Sorry.  Where I said:

You don't want the underlying strike price to fall below the price of the puts you sold.

I should have said:

You don't want the price of the underlying stock to fall below the strike price of the puts you sold.

At this point, I wouldn't increase my position, though it looks like I could make a lot more money by doing so because of the sudden and horrific downturn in the market today.

But no, I would not.  I'm understandably spooked by today's events.  I hope we can at least hold at this level!

I hear you, bad internet connection ruined my last two trades, I'm back down to what I started with after the decline today.

There was indications as why not to be bullish down near S&P 800, for technical reasons you could say it was the 3rd time it tested that bottom, in a bear market that's bad because it's most likely to break-though on the third test.  Or I could put it a little differently, if the market was going to switch into a bull market, we would have never seen the S&P at 800 again, the fact that we neared it is just incredibly bearish and as soon as that level is broken, of course millions of stop-losses hit the market and every person who cares about technical analysis sells.

I could understand thinking that the market would range-trade for a while considering its valuation, but for that to happen the auto-makers would have had to been bailed out.  Congress may bail them out in the end, but it didn't happen today.

I think there's a good chance of a rally tomorrow or Monday, but you have to sell it.  I would be so bearish as to sell the S&P when it touches near 800 again because that will probably become a resistance level.  Best case is that it uses 800 as a teetering point to zoom up past and then drop down back below.  Until the auto-makers are saved this market is absolutely rotten, no valuation is too low because no one has the capital to buy equities or businesses, which are required to even form a bottom.

I think the real bottom gets formed when we reach a pinnacle of negative news, like an auto-maker fails utterly or we see a really terrible unemployment number.  Even then it's hard to say which bit of news will be the worst and will it be more terrible than what is to come.  Only real strategy that works is to sell the rallies.  We'll enter a bull market again late next year or in 2010, and about that time the talking heads on CNBC will be saying you can't trust the rallies despite mutual funds holding nothing but cash.  That's when rallies will stick and fundamentals will matter.  If we're in a depression it'll be a slow climb up, if the economy isn't half bad then we'll probably see an insane year of 20% returns for the indexes just to arrive at fundmental valuation of companies once more.

Well, we had a monster rally today.  I didn't have the opportunity to take advantage of it, but I'm hoping things won't deteriorate over the weekend.  I'd like to buy back my short option and then leave in my long option in hopes that the rally will be reversed (just like every other rally we've had in this market) and then I can make some money on the way back down.

Who knows, I just might turn a profit yet.  Wish me luck.  :)

At this point I think the stock market is overbought.  I would take profits on any long option positions to be safe.  It's kinda easy to tell when it's overbought, I'm managing a fantasy portfolio and my worst performer in there was up 2% while my best performers were up 20% in a matter of a week.  If the market is done going down it needs to go up slower than this, this is just too far too fast.

About Obama calming the market, yes he did do that a bit I think, yet it changes nothing fundamental except uncertainty about the next treasury secretary.  Consider this... the market was already oversold and was in the middle of an upswing when Obama made that announcement.  Very often minor news seems to prod the market in a certain direction, not because the news is important to the fundementals of the market but because the market was going to make the move anyway, an impetus just helps it move.

It was good news no doubt, but to me it does not mean that the entire stock market is worth 10% more than it was before the announcement ;)  hence overbought.

If you want to short at this point, I would be cautious with such a move, the market may move a bit higher and have a false move to Dow 7,500 before making the real move there.  What I expect is a pull back to 8,200 and then a bounce upward from there but honestly who knows.