DIA has been in an overall downtrend over the past 1 year. I bought a deep ITM put and am selling the front month ATM to get the short position to expire worthless. Then each month I will continue to sell ATM to lower my cost basis and increase my ROI.
This puts my breakeven point all the way up to 115.22. Also, since I bought the Dec quarterlys I can get an extra credit for December which further increases my ROI potential.
SOLD -24 DIA 100 SEP 08 110 PUT @ $0.70 credit
BOT +24 DIA 100 (Quarterlys) DEC5 08 120 PUT @ $9.20 debit
ROI potential for this month= 0.70 credit/9.20 cost basis= 7.6%
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