Weekly Recap - December 19, 2008

The market continues to show resistance at current pricing levels, along with a downward trend in volatility. Both trends are encouraging despite a very difficult economy. However, the stock market is likely to remain very bumpy over the near term as volatility is still high despite recent declines. For short-term investors, a bumpy market will provide many profitable opportunities on both short and long positions as the market swings back and forth, within a 100 point trading range.

How is our performance?

The Aggressive Portfolio (Options) ended the week slightly down, but continues to sport an exceptional 263% return since January 2007. Year-to-date, this portfolio continues to beat the market return by a large margin, with an excess premium of almost 30%!

Our tips for option investors?

We expect the market to swing between a trading range of 850 and 925 over the near term. With that in mind, we may look to buy a call on the market index near 850 if the market swings sharply down and we can get in with a good price. We will also look for additional opportunities for writing options, but will only consider those with exercise prices that are more than 10% from current market prices and with very short durations. Volatility is still too high, although it is trending down, but market swings of more than 5% are still common, which makes writing options very risky. In addition, we are still not ready to begin buying straight call options on individual stocks as the short term direction of the stock market is still volatile and difficult to predict, and the 3-6 month outlook very uncertain. We are now 70% cash in this options portfolio and will look for more short term trading opportunities.

Remember, our complete list of options is Available Online At: http://www.marketbeatingstocks.com