Selling put spreads on S & P 500 Futures

The S&P September futures are down 37 points today and are trading around 1238. The market has dropped 65 points in the past 3 days. The weekly unemployment report ahead of the monthly jobs report out tomorrow is the main weight on the major indexes. We feel that we might see a short term reversal after the report tomorrow. Although the market might fall further, we do not feel the market will drop another 6% in the next two weeks. We are looking to sell the September 1160 put and buy the 1140 put to limit our risk on the trade. We are looking to collect 1.5 points or $375 less commission and fees. Risk on the trade is 20 points (1160-1140=20 minus 1.5 of collected premium = 18.5) or $4625 maximum risk. We would look to close out the position if it gets to 4 points in value.

The call spread sold on September 2 is worth .2 points or $50. We would look to close this position out to lock in our profit prior to expiration. If we have the opportunity, we would look to sell a call spread to collect additional premium.

The Federal Reserve has its FOMC meeting on monetary policy and interest rates September 16, 2008. We would look to close out these positions prior to the meeting.To discuss setting up a monthly S&P Income generating program for you, give us a call.908-787-2089
Stephen Zielinski
Mercury Capital Management, LLC
Website http://www.mercury-capital-management.com/
There 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.