Well, well, well… That was a pleasant surprise closing in the markets today.

Let me update you on the paper money portfolio.

This morning, right after the opening when things were in the toilet I was filled on all five of my positions. Of course, having a great broker I received price improvement all every last one of these.

Here they are in order of execution:

• Sold 200 Vertical SPY(110.45 -0.38) Feb 2008 122/121 Put @ $0.28
  • Credit $5,600
  • Commissions $(609.95)
  • Margin Hold $20,000
• Sold 200 Vertical QQQQ(45.86 -0.19) Feb 08 40/39 Put @ $0.18
  • Credit $3,600
  • Commissions $(609.95)
  • Margin Hold $20,000
• Sold 200 Vertical DIA(104.84 -0.25) Feb 08 111/110 Put @ $0.22
  • Credit $4,400
  • Commissions $(609.95)
  • Margin Hold $20,000
• Sold 200 Vertical IWM(65.06 -0.09) Feb 08 61/60 Put @ $0.21
  • Credit $4,200
  • Commissions $(609.95)
  • Margin Hold $20,000
• Sold 100 Vertical VIX(23.77 -0.48) Feb4 08 32.5/35 Call @ $0.67
  • Credit $6,700
  • Commissions $(309.95)
  • Margin Hold $25,000

The long and short of it is that I think that fear was at a high this morning, and that the market has hit a short term bottom.

At the close of the market today, I had a paper money unrealized gain of roughly $13,000 on these positions. I plan to keep them around for a while as we hopefully continue up a bit more and then I may exit early to lock in profits in this volatile market.

Please take caution in this market. If you are not comfortable with a trade – do not put it on. It is critical that you understand the risk that you are signing up for, especially in highly volatile markets like this.

2007 has come to a close. The Santa Claus rally didn’t really do much this year and we ended on a down note.

The RUT closed the year at $766.03 down ($5.73) for the day. All of the other major indexes shared similar performance for the lackluster close of the year.

Overall, 2007 was a pretty good year. We’ve seen volatility, measured by the VIX, come back and hopefully it will stay around for a while! Volatility makes for more time value in options, more time value means more premium which in turn should lead to more PROFITS!! Given all of that, personally, I’m happy that volatility is back.

Of course all of the major trading rules still apply. We still have to do proper analysis of the trades and ensure that he risk is appropriate for the reward. More premium in the option prices means that we should be able to move further way from the current price of the underlying when opening positions, creating more profitable trades. Not only can we move further away, it is very possible to make some great near term trades as well. The rules become very important. Trading by the rules means long term profits!

Going forward…

I’m still bullish on the overall market. I don’t think that we are through the end of the current credit crisis, and I expect that will continue to drag on stocks, especially in Q1 2008. However, I would be surprised if at the end of 2008 I’m not talking about what a great year it has been. The RUT, DJI, SPX, NASDAQ and all other major index’s, in my opinion, will see solid gains during 2008.

I’m not going to make a percentage prediction, however I do think it will be a bumpy ride to get there!

Wednesday January 2nd 2008 marks the first day of the 2008 trading year. It should be a fun day with the fed releasing the minutes from their December meeting. If inflation is a key theme to the minutes, it might mean a rough day in the market. Even with hawkish commentary from the fed, I think we have a few more rate cuts ahead. While I think it would be dangerous to get back to the 1% rates of the last few years, we need to get down a bit from the current rates to help clear up the lending and credit crisis.

Anyhow, I hope your 2007 was as good as ours! Good luck in 2008 and remember – Trade Smart!

Google drives me nuts! I love the company, love the software and lose money in the option chains! So with a miss in earnings today, I decided that once again I’ll throw out some cash and see what happens.  Luckily this time it panned out!

Here is the story: Last night Google ( GOOG) announced their earnings. Although they were up something ridiculous like 84%, the stock tanked over night. I decided that I’d try to take advantage of the volatility in the options and see if I can get a bit of profit from them. Here is the trade:

• Bought Feb 2006 370 Put for $5.30 Debit
• Later that day: Sold Feb 2006 370 Put for $5.80 Credit

• Result: $0.50 Profit or 9.4% profit in a few hours

Finally, I made money on a Google trade!

A related note about Google… I’m guessing its time for Google to come back to earth. It will be interesting to see what happens over the next few weeks/months. I’m going to stay on the Google sidelines for a while, maybe I’ll play again but not for a while. I think it’s time to move back to the core strategies – indexes, indexes, indexes