Market Overview

01/07/11 Market Update

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Market Update:
Well, the jobs number was disappointing today. But, the market held up well considering the news of less jobs being created than anticipated. The Unemployment rate fell more than expected (which is a good thing) and that buoyed sentiment in the wake of the jobs data release.

The market was down all day but recovered nicely going into the close. It was basically a quiet day other than the jobs data but the bulls did a good job of defending themselves.

Areas of support remain unchanged at S&P 1250, 1225ish, and ultimately at 1175. Resistance remains at S&P 1280 and 1300.

BookingAlpha Update:
The existing ORCL position underwent the final phase of its hedging adjustment today by selling calls against the already long lower strike calls; thus, creating a debit spread. As stated in yesterday's Update: The “gymnastics” of the hedging process as one subscriber put it (which may be my new favorite financial term – thanks, Bert) have displayed how flexible you have to be sometimes when managing positions. A linear approach is a limiting approach when trading any strategy.

The final result of what we are holding on ORCL is a Butterfly on steroids. We basically have an Iron Butterfly and a Call Butterfly. Normally we would never open a trade like this from the outset, but this position is a metamorphosis of credit spreads and hedge adjustments just so happening to result in this type of position. All in all, we have hedged out all but a potential marginal loss and an opportunity for a good profit still remains.

A new SPY credit spread was also deployed at the end of the day today using January strikes. This spread was executed to exploit margin requirements that already exist for another SPY spread, thereby, giving us 2 trades for the margin requirement of 1. This trade strategy created what's known as an Iron Condor on the SPY.

Visit www.BookingAlpha.com for more information.

Posted-In: butterfly spreadBroad U.S. Equity ETFs Hedge Funds Options Intraday Update Markets Tech Personal Finance

 

Related Articles (ORACLE (NASDAQ: ORCL) + (NYSE:SPY))

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