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12/20/2007
This "best trade" is a continuation of previous "Best trade" newsletter posted (sent to MV subscribers) on December 12, 2007. Below you will find a Table of Trade Motivations and a chart showing the trades, including detailed trade calculations. In Table 1 - a ''Table of Trade Motivators'' - we show the motivating factors that led us to take the above trades. Table 1: Table of Trade Motivators Advance/decline volume and issues ratios hit critically low levels. We saw following readings: 0.04 A/D issues ratio and 0.09 A/D volume ratio for S&P 500. SBV oscillator advanced above minus 20% based on the 60-day SBV(20) chart. This reveals that there is a chance of a short-term move up. Below we list in detail the actual trades made, along with the netted returns achieved. 12/11/2007 12/12/2007 12/12/2007 12/20/2007 In this example, we have based our SPY options trade on the S&P 500 volume indicators. Using the principles outlined above, you may wish to trade options on the SPY, ^SPX, DIAMONDS (DIA). It is also conceivable that an analysis similar to the one shown below could be used to trade options based on the NASDAQ 100, Russell 2000, and other indexes.Chart 1: S&P 500 60-day Chart
Date Trading
DecisionMotivation 12/11/2007 Buy Calls Today''s precipitous drop was associated with a huge buying surge. In fact, today''s volume output exceeded the average volume generated over the past nine sessions by 27% on the Dow, by 19% on the S&P 500, and by 5% on the NASDAQ 100. The largest volume surge was noted on the AMEX; here, today''s volume output exceeded the average volume production over the last nine sessions by 35%. 12/12/2007 Sell Calls The dominant buying surge that was created yesterday afternoon following the Fed’s announcement on interest rates manifested in a strong gap up opening on the NASDAQ 100 today; we found that it is safe to sell previously bought calls. 12/12/2007 Buy Calls Late in today''s session, we witnessed another downswing on the major indexes. It generated a huge amount of buying volume. It is our assumption that the cumulative buying volume produced from the buying surges seen over the past two sessions could soon prompt a market recovery from Tuesday''s selloff and potentially lead to a resumption of the midterm uptrend. 12/20/2007 Buy Calls
Table 2: Details of the tradesDate Trade Strike Expiration Contracts Contract
PriceBuy SYHBU Calls $151 Feb, 2008 20 $4.45 Sell SYHBU Calls $151 Feb, 2008 20 $5.45 Buy SYHAT Calls $150 Jan, 2008 30 $3.15 Buy SYHAT Calls $150 Jan, 2008 80 $1.24
12/20/2007
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List of Trading Newsletters sent out in 2007
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