Stock Option Trading Strategy – Bull Put Spreads

The market got off to a slow start yesterday and by late afternoon, the Dow Jones Industrials Average made new all-time highs. If you “look under the hood”, you can see that the market rally was very narrow and it was carried by a handful of big cap names. Tech stocks floundered all day and they were impacted by the earnings releases of MOT, IBM and YHOO. After the close we get to see how GOOG has performed. The overnight earnings seem pretty solid and MER posted very nice numbers. The market is reacting to China’s 11% growth in GDP and the fear is that they will raise interest rates. This is the epitome of the phrase “the markets climb a wall of worry”. Phenomenal growth is being punished because it is too good. Decent overnight earnings, robust global growth, lower oil prices and a bullish expiration related bias have me thinking this decline will be contained today. If the bears can’t push prices lower and make a series of new lows by noon, the bulls will step in and buy. As long as the APY is above 144, stay long. I don’t trust this market so I am staying neutral. My stock option trading strategy is to sell put spreads (bull put spread) on stocks that held up well in February.

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