Thursday S&P 500 Futures Option Report

With the Futures Markets still looking a little gloomy, my 900 PUT option is higher on the margin/maintenance requirements. Obviously Wall Street isn't happy with Capitol Hill's solution to the debt crisis. Maintenance Requirement $1176.00. 

The "Geeks" of it all: 

Greeks / NBBO

Symbol	Bid	Ask	IV	Delta	Gamma	Vega	Theta
SPU1900P	0.40	0.55	40.99	0.01	0.00	-0.10	0.05

 The underlying Futures contract is at:

SPU11 FUTURES

1245.10 Last

-9.40 Change

1245.00 (1) Bid

1245.20 (1) Ask

2,461 Vol

7:55:14 AM ET Time

Tuesday S&P 500, 900 PUT Option Report

This morning we find the S&P 500 down again. I had previously made the comment that it would drop to between 1275 and 1250. It would appear the forecast is coming true. It is now the time to do a little more shopping. I'm thinking of SELLING another 900 PUT option. Perhaps in the same month, September. Margin/maintenance is under 1K and time is on my side. The vote on the new budget deal has passed the House and is now in the hands of the Senate. It's not much of a "Deal" and I believe the markets are reflecting their opinion also. But it is what it is. I think IF the Senate votes positively on the "Deal", the markets will rebound again and keep climbing to around 1400. That is unless another "Monkey Wrench" gets thrown into the gears. That being said, here's today's numbers. Margin Requirement $959.00. 

The "Geeks" of it all:

Greeks / NBBO

Symbol	Bid	Ask	IV	Delta	Gamma	Vega	Theta
SPU1900P	0.40	0.55	42.18	0.01	0.00	-0.10	0.04

The underlying Futures Contract is at: 

SPU11 FUTURES

1269.40 Last

-10.30 Change

1269.40 (1) Bid

1269.60 (1) Ask

3,795 Vol

8:39:55 AM ET Time

Monday Morning S&P 500 Option Report

This morning we find a possible agreement in our Nation's Capital concerning the "Debt" crisis. The markets are rebounding on the news but my 900 PUT option has not traded so the numbers on margin/maintenance are still high. It will take a while for the options in the underlying S&P Futures contract to settle back down. Currently my margin/maintenance requirement is at: Maintenance Requirement $1044.00.

The "GEEKS" of it all:

Greeks / NBBO

Symbol	Bid	Ask	IV	Delta	Gamma	Vega	Theta
SPU1900P	0.00	0.00	47.94	0.01	0.00	-0.14	0.07

The underlying Futures contract is at:

SPU11 FUTURES

1303.30 Last

+14.90 Change

1303.60 (3) Bid

1304.00 (22) Ask

2,038 Vol

8:13:45 AM ET Time

Friday's S&P Option Report

With our Nation's focus clearly on the debt crisis, the markets also are staying negative. The margin/maintenance requirement on my 900 PUT option has gone up some more today. It currently is at: Maintenance Requirement $969.00.

The "Geeks" of it all:

Greeks / NBBO

Symbol	Bid	Ask	IV	Delta	Gamma	Vega	Theta
SPU1900P	0.40	0.55	41.89	0.01	0.00	-0.10	0.04

The underlying Futures Contract is at:

SPU11 FUTURES

1290.60 Last

-6.20 Change

1290.60 (1) Bid

1290.70 (1) Ask

1,548 Vol

8:15:47 AM ET Time

Thursday S&P 500 Futures Option Report

With the S&P still falling on worries of our Nation's debt crisis deadline getting closer, I find the margin/maintenance requirement on my 900 PUT option has gone higher. It is now at: Maintenance Requirement $933.00.

The "GEEKS" of it all:

Greeks / NBBO

Symbol	Bid	Ask	IV	Delta	Gamma	Vega	Theta
SPU1900P	0.40	0.55	42.19	0.01	0.00	-0.10	0.04

The underlying Futures contract is at:

SPU11 FUTURES

1297.90 Last

-1.00 Change

1297.90 (18) Bid

1298.20 (4) Ask

2,493 Vol

8:28:47 AM ET Time

A Recent Article I Wrote

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How to Make Money Trading the S&P 500 Index

Not For Beginners

The method of trading described below is an advanced trading technique and is definitely not for beginners. Although the technique is relatively simple in design, if one is not knowledgeable in all of the different aspects of options trading and the repercussions that can occur, bad things will happen. That being said, let's move on.

