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The market neutral option strategies analyzed and made available for download last quarter have effectively accomplished their mission, namely allowing one to maintain a bearish position while still being able to profit from spikes in the market. In periods of uncertainty, this is the methodology that I will fall back on personally, although the directional positions are the ones that reap my windfall profits. 

The following are the updated payoff's for selected optimal strategies for rhe S&P index, GS, JPM, AXP, HOT, STI, CAT and MAC (subscribers, see the downloads section for the strategies and the forensic analysis of each company). We have computed revised breakeven points, initial cost, payoff matrix, implied volatility and option parameter for the optimal strategies selected previously. I will post these figures in detail within 24 hours, but here is the synopsis.

 

 Preferred strategies

 Underlying

 Company

 Preferred strategies (Net gain (loss)  Oct, 05

 Preferred strategies (Net gain (loss)  Sep, 04

 Net Premium 

 Gain (loss) as % of premium

 Oct, 05

 Sep, 04

 Beginning of period

 % change over prev day

 % change since beg

 S&P 500

             1,032

                  1,244

        (2,966)

34.8%

  1,025.2

  1,016.4

     997.1

0.9%

2.8%

 

 

   

 

       

 

 Stocks

 

   

 

       

 

 AXP

                150

                     136

        (1,500)

10.0%

       32.5

       32.8

       31.7

-1.1%

2.5%

 CAT

              (320)

                   (124)

        (1,235)

-25.9%

       48.8

       46.1

       46.6

5.9%

4.7%

 GS

                (62)

                   (592)

        (4,427)

-1.4%

     179.6

     163.0

     164.1

10.2%

9.5%

 HOT

              (580)

                     151

        (1,690)

-34.3%

       29.7

       28.6

       27.8

4.0%

6.8%

 JPM

                  17

                     308

        (3,187)

0.5%

       41.9

       42.3

       41.2

-1.1%

1.5%

 MAC

              (385)

                     110

            170

na

       27.9

       26.2

       23.6

6.5%

18.3%

 SHLD

             2,965

                  2,800

         3,915

na

       62.6

       62.4

       78.4

0.3%

-20.1%

 STI

              (180)

                     (60)

            260

na

       21.2

       20.8

       20.1

1.9%

5.4%

 WFC

                  96

                     210

        (1,126)

8.5%

       26.3

       26.9

       27.9

-2.3%

-5.7%

 WYNN

              (559)

                   (334)

         1,260

44.4%

       67.7

       56.6

       52.9

19.6%

27.9%

 Total Stocks

             1,142

                  2,605

        (7,560)

15.1%

       

 

 

     

 

       

 

 Total

             2,174

                  3,849

      (10,526)

20.7%

 

 

 

 

 

 

These numbers are as of 10/4/2009's closing prices. Although most of the option strategies would continue to remain optimal, companies such as SHLD and WYNN which have witnessed significant price movement (20-30%), thus the optimal strategies selected previously may not be the best strategy based on current strikes moving forward. I will be updating the output sheet for SHLD, WYNN and WFC within a day or two.

 

Overall the preferred strategies have yielded a gain of 20.7% since September 2009 while the total universe of strategies analyzed have yielded a loss of 12.0% since September, 2009. Take note that the preferred strategies have actually outperformed the market substantially while still allowing for substantial bearish exposure.