I believe it’s time to get back in the game.  I feel the DOW made a bottom Friday (10/10/2008), at 7882.  However, I feel that we will retest that bottom.  It looks like in the near term we are moving into a channel.  The trading range on the DOW will be 7900-9500.  I know that is a wide range, but as volatility comes out of the market, we should see a narrower range.  It should begin to settle into an 800 to 1000 point range.

This type of a market will bode well for strategies like Vertical Credit Spreads, Iron Condors, ATM and ITM Covered Calls, and Calendar Spreads.  Initially, the volatility will remain relatively high, so those strategies that take advantage of high implied volatility should be considered.   Going forward, I don’t see stock movement necessarily as beneficial as non-directional, premium collection strategies.  If you do play directional strategies you may want to make sure that they are hedged.  For the longer term, I believe stock ownership at these bargain levels will make you a happy camper when you open your account statement in 24 to 36 months.  In the meantime, you can reduce the cost basis of your stock holdings by selling calls against your stock.

A somewhat more aggressive approach if we get a cyclical bear market rally in the greater secular bear market, would encompass buying deep in the money leap calls on a broad market ETF at a delta of at least .80 and selling front month calls against those positions on pull backs.

I want to remind you that these are not specific recommendations, but only strategies that are merely presented to you from an educational perspective so that you may better learn to trade the stock market.  Any strategy must align with your risk tolerance and only be considered after you apply your own in depth due diligence.  If you want to learn more about some of these aforementioned strategies, stop by www.marketamer.com.  Best, Robin

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