Whoo-hoo! What a day!
First of all – welcome to my new site! I’m really happy to be here and I hope you will be too. I’m going to lay out some ground rules, which I will make up as I go along and change as I see fit but at least we can get started.
- Never talk about stock club! This is for us, these trades are for us, some of these trades will not work with too many people in them so sharing is not caring (for the other members).
- You will always hear it here first! From this moment forward – all posts start here. I am going to experiment with posting unfinished posts here and you guys need to let me know if you like it or hate it but I am done with a lot of stuff hours before you see it on the main site so I thought it might help.
- Participate! This is a dictatorial democracy – that means I always want to hear what you have to say before I do whatever I want. There are no dumb questions, only dumb people (wait, scratch that – reverse it, thanks).
- Have Fun! I’m going to have fun so you may as well to. If there is anything I can do to make this site better let me know – you are a guest in my house and I want all of you to feel like family. If you are reading this you are one of my original readers and that means a lot to me – we’re going to do something that’s never been done before and it’s going to take time and effort but why can’t we have a good time AND make money AND help people?
From now on we will only publicize certain picks (I promised Seeking Alpha 2-4 picks a day) but will keep the comments (for 3-5 days, not sure yet) and spreadsheets (always) to ourselves. There will be lots of private columns that track sectors but, most importantly, we will try to help you identify what kind of investor you are and what strategy will work best for you.
I’ve never done this before so don’t just humor me, ask questions, request topics, give us your opinion so we can build this thing together. I’m very proud to have gotten this far after just one year of newsletters and I thank you for being one of the first to join our community – it means a lot to me!
I’d better tell you now that, for some reason, I have no spelling checker and I make a ton of typos so please excuse those while we get that rectified…
Today was a fantastic market day, everything worked:
- The Dow gained 99 points and flew to a record 12,416
- Transports popped through the 50 dma, up 34 points to 2,633
- Don’t blame the SOX, up 2% to 475
Oil went flying up and I’m just about ready to raise the white flag there as there seems to be nothing that will convince oil traders to stop paying more and more for their oil. The NYMEX crowd pulled the amazing trick of dumping 34M barrels in January contracts while bringing the price of those contracts up $1.14.
February contracts swelled to a stunning 278M barrels at $63.33, which will be the price you will see (+/- whatever change) at tomrrow’s close. OPEC did not cut output, despite the fact that they said 100M barrels of excess supply need to be taken out of the market, despite the fact that this weeks total draw of product was 2M barrels less than last.
But those are fundamental arguements and we have to admit that fundamentals are out the window at the moment. I took my last stab at oil puts today and am now at equal weight with puts and calls (in number of contracts) but I would still prefer down to up!
Over the weekend we will initiate some spreads for next month for this sector but I’m not advocating the XOM bandwagon as it approaches a $500Bn market cap, even though I already have the April $80s!
The biggest fundamental that drove oil today was the illness of Senator Johnson – Democratic control of both houses was sending a shock wave through the oil patch as they had really been backing the wrong horse.
On the bright side, if we are going to accept the premise that XOM really is worth $500Bn, then the S&P, which it used to stick to like glue, must be tremendously undervalued still.
That’s the logic behind taking oil puts against our postive Dow plays, they are a nice, volatile hedge – as evidenced by last week where we pulled several huge profits off the table.
The dollar moved higher today (.42%) and may be gathering steam for a decent move back to 85 (1.2%), perhaps next week. Gold remained flat at $632 and oil’s move was less than impressive as you roll the statistics into the continuous contract (but shhh, dont tell the roaches).
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We didn’t make many moves today other than a double down on open oil puts at what wasn’t even the top at about 11 but I had to leave and I really thought the rally wouldn’t last…
AXP suddenly flew out of the box and the Jan $60s are well in the money at $2.75 (up 150%) and I’ll be looking to roll into the Jan $65s, currently .45.
Both BBY and CC gained 1.6% but it’s nothing to get excited about just yet.
We took the DIA Jan $123 puts for $1.10 as a cover and they finished the day down a dime. This allowed us to ride out the rally without worrying about lightening up but we still have to think about a weekend strategy for tomorrow morning.
We stopped out of DALRQ Jan ’08 $2.50s at .75 (up 1,400%) and the stock finished down 13% on the day as reality sets in.
HD initiated a $3B stock buyback and our May $40s should be in great shape tomorrow, currently $2.70 (up 38%).
INFY perked back up today with India’s recovery but I forgot to make the play I picked on Monday (kick, kick!).
That first sign of trouble we were looking for on LVS came early and the Jan $95 puts at $5.50 (up 15%) were rolled into the March $85 puts for $4.10 rather than the $80 puts for $2.90, seemed like a good trade up for $5 closer to the money…
MSFT actually moved! The Apr $30s finished at $1.70 (up 36%).
I added OIH $150 puts, which were meant to be a day trade but I cashed half and reduced the basis to $1 and held it into the close (mainly because I couldn’t get out for .90). I picked the wrong week to decide GSF was a good leading indicator!
TXN had another up day on the roller coaster and the Jan $30s came back to .90 (up 50%) where I’m very tempted to sell these annoying calls in favor of my more relaxing Apr $27.50s at $3.70 (up 12%).
