*look for our commentators every Monday and Thursday on CNBC Morning Call 8:30ET*

This week is packed with economic data that will have a significant impact on the stock, bond, futures, options, and currency markets. Tomorrow we have motor vehicle sales, and pending home sales. Wednesday we have ADP and Challenger Job Reports. Thursday is Factory Orders, productivity/costs and Jobless Claims. Friday is the Jobs Report containing Nonfarm Payrolls and Unemployment Rate. I've included some trades below that will benefit from weak numbers across the slate.

With all the uncertainty continuing into 2009 and the CBOE VIX Volatility Index climbing back above 40, you may want to consider using limited risk options as an investment vehicle. With this strategy you can manage your risk, set profit targets, and have time to see a market move in your favor... regardless if you are an option buyer or seller.  Have a plan. Good luck and good trading.

Today I executed new trades in the option selling strategy. We sold february 880/890 call spreads at a premium of 2.00 to the sell side. This comes out to $500.00 per spread. We also sold february 885/905 call spreads at a premium of 3.30, or $825 per spread. There is a lot of information on the docket this week, but nothing more important than Friday's jobs numbers. In my opinion the S&P recent rally can be attributed to a short covering rally in a bear market. Ultimately I see the March S&P breaking through 800 this week and testing the November 2008 5 1/2 year lows before Valentines Day. In selling the february calls we would benefit from time decay of the options as well as a flat to lower stock market. The positions have 18 days until expiration, which is 02/20/09, or the third Friday in February.  

VIX is the ticker symbol for the Chicago Board Options Exchange Volatility Index, a popular measure of the implied volatility of S&P 500 index options. Referred to by some as the fear index, it represents one measure of the market's expectation of volatility over the next 30 day period.

When the VIX increases it enables us to sell credit spread call and put options on the S&P that are much further away from the underlying S&P futures market and still be able to collect a sizeable amount of premium for your account and risk. In my opinion selling positions further out of the money will enable us to have a much wider profit zone for the market to freely move within. We generally look to capture 2-4% per month.  THERE IS NO GUARANTEE FOR WINNING TRADES AND YOU CAN LOSE MONEY.

When the trade is opened, you will receive a cash credit in your account. That credit represents the maximum profit you can earn on the trade.

FUTURES AND OPTIONS INVOLVES RISK AND IS NOT SUITABLE FOR ALL INVESTORS. MARGINS ARE SUBJECT TO CHANGE. AN INVESTOR CAN POTENTIALLY LOSE MORE THAN ORIGINALLY INVESTED. ONLY RISK CAPITAL SHOULD BE USED TO TRADE.CHARTS ARE COURTESY OF BARCHART.COM

Trading In A Consolidating Stock Market

An iron condor is best suited for stagnant or sideways markets. So long as the market stays flat, or within an identified range, all of the options will expire worthless allowing you to keep the credit generated when the position was originally opened.  Trading a large index like the S&P 500 takes advantage of its tendency to move slowly, within defined ranges. We believe that in any trading strategy, prudent money management must be the first objective. If the market was to move outside of our identified range and at the options expiration be beyond one of the options we purchased as a hedge, our maximum loss would be the difference between the option sold and option purchased less the initial credit received. It is imperative that we purchase the long option upon entry of the trade, otherwise unlimited risk and losses could occur.

Trading The S&P 500 And Other Large Index Products

It is possible to trade iron condors on individual stocks. However, we prefer to trade the position on large stock indexes such as the S&P 500. These indices tend to move more slowly than individual stocks, are less prone to large gaps up or down as compared to individual stocks, and carry highly liquid option chains. Our goal is to construct an opening position that provides a wide profit zone, giving the index ample room to move over the life of the trade.

The Time Means Money program exploits the time decay aspect of option premiums, potentially putting you on the receiving end of the fact that most futures options expire worthless.

According to a breakdown by the Chicago Mercantile Exchange Clearing House, more than 85% of all S&P options sold during the last three years expired out of the money and worthless.*

 * Source: Chicago Mercantile Exchange Clearing House; Analysis of S&P options sold during the period 2004 through 2007.

Michael Maniatis
Market Strategist
Lasalle Futures Group
888-325-9300
mmaniatis@lasallefuturesgroup.com  http://www.timemeansmoney.com/