Whee, what a day!
The Short-Term Virtual Portfolio jumped 28% today as that's where we keep our covers and we went into the weekend with 700 naked DIA puts and 200 QQQQ puts but, most importantly, we went into the weekend with — CASH!!!
Our Long-Term Virtual Portfolio, of course, held up just fine and should be finer by the week's end. I urge members not to get too full of themselves, as the runaway VIX is causing all of our remaining positions to look great as it jumped 10% from 18 on Friday to 20 in the afternoon.
We didn't go crazy and start running mattress plays as we've been burned too many times on the short side but we were very well positioned to take advantage of the drop and a great time was had by all buying back and rolling our poor callers, who seemed a little shell shocked as no one seemed to tell them that markets go down as well as up! We had a great week last week going with the flow, but that all changed on Friday morning on Friday when I asked in the morning post:
"Did the market just fire a warning shot across the bow of the bulls or is this the beginning of the end? On the whole, it was a mild-low volume pullback but it won’t take much follow-through to send us into a major correction so we need to be vigilant and get ready to move back to cash. I will be VERY concerned if we give up another 25 points on the Nasdaq (2,750) as that could lead to a quick retest of 2,650, an that’s a test we dare not fail!"
It took me all of 11 minutes to decide the market action on Friday morning was nonsense and we went into Friday's rally as one of the only sellers. We sold calls and we cashed out positions and we went short:
October 12th, 2007 at 9:38 am | Permalink
- Cash cash cash – taking calls off the table.
October 12th, 2007 at 9:52 am | Permalink
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Cash is tight stops on winners. There’s no way to guess the direction so, as long as you are reasonable balances, it’s best to just start taking profits off the table, we can use the profits to save other positions later. Don’t forget tomorrow started with a 100-point gain and didn’t end so good.
October 12th, 2007 at 11:31 am | Permalink
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You can’t be too short in this environment because a clear message is being sent that selling the high flyers is a mistake. Waiting to buy is a mistake. Thinking there’s a top is a mistake. There are all the psychological games the big boys play to train you (the retail investors) to take their huge positions off their hands before they tank the markets.
- This probably means we have a bit more time for this nonsense because it costs a lot of money to pull an institutional reversal like this so the people pushing the Qs must be very, very deep in it so they need record headlines. That’s why there’s the adage that by the time the story makes the cover of time it’s already over – getting the markets on the cover of consumer magazines is mission accomplished for manipulators, that brings in the flood of new money that they can sell into.
- As I mentioned above, the top 1% have gained 5% of the nation’s wealth in the past 3 years. First in housing, now in stocks. Now that play has run it’s course it’s time to go to cash so the move is to get out of the markets and pour money into bonds, which can spike our currency (a double win) as well as rates.
October 12th, 2007 at 2:35 pm | Permalink
- UTX/all covers – I won’t be giving up any protection into the weekend.
- Well nothing is staying down so cashing out on the bull run was the right call – just have to wait to see what Monday brings.
We put some of our cash to good use today, using it to reposition our leaps and adding a few short plays. We sold the current XOM $95 puts as that stock was out of control and we are super pleased with out Double Downs on BXP and VNO puts so things are going very well so far into expiration (sorry callers) and now we'll go with the downhill flow but we stand ready to come off the sidelines and put that cash to use if some Fed speaker comes out with another harebrained scheme to unnaturally save the markets.
Bernanke didn't help this evening when, speaking at the New York Economic Club, he said: "The housing sector is expected to deteriorate further and is likely to be a "significant drag" on economic growth through early 2008. It remains too early to assess the extent to which household and business spending will be affected by the weakness in housing and by the tightness in credit conditions." Oh no, not the truth, anything but the truth!!! It will be interesting to see how the markets react to this very interestingly timed statement tomorrow.
Oil blasted through $86 on the ridiculous that Turkey is going to disrupt the flow of oil in the Mid-East as they take action against Kurdish terrorists in Iraq who have been coming across the boarder to kill Turks for quite some time. Since the US seems unable to control the situation, Turkey is taking matters into their own hands. Members may be interested to read all about this situation in last night's comments but the short story is – this is one silly, silly reason to jack up the price of oil.
Once our poor caller expires we're going to roll our Nov. XOM puts all the way up to $100 and I don't think I could be more excited about their Nov 1st earnings report – It will be so much fun to hear them explain how they justify a 35% increase in stock price (that's a $183Bn INCREASE in market cap) when sales are fairly flat and, despite a 40% rise in crude prices, INCOME IS FLAT TO LAST YEAR AND PROJECTED TO BE FLAT NEXT YEAR. Wake up people, this isn't Google, with infinite growth possibilities; this is a dinosaur legacy company that hasn't innovated since 1939 (and that innovation was squeezing out their competition when they were Standard Oil) and is profiteering off a war. Sure the war looks like it will last forever but the profiteering won't. Already PTR and CEO are running around buying up global oil assets AND ACTUALLY PRODUCING MORE OIL, something XOM hasn't done in 10 years.
The dollar is back down at 78 after a very weak bounce and Ben's little statement isn't likely to help. We've also been adding to our gold positions on the dips as I can't see $90 oil without $800 gold and it looks like we're going to get both before this pary's over.
