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OPTIONSMART MORNING UPDATE: Sunday Edition

1. OUTLOOK. Despite a downward start as a result of disappointing jobs data, the tech sector managed to make an upward turn in the early going, then spent the rest of the session chopping sideways. GE and AMZN upgraded. SBUX finished 7% higher after beating expectations and issuing upside FY09 guidance. On the Nasdaq, decliners topped advancers seven to six. QQQQ's implied volatility inched lower. The key issue is whether we've seen enough of a correction to bring out even more buyers. Investors need to start seeing improvement rather than just better-than-expected news. We expect the tech sector to seesaw for the next few weeks.

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2. TRADING OPPORTUNITY:  n/a

4.  Top Four Reasons to Prefer Debit Spreads

• You can lower your risk and reduce your capital outlay by paying a small upfront premium instead of purchasing an option or an underlying stock.
• You can manage the risk and reward characteristics by choosing between many strikes and expiration dates.
• You do not need a quick move in the underlying stock with this strategy, as you would with the straight purchase of a call or put option. 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 avoiding a situation in which time decay is a major risk.
• You benefit because falling commission costs make spreads more attractive for small investors.

EXAMPLE
Bullish Debit Call Spread: You purchase a call position at one strike and then sell a call on the same stock at a higher strike. The difference between the premium paid and the premium received is a debit in your account.

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