OPTIONSMART MORNING UPDATE: Bouncing back
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September 29th, 2009 at 8:48 am
OPTIONSMART MORNING UPDATE: Bouncing back
1. OUTLOOK: Two multi-billion dollar merger announcements gave investors a reason to get back into stocks. Big mergers were considered as a sign that the credit market is improving,However, trading volumes were very low. Xerox bought Affiliated Computer Services for $6.4 billion in cash and stock. The only tech stock that didn't gain was IBM. The market will attempt to extend gains as the technical chart looks very bullish in the short-term. There is more room to run. Tuesday brings readings on consumer confidence from the Conference Board. U.S. futures point to a lower open.
2. TRADING OPPORTUNITY: none
3. OUR FREE MONTHLY TRADING RECOMMENDATION AUTO-TRADEABLE WITH OUR PARTNER BROKERAGES: to be published in late October.4. TOP FOUR REASONS TO PREFER DEBIT SPREADS AS A TRADING VEHICLE
- You can lower your risk and reduce your capital outlay,i.e, the upfront premiums to be paid in comparison to only purchasing an option or an underlying stock
- Easier to manage the risk and reward characteristics (many strikes and expiration dates to choose from)
- The anticipated move in the underlying stock doesn’t have to happen as quickly with this strategy compared to the straight purchase of a call or put options. The reason for this is that you are off setting the time premium in the option you purchased with the time premium you sold, thereby creating an opportunity wherein time decay is not a major risk upon entering the trade.
- Lowering commission costs make spreads more attractive for small investors.
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