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November Option Position

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NASDAQ OMX Group, Inc. (NDAQ) has been one of the only exchanges to hold up its price. I had thought NYSE Group (NYX) and CME Group (CME) would be the beneficiaries of the added volatility. But the markets differ in opinion. NDAQ reports their earnings on November 6th. Therefore, there is added volatility premium ahead of the EPS release. NYX actually missed their estimates but still bounced. When comparing the exchanges my fundamental screener ranks NDAQ at the top. But that means there is only one place to go. Let's sell the November 25 Puts with a target of $0.70.

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According to the chart there is support from the 10/28 low of $25.45 as well as the lower Bollinger band at $25.61. We will use a breach and close below the $25.45 support as the technical stop level. Since I am still testing for the minimum account size, the minimum position is actually 1 contract. My tendency is to use a similar "nominal" position size rather than initial margin. Initial margin changes according to the underlying stock's and option's price. So there isn't a constant to monitor risk. NDAQ appears to have a little downside until it is at a great technical level. One could sell a partial position now and set a target to sell the remaining position at a test of the 21 day EMA at $30.65 (pink line below).

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