Stock Option Trading Strategy: Close bearish call spreads and enter bullish put spreads.

April 9, 2007
Author: Peter Stolcers, Founder of OneOption

Friday the Unemployment Report was released and it created a nice 5 point rally in the S&P 500. The rest of the markets were closed and traders had an extra day to review the numbers. Jobs were plentiful and wage inflation was contained. That initial positive reaction has faltered on the open and the market is taking back those gains. We are a few SPY points from making a multi-year high, a feat which has been accomplished by many foreign markets recently. I looks like the next leg up will be hard fought and it will take a round of good earnings news to generate the required energy. The market was able to get above the FOMC rally from two weeks ago and if it can hold this level, it will bode well for prices. Today, there seems to be a “holiday hang-over” and a tight range may set in. I don’t believe the bears have enough news to pressure stocks. Two weeks ago, they had all of the negative releases they could ask for and that still was not enough. On the other hand, the bulls have the momentum and number on their side. I expect a slow grind higher today. There is significant overhead resistance and the market will need a catalyst to breakout. I thought last Friday’s report might do the trick and jettison the market, apparently not. My stock option trading strategy is to close my bearish call spreads and to establish a few bullish put spreads. I still like energy and commodities for those plays. I’m market neutral at this time.

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