quadruple witching, one expired trade and one new trade and DOW's 8th straight winning streak is over

The markets behaved much like I expected today. Volume was light and the markets did finish down -albeit not that much on this quadrule witching day. Our unique March option position:

sell to open 1 PUT XOM 2010MAR20 65 for $1.18 USD

expired worthless. We took advantage of this market pull back turn to re-establish an XOM position using same premise as the previous trades since the March trade was history.

sell to open 1 PUT XOM 2010OCT16 65 for $3.40 USD

net premium: $328.80 USD
margin requirement: $6,171.20
strategy used: near 52-week low and strong support @ $65
probability of success: low to medium
comments: with XOM closing @ $67.04, the downside protection is 3.04%, this trade has a low to medium chance of expiring worthless, if we take a closer look at the graph there seems to be a huge support level @ $65 and further the 52-week low is sitting @ $61.86 - these two factors may play in our favor

Here's today's market recap:

U.S. Stocks Decline, Breaking Eight-Day Winning Streak for Dow

U.S. stocks declined, ending an eight-day winning streak for the Dow Jones Industrial Average, as India’s unexpected interest rate boost spurred speculation withdrawals of economic stimulus will curtail global growth.

Exxon Mobil Corp. and Dow Chemical Co. dragged energy and raw-material producers to the biggest losses in the Standard & Poor’s 500 Index as oil fell below $80 a barrel. Financial shares dropped after Goldman Sachs Group Inc. cut estimates for banks and brokerages. Palm Inc. plunged 29 percent after forecasting sales that trailed analysts’ estimates and Canaccord Financial Inc. cut its share-price estimate to zero.

The S&P 500 fell 0.5 percent to 1,159.90 at 4 p.m. in New York, trimming its third straight weekly advance to 0.9 percent and had the biggest daily decline since Feb. 23. The Dow lost 37.19 points, or 0.4 percent, to 10,741.98 after rising 2.2 percent since March 8. Almost two stocks dropped for each that rose on U.S. equity exchanges.

“Keep an eye on the punch bowl,” Larry Kantor, head of research at Barclays Plc, told Bloomberg Radio before the announcement in India. Governments that injected funds into their economies to jumpstart growth are “going to be withdrawing that stimulus,” he added. “That’s actually the big risk.”

Most stocks fell yesterday on concern the Federal Reserve will boost the discount rate, the amount charged on direct loans to banks. Economists said this may occur before the next meeting of the Federal Open Market Committee on April 28. Fed spokesman David Skidmore declined to comment.

16-Month High

India’s central bank unexpectedly raised rates for the first time since July 2008 after inflation accelerated to a 16- month high. The Reserve Bank of India increased the benchmark reverse repurchase rate to 3.5 percent from a record-low 3.25 percent and the repurchase rate to 5 percent from 4.75 percent, according to a statement in Mumbai. The surprise decision comes a month before the bank’s scheduled monetary policy meeting.

“Whenever you have any noise about central banks making that shift in policy, you’re going to get that market reaction,” said Keith Wirtz, who oversees $18 billion as chief investment officer at Fifth Third Asset Management Inc. in Cincinnati. “We’re going to start to see signals and actions from the Fed suggesting that they’re preparing for that policy shift, and the market will react. On top of that, we’ve had a huge move in the stock market. So it wouldn’t surprise me to see people protecting profits.”

$12 Trillion

The S&P 500 climbed to the highest level since September 2008 on March 17. This week’s rally brought the surge from a 12- year low last March to 72 percent after governments and central banks around the world maintained low interest rates and committed more than $12 trillion to stimulate the economy.

Stock swings have narrowed, with the 10-day average change between intraday lows and highs for the S&P 500 falling to 0.8 percent from 1.8 percent on Feb. 8.

“I don’t expect big moves,” said Peter Jankovskis, who helps manage about $1.8 billion as co-chief investment officer at Oakbrook Investments in Lisle, Illinois. “Stocks are fairly valued after the rally we’ve had from the lows. People are waiting for more signals that the economic recovery is sustainable.”

More than 10.3 billion shares changed hands on U.S. exchanges, the most since Feb. 5 and 20 percent higher than the average in 2010, as the expiration of futures and options on stocks and equity indexes spurred trading. The process known as quadruple witching occurs every three months.

