Treasury to the Rescue
14th December 2008
The financial markets tanked all over the world when the Senate voted against the Big 3 Auto Bailout, but when the Treasury said it stood ready to provide funds for automakers until lawmakers could consider a longer-term package next year the market steadily rose thoughout the day to finish the day up slightly. For the week, the SP 500 and the DJIA were virtually unchanged, while the technology stocks in the Nasdaq posted a 2% gain.
Volume has been weaker during the rally over the last couple of weeks, so while it appears that sellers may be done with most of their selling, the recession appear to be holding back the buyers. It could not be that most investors still waiting for the next bomb to drop on Wall Street or in Washington. All of this helped the VIX fall by almost 10%, which may have been the most significant thing to happen in the markets this week.
The market appears to be in a trading range that has a slightly bullish tilt. Selling January puts will not provide near the profits that selling December puts did, but that strategy should still yield good returns. A safer way to profit in this market may be Bull Put Spreads. Selling the SPX 850 and buying the SPX 840 will let you keep the credit as long as the market stays above 850 by the January expiration.
JD
