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| 5 Mar 2007 Close recommendation for DIA Double Diagonal initiated on 19 Dec 06 Trade Summary
Trade Analysis We are making use of the bounce we see today in the Dow to close up this trade for a small profit. As we mentioned in our weekly update, we have time and distance in our favor because we collected a very high premium. However, it seems like the market has no let-up in the sell-down. The Dow may slide further before bouncing. If we remain in this IC position, we could end up eventually with a higher profit than what we can lock in today. However, if the bounce is weak and our position remains ITM, we could end up losing our small profit. The market looks very weak currently and thus, we decided that it'll be wise to close this trade now. We entered this DD for $0 on 19 Dec 06. We rolled it into an Iron Condor for $1.20 credit on 31 Jan. Finally we bought back the IC for $0.80 today. We made a profit of $40 per trade for this advisory despite what happened to the market. This goes to show how durable market-neutral strategies are. While many traders out there are suffering from the crash, we actually made some small gains. Good trade, Gary **********Trade History********** 31 Jan 2007 Roll recommendation for DIA Double Diagonal initiated on 19 Dec 06 Trade Summary
Trade Analysis We are rolling this double diagonal into a Mar iron condor for a $1.20 credit. We will now be short a Mar iron condor for a very good credit. By rolling this trade, we are also reducing our risk from $200 per trade to $80 per trade. We are now risking only $80 to make $120 per trade. Our break even points are now 120.8 on the downside and 128.2 on the upside. DIA has a 55.8% probability of trading between these breakeven points by March expiration. We will keep a close eye on this position and advice you accordingly if there is a need to adjust. After today's FOMC meeting settles down, we will be opening new positions for Mar and Mar/Apr. Good trading Gary ***** Trade History ***** 19 Dec 2006 DIA Double Diagonal initiated on 19 Dec 06 Trade Summary
Trade Analysis Although it is still a long way to go to Feb and Mar expiration, Feb/Mar double diagonals are already increasing in price. This double diagonal is currently very market neutral with a delta of only 0.55. We are entering this trade early so that we can enter this trade for even money or a credit. This double diagonal will not become worthless before Feb expiration and thus this trade is currently "risk-free." When we roll this double diagonal, we will end up with a Mar iron condor. How much we can collect depends on the market environment at that moment. As of now, the DIA will expire between our breakeven in Feb with a probability of 55.57%. This probability probably doesn't tell us much at this moment because what price we can roll into a Mar iron condor is still an unknown. What is more important for us at the moment is the current value of the Jan/Feb 127/122 roll. The current roll value is $1.40. If we can get a credit of $1.40 when we roll into a Mar iron condor, we'll have an iron condor for a great price.
We will inform you when the time comes for the roll. Gary Founder,
Head Trader of MarketNeutralOptions
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