Selling put spreads on S & P 500 Futures

We have seen the major indexes slide from their mid May highs to the current lows. The S&P 500 was trading around 1440 on May 19th, to the recent low today, July 1, 2008 of 1261. This is a drop of over 12% in the past 6 weeks.

We are looking for a short term bottom in the market. Although we might see a further slide in the market, we feel that we will see a rise from the recent low. We believe that the S&P 500 will not drop more than 6 % or below 1180, within the next 23 days. We recommended selling the July 1200 put on the September S&P Index, and buying the 1160 put to limit our risk to collect 2 points for the put spread, $500 less commission and fees.Each point on the S&P is worth $250. Initial Margin on the trade is less than $3500. Maximum risk is the difference between the option sold and the option bought which is 20 points on the put side; (1180 – 1160 = 20) less the points of collected premium; (20 – 2 = 18 x $250 = $4500 plus commission and fees).If the options expire worthless, your return on initial margin is 14% less commission and fees in 23 days. Return on risk is 10% in 20 days. To discuss setting up a monthly S&P Income generating program for you, give us a call Stephen ZielinskiMercury Capital Management, LLCWebsite http://www.mercury-capital-management.comThere is a risk of loss trading futures and options. Past performance does not necessarily indicate future results. Trade with risk capital only. Commodity trading is not appropriate for all investors. This recommendation is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is obtained from sources believed to be reliable, but is in no way guaranteed. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and options trading involve risk. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. In no event should the content of this market letter be construed as an express or an implied promise, guarantee or implication by or from Mercury Capital Management that you will profit or that losses can or will be limited in any manner whatsoever. Past results are no indication of future performance.