Sold EEM November 40 Naked Puts

I’m not trying to fight the tape any more. I’ve learned from my mistake of holding back while the charts weren’t saying to give up yet. I was too bearish for too long and now I’m just along for the ride again. I came back to the iShares MSCI Emerging Markets Index ETF (EEM) today and while I was flipping back and forth between it and the QQQQ chart I placed limit orders in on both seeing likely support close to the levels they were trading soon after lunchtime.

The simple mistake I made again, as I did with my SSO naked puts a couple of days ago, was to try to eke out a few extra dollars on each trade and it cost me missed premiums. I reduced my limit order on both as they started to rally from the afternoon lows and while EEM was trading at $41.06 I sold three EEM November 40 naked puts (EEMWN) for $0.90 each and received $257.75 after commissions. I stopped chasing QLD (2x QQQQ ETF) and left my limit order to hit another day on a dip another day. I might come back to it tomorrow and consider a different strike or lower premium, but I’ve done all the chasing I want to do for today.

Last month I sold EEM naked puts in the money expecting EEM to rise after touching its trend line of higher lows. Today EEM wasn’t all the way down to its trend line, so I sold out of the money puts to give myself a little more cushion. I didn’t wait for it to get there because EEM is in the middle of its trading channel and could go in either direction from here, but I think the downside is limited. When I originally placed my limit order EEM was trading just below its 10 day moving average (it has since moved back above it), but had its 20 and 50 day averages just below $40.00 and close to $38.00 respectfully. Add in the trend line of higher lows that’s moving up close to $39.00 and I expect support to be somewhere close by if EEM drops some from its current levels.

Unrelated – I updated my Current Portfolio page yesterday and will try to be better about updating it at least monthly, if not twice per month.

More on this topic (What's this?)

Key Price Levels: EEM (The Technical Take, 1/26/10)

VWO Vs. EEM: Which Should You Buy? (Index Universe, 10/13/09)

TRADE OF THE DAY: BIG MONEY BETS AGAINST EMERGING MARKETS (THE PRAGMATIC CAPITALIST, 9/30/09)

Feel like throwing money out of the window? (Intelligent Speculator, 9/23/09)

Read more on IShares MSCI Emerging Markets Index Fund at Wikinvest

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