‘Cautious Tone’

“The expiration is only magnifying the cautious tone,” said Michael James, a managing director at Wedbush Morgan Securities in Los Angeles. “Buyers have been more cautious with the market being up eight days in a row and heading into the weekend’s health-care vote. More people are concerned with locking in recent gains.”

The VIX, as the Chicago Board Options Exchange Volatility Index is known, rose for the first time in four days, advancing 2.1 percent to 16.97. The index, a measure of how much investors pay for insurance against declines in stocks, moves in the opposite direction of the S&P 500 about 80 percent of the time.

The energy and raw-materials industries in the S&P 500 fell more than 0.9 percent as the dollar rose, reducing the appeal of commodities as an alternative investment.

The Dollar Index, a measure of the U.S. currency’s performance against those of six major trading partners, advanced 0.6 percent. The euro fell as concern Greece will fail to secure financial assistance from the European Union reduced demand for the currency.

Exxon, Dow

Exxon dropped 0.5 percent to $67.04, while Dow Chemical retreated 3.5 percent to $28.95. Freeport-McMoRan Copper & Gold Inc., the largest publicly traded copper producer, slid 2.2 percent to $78.51.

Financial shares in the S&P 500 dropped 0.7 percent after Goldman Sachs said it was cutting estimates on banks and brokers with ties to the capital markets by 15 percent following February results.

Goldman said it favored JPMorgan Chase & Co. and Bank of America Corp. versus Morgan Stanley and Citigroup Inc., and reiterated its sell recommendation on Jefferies Group Inc.

Palm slumped 29 percent to $4. Revenue in the quarter ending in May will be less than $150 million, Chief Financial Officer Doug Jeffries said yesterday on Palm’s third-quarter conference call. Analysts in a Bloomberg survey had estimated $300 million on average.

Price Estimate of $0

The company also reported its 11th straight quarterly loss. Deutsche Bank AG slashed its price estimate on the stock 38 percent to $5. Canaccord cut its estimate to zero from $4 on solvency concerns.

DirecTV fell 3.4 percent to $33.42. The largest U.S. satellite-television was cut to “hold” from “buy” at Citigroup Inc.

David Tice, chief portfolio strategist for bear markets at Federated Investors Inc., said he still expects the S&P 500 to plunge following the biggest rally since the 1930s. The measure may fall to 400, or 66 percent below yesterday’s close, he said.

“We still have vast excesses and imbalances that still need to be worked off,” Tice told Bloomberg Television. Tice’s bearishness has proved wrong over the past year. In May, he said the index would sink to 400 within six months. He repeated the forecast in November.

A gauge of health-care companies had the biggest gain in the S&P 500 among 24 industries.

Beating Estimates

Aetna Inc. rose 3.7 percent to $34.46. The third-largest U.S. health insurer said it expects first-quarter operating profit per share to exceed analysts’ estimates.

U.S. health-care stocks are poised to rally if the industry overhaul being considered by Congress becomes law because it removes uncertainty and expands coverage, BlackRock Inc.’s Bob Doll said.

The companies also are “still very cheap” relative to their earnings prospects, said Doll, vice chairman and global chief investment officer for equities at New York-based BlackRock, which oversees $3.4 trillion. Amgen Inc., UnitedHealth Group Inc. and Johnson & Johnson are “favorites” at the world’s biggest asset manager, he said in an interview yesterday in Dayton, Ohio.

The House of Representatives plans to vote on a $940 billion overhaul of the U.S. health-care system that aims to extend coverage to 32 million uninsured Americans on March 21. Health-care companies and health-maintenance organizations, known as HMOs, will benefit most because more people will be insured as the U.S. population ages, Doll said.

The S&P 500 has entered an “air pocket” of little resistance as it pushed to a 17-month high, according to analysts at Instinet, who say the benchmark could extend its rally. The area of little resistance extends to between 1,180 and 1,200, where prices may keep rising even with low volume, said Instinet’s chief market technician John Schlitz.

“Should the index eventually reach” 1,225, “we expect significant resistance to develop,” Schlitz said. The 61.8 percent Fibonacci retracement level of the bear market resides within 10 points of that level, he said.