Daily Stock Market Equity and Options Trading Commentary

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Wednesday, February 25, 2009

Straddling Financials in a Crazy-Volatile Market

The top ten option contracts traded today were:

1. XLF Mar 9 Call
2. XLF Mar 8 Call
3. C Mar 6 Call
4. BAC Mar 5 Call
5. SPY Mar 71 Put
6. XLF Mar 10 Call
7. SPY Mar 75 Put
8. SPY Mar 76 Put
9. QQQQ Mar 28 Put
10. SPY Mar 68 Put

This is very mixed activity. The good is that the top 4 are indicating the financials to go higher by expiration in March, and the bad is that the bottom 4 are indicating that major indices are going to sell off even further by March expiration (vise versa for the bears out there).

With the market being extremely volatile it may be worth it to buy both a put and a call (straddle) at the money on any financial such as BAC. I think it will move more than 10% one way or the other in the next 25 days. This should allow one to capture a massive gain on the position and be able to flip both within a week for a nice gain. I have been using straddles all along on the financials and have been cashing in. The key is not to get too greedy, because the time premium plays a big role for both sides.

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