Tuesday’s Levels
Monday Recap: Stocks started a frenetic
Monday with a kick in the pants on strong and surprising news of the Iraq
handover. One of the reasons I thought this week the markets were going higher
was in an expectation of an “Iraq rally” on the handover, but I don’t think
anyone anticipated that event to occur Monday.  However, in the afternoon the
market sold off on interest rate concerns and anxiety over Wednesday’s Fed
meeting sent the markets down hard and fast. On the day the Dow, which reached
an intraday high of 10464 during the Iraq rally, ended the day down some 15
points to end at 10357 on light NYSE volume of 1 ¼ billion.Â
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Charts from www.stockcharts.com
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Prediction for Tuesday:Â The
index to watch on Tuesday is the Sox. The semiconductor index is sitting on
support, and a break and hold under support it would likely lead all markets to
sell off. However, so long as we don’t get any international surprises, that’s
not likely going to occur. In sloppy trade Tuesday, I expect the markets to
touch both sides of the flat line with an upside bias.  Ultimately I still hold
to my prediction that the Dow closes higher at the end of the week than where it
is now. I think there is a good chance that we rally after the Fed
announcement, and up until that announcement I expect back and forth trading.Â
Having said that, if the Sox does move and hold under support and if the cash
Dow breaks its 20-day EMA at 10340, we’ll then look for a move to test the Dow’s
50-day MA at 10254.Â
Portfolio Strategy:Â We’ll
likely stay delta positive until after the Fed announcement – unless we get
significant technical sell signals before the Fed announcement.Â
Previous Day’s Results and Current
Portfolio Status:Â Â
Daily Loss: $90
9900 July Mini Dow Put Options
Long 4
Yesterday it closed at 25, up 3.Â
Profit yesterday with this position was $60.
10300 July Mini Dow Put Options
Short 5.Â
Yesterday it closed at 105, up 10.Â
Loss yesterday with this position was $250.
10600 July Mini Dow Call Options
Short 2
Yesterday it closed at 22, down 10.Â
Profit yesterday with this position was $100.Â
Mini Dow Futures
We are flat the mini Dow.
Estimated margin requirement (may vary broker to broker): $10,402
Delta: +135.5
Gamma: -76.22
For questions e-mail,
subscriptions@dowoptionstrader.com
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.
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Past performance is not necessarily indicative of future results.
There is a substantial risk of loss in commodity futures and options
trading. It is not suitable for all investors. Only you can determine
whether this trading suits your particular needs and risk tolerance.
All profit and loss representations are hypothetical and based on the real
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