Back Into NDAQ With Naked Puts

For those of you who have been reading My Trader’s Journal for a while you know I have a hard time staying away from NDAQ for long.  It’s good about bouncing in a decent trading channel and I think the downside risk is somewhat limited.  I’ve been waiting for it to return to the $20 range for the past couple of weeks or find a new trend line somewhere else I could use as an excuse to get back in.  Yesterday NDAQ finished the day close to one of its trend lines of higher lows (although it dipped below it briefly) and I decided I’d wait to see if it opened below that before I got in.  It opened lower, but recovered quickly so I started trying to pick my strike and limit price.

While NDAQ was trading at $20.13 I sold three NDAQ February 20 naked puts (NQDND) at $0.70 each and received $207.90 after commissions.  If I would have taken the chance yesterday afternoon I might have gotten $0.80 per contract, but I felt it was worth the wait to see if NDAQ would maintain its footing today.  My main concern is the two week trend line of lower highs.  NDAQ stopped at that line again today.  If it continues to hold resistance my new naked puts will be in the money very soon.  That’s why I went with only three contracts instead of a five, which I’m considering a “full” order for me this year since it’d be $10,000 worth of underlying shares.

I started to place my order to sell four contracts, but then couldn’t get myself to pull the trigger on the order.  I reduced the quantity to three and was able to get past my fear of making a mistake a little easier this way.  I debated placing my order for a higher premium, but decided although I might make another $15 or $30 by waiting or could miss out on the entire trade if it didn’t hit.  I did that on MON a couple of weeks ago and my order still hasn’t hit and I haven’t wanted to chase it higher, yet.

Unrelated – Keep an eye on AT&T (T).  Check out the trend line from the highs of 9/23/09 through the lows of 12/17/09. It broke today, but then T recovered.  The shorter trend line from the highs of 11/25/09 through the lows of 12/17/09 held.  If this line breaks too, T could head back down to $25.00 which would make it hard to resist.