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Market Neutral Strategy

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NEW STRANGLE & SPREAD PLAYS

Ultra S&P500 ProShares - SSO - close: 24.84 change: -2.65 stop: n/a

Why We Like It:
The S&P 500 index has settled right on support at its October lows. This is a pivotal spot for the market that could give birth to a new leg lower or another bounce to the top of the range.

We want to capture the move with a market neutral strategy like a strangle.

Note: The SSO is an ultra-long ETF that typically moves twice the daily performance of the S&P 500 index.

What is a strangle? It's when a trader buys an out-of-the-money (OTM) call and an OTM put on the same stock. The strategy is neutral. You do not care what direction the stock moves as long as the move is big enough to make your investment profitable.

Suggested Options:
We are suggesting the December options. You can pick different strikes to form your own strangle since strike prices are available at $1.00 increments.

We're suggest readers buy the December $30.00 call (SOJ-LD) and the December $20.00 put (SOJ-XT). Our estimated cost is $3.75. We want to sell if either option hits $6.00.

Entry alert: We would only open positions in the $23.50-26.50 zone. If the SSO gaps open tomorrow wait for a move back into the entry range. The closer to $25.00 the better.

BUY CALL DEC 30.00 SOJ-LD open interest=3687 current ask $1.95
-and-
BUY PUT DEC 20.00 SOJ-XT open interest= 393 current ask $1.80

Annotated Chart:
SSO

Picked on November 12 at $ 24.84
Change since picked:      + 0.00
Earnings Date           00/00/00
Average Daily Volume =           million  


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