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INITIAL MCM MARCH 2008 DJX credit spread 2-9-08

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A NEW FEATURE TO THE MONTHLY CASH MACHINE: Dow Jones Industrial Average Monthly Credit Spread - DJX

Starting this month and every month after the Monthly Cash Machine will use a credit spread strategy that will involve generating income using the DJIA as the underlying issue ( DJX Index.)


We will put on this trade once a month and if conditions dictate it, we may add an addition spread to the other side of this index to create an iron condor. In otherwords, we will be playing the middle against the extremes at times.

However, there will be times when we do not put on both sides of the DJIA spread if market conditions dictate an extreme bearish disposition or an extreme bullish disposition during any expiration month.

This position will require a $10,000 margin requirement, and if you have the right broker, you should be able to put on the other side of the spread ( we we make that additional recommendation ) without incurring any additional margin requirement
(Please check with your broker to see if they allow the same courtesy. If your broker does not, maybe its time to consider a more accommodating brokerage firm)

The position will be a 50 contract spread with a 2 point strike price interval between the strike prices. We will follow this position and trade it every month as a separate recommendation and in a separate portfolio, called the:
Dow Jones Industrial Average Index. ( Of course you can do any amount in proportion

EXAMPLE:

$5,000 =25 contracts
$20,000 = 100 contracts,etc.

In addition we recommend having twice the margin requirement in the account as insurance in case we need margin to roll out a position or double up a position.

The DJX Index moves in tandem with the DJIA and is priced the same as the Dow Jones Industrial Average the only differenceis the decimal place is moved over two places to the left

EXAMPLE:
If the Dow Jones Industrial Average is trading at 12,182, then the DJX Index would be trading at 121.82

We are starting off MARCH with the following DJIA (DJX) index spread

DJX - DJ INDUSTRIAL AVERAGE (DJX)

We are recommending the following specific credit spread in the DJX

^DJX $121.82 (Please do not haggle over a $0.01, if you can get $0.12 take it as well)

BUY DJW-CD ^DJX MAR $134.00 CALL DEBIT = $0.23
SELL DJW-CB ^DJX MAR $132.00 CALL CREDIT= $0.36
NET CREDIT = $0.13

INITIAL "NET- CREDIT TARGET= $0.13 or $13.00
POTENTIAL PROFIT ( X 50 CONTRACTS @ $0.13 = $650.00
MARGIN REQUIRE. 50 CONTRACTS $9,350.00
RETURN ON INVESTMENT= 6.95%

EXIT STRATEGY = 1. WATCH LIST 2. MAXIMUM LOSS SPREAD PRICE DIFFERENCE $2.00
1. INDEX WILL BE PLACED ON WATCH LIST IF INDEX PRICE RISES TO: 127.00
THE DIFFERENCE IN THE STRIKE PRICES WILL BE OUR MAXIMUM EXPOSURE - WE WILL NOT USE STOPS ON THOSE POSITIONS. THEY WILL GO ON THE WATCH LIST AND BE FOLLOWED WITH INSTRUCTIONS AS TO HOW TO PROCEED OR/WHAT EXIT POINT NEEDS TO BE ESTABLISHED




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