.com

Trading Method:  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.