We had bids in below the market Friday for some QQQ calls, but perhaps we shouldn't be too disappointed about not getting filled. The July 37s were trading for 2.00 apiece earlier this month and for 1.40 as recently as Thursday, but as the index tumbled yesterday toward an abysmal close, the July 37s came within 0.05 of our stingy 45-cent bid. When stocks are falling hard on a Friday, call premium can evaporate with frightening speed, especially for those who own them. And yes, you're right, it can be a helluva a lot easier to make money being short options than trying to scoop them up at bargain prices in hopes they'll double before time decay wins the game, as it very often does. However, because of the punitive margin requirements governing naked-short positions held by retail customers, I never, ever recommend option strategies that would leave subscribers net-short contracts. Instead, we look for our edge at swing points, attempting to buy puts at rally tops, calls at swing lows. Ideally, those who hold puts and calls will be at the point of despair when the stock is topping or bottoming, and they will sell us options not at fair value, but at distress prices. (Click to enlarge) A Winner in Gold Speaking of swing points, we had a fine winner in Comex August gold, which danced on our hidden pivots Friday (see chart above) with the precision of an Astaire soft-shoe. Here are the instructions I put out the night before, for those of you would like to retrace the steps for practice: 'August Comex Gold is accelerating toward a 447.70 rally target first broached here more than a week ago, when the futures were trading below 437. The target has a 60 percent chance of being reached
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