Enlightenment

I had been trading Commodities for about 15 years when I accidentally stumbled upon this strategy being used in a large investment firm with dozens of professional investors using dozens of strategic maneuvers to lure investors into their firm. One of the trading techniques stood out like no other. Although I made a few modifications to his strategy, the principal is basically the same.

Fact

We all know how NASDAQ, the DOW and S&P work. Follow the charts and they go up and down on a regular basis. If you took an overlay of all 3 and laid them on top of one another you would see they all follow the same paths similarly. Economy goes up, the chart goes up. Economy goes down, chart goes down. The part of the fact I like is as the charts go up and down, it is almost steadily climbing upward. This gives the trader an opportunity to prosper.

The Idea

What we want to do is pick a low point in the S&P 500 where it hasn't been in quite some time. A point that has some higher volumes of trading going on in the options chains and has a low initial margin/maintenance requirement for selling PUT options. Currently the S&P is at 1334 and moving. We want to be WELL low of where it currently is.400 points out of the money is a good place to start your search. We also want to be about 60+ days into the future. There we start pricing PUT options that we are going to sell.

Research

Now we know what we are looking for. Let's look at a current chart and see what we can see. I am sure if you are an active trader you have resources of your own for checking charts, graphs and pricing options. If not, I like using this chart because it goes back to 1960.

http://stockcharts.com/freecharts/historical/spx1960.html

Now to find an put option that meets our criteria. If you don't have current resources, try this:

http://www.cmegroup.com/trading/equity-index/us-index/sandp-500_quotes_globex_options.html?exchange=XCME&foi=OPT&venue=G&productCd=SPU1&underlyingContract=SP&floorContractCd=SPU1&expMonth=201109

The 900 PUT option falls into the criteria we require for a successful trade. Again, your brokerage firm should have the calculations or calculator to find the initial margin/maintenance requirements.

The Trade

Entered Trade

Sell-1 (SPU1900P)
Price:------------------------------ 0.45
Cost:--------------------------($112.50)

Requirements

Total Cost--------------------($112.50)
Initial Requirement---------- $811.25
Maintenance Requirement $649.00

Total Requirements--------- $811.25
Estimated Commission------ $12.99

Breakdown

What did I just do?
Sell-1 (SPU1900P) = Sold one S&P 500, September 2011, 900 Put option.
Price-0.45 = The cost of the option = $250.00 X 0.45 = $112.50.
Please notice that the total cost is in parenthesis. This usually means a negative but since I sold it, It now becomes a double negative which makes it a positive.
Initial Requirement $811.25 = Money I needed to have in my account to place the trade.

Maintenance Requirement $649.00 = Money I need to maintain the trade. Cannot have less than that amount in my account.
Estimated Commission $12.99 = The cost to place the trade.
The final total of this trade is = I just made $99.51 on less than $1000.00.

Now What?

The option I just sold will expire on September 16th, 2011. If the S&P does not drop to 900 in the next 60+ days, the option expires worthless and I do it again. If the market moves up, the cost of that option moves down, along with that is the time value. It gets worth less every day as it gets closer to expiration. Most of the time even if the market moves down towards the option, the margin remains the same due to the devaluation of time. You can also buy the option back at any time if you wish to close the trade. Say the "Doomsday" report just came out. Of course, we're ALL in trouble then.

Summary

Well that's it. Actually pretty simple, pretty basic. If you have access to all the tools required, paper trading is always the best way to start. The way I do it now is to wait another 30 days and put another trade into place. It is better to wait until the market is on a down swing when doing this for you may pick up a few more dollars or you can move down farther in the option chain and make the same amounts. Either way, it works.

Tuesday S&P 500, 900 PUT Option Report

Not much happening yet this morning. Almost like everybody's waiting for Congress to do their thing. My margin/maintenance requirement on the 900 PUT option is up just a bit. Maintenance Requirement $632.00.

The "Geeks" of it all:

Greeks / NBBO

Symbol	Bid	Ask	IV	Delta	Gamma	Vega	Theta
SPU1900P	0.40	0.55	44.01	0.01	0.00	-0.09	0.04

The underlying Futures Contract is at:

SPU11 FUTURES

1336.10 Last

+2.60 Change

1336.00 (2) Bid

1336.30 (5) Ask

1,402 Vol

8:25:19 AM ET Time