What to do in a ranging stock market ?

The XJO dipped to a low of mid 4200 in early Sep12 and rallied to mid 4500 in mid October.

If you share the view it’s likely to mirror the range from now to pre-Christmas and want to make an income from it, then we’ve got a trade.

Go long at 4300 Dec12 XJO by selling put
Go short at 4500 Dec12 XJO by sellingcall. Together the combination gives 40 points credit or *$10, $400 per contract

Set aside about $2k cash or share value per combination of the trade and leave it alone till 20Dec12. Meanwhile XJO can go anywhere it wants to, there shall be no implication. As long as it stays within 4300 and 4500 on 20dec12.


Profit downgrades storm QBE

QBE has fallen 6% today to $11.07 as profit downgrades from brokers swamp the stock.

1) very high options volume in the stock yesterday and today

trades on 12 Nov Monday alone (for both calls and puts) equal that of the whole of last week’s. Skewed towards puts.

2) volatility rose again to above 27. breaking above this level may bring to up to 33.

3)  long strategy was seen at $10.50 level

Likely to have more activities as stock settles, some looking for bargain whilst others seeking refuge.

Not settled yet.