Dear Options Writers,

The 500 points plunge in one is just half of the anticipated probable 1000 points plunge but it was enough to send most short guts traders' account down by another 10% from Friday's close.

The market has corrected about 1000 points in two weeks. From data we gathered so far from short guts traders, the loss due to delta and high volatility was ranging from 8% to 25% from their recent highs on 31 Aug 08.

If we compile the performance based on year-to-date profit, here are the performances:

Best performers: 20-28%
Above average performers: 8-17%
Average performers: 2-7%
Below average performers: -10% to 1%

Short guts have been making steady returns of 38-68% for past severals years when gapping range was not too severe. Recent over night gap down had caught many short guts traders off-guard (especially those on single stocks and cheaper ETF). Once the repair was executed when the underlying was out of the short call strike price, the repair takes slightly longer, from 1-2 months to 2-3 months for cheaper ETF and single stocks.

Everyone was watching whether any reversal doji would form. As long as the market stops free falling, the time decay will start to kick in and volatility will fall further. Then the repair will start from there.

For old and seasoned short guts traders, not making 30-50% returns this year is quite disappointing. But you have been making that for past few years. As long as you do not lose back what you got for past few years, it is a relief.

We projected short guts traders would get a maximum annualised returns between -5% to 18% this year.

Stay cool when everyone is panicked (to cut loss, to terminate insurance policy, to cash out.....).

Etradehome.com
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