Today, for my first trade ever, I sold to open 1 Mar 17.5 ERX Put for 1.15. I received $112.05 after commisions. ERX and the other triple leveraged ETFs have amazing premiums, and right now, amazing volatility.
The trade gives me downside protection to 16.35, which is 35% below the current close price of 25.23. The odds are good that it will stay above this, and with 28 days before close, time decay is at its finest.
The only issue I have is that ERX made a new low today at 23.51, and ended up 7% down for the day (which is why I sold the put because the premium was up from yesterday).
The S&P 500 closed at 770.05 which is only 3.9% above its November low of 741.02. If next week is like this week, then it'll break that level early in the week and probably become a point of resistance. Let's hope some bulls rally.
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Careful with those 3x leveraged options. Check out the % size of the moves ERX made in nov/dec 08! I've thought of the 3x leveraged options before, but in this environment, unexpected moves do happen. The % moves have definately calmed down this year, but a 35% move on a 3 x leveraged option, is like a 10% move in a normal option. 10% in a mkt like this, especially if it becomes volatile again, are possible.............
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