Another fantastic day in the markets!
There's nothing better than being well hedged and having your callers evaporate into expirations. Of course this could all end in tears if we don't hold my 13,000 line but that's what mattress plays are for so we're not going to worry about that until we have to.
I ended the day buying DIA calls of all things so we'll see how that works out. Seeing the Dow kind of, sort of hold 13,100 in the afternoon gave me hope that there were buyers out there, timid though they may be.
We had nice Daily Doubles on the XOM and CVX $85 puts as we nailed the inventory build before hand and they both flew straight down from our very cheap buy points. We even felt good enough about a market bottom to make a play on HOV, although not so good that we didn't cover it! After the spectacular death of our Googlefly play we got some nice entry points on our new Applefly and hopefully Apple will continue to flatline today so we can add more to this one. Entries were (all December): $165s bought for $5, $180s sold for $11.75, $150 puts bought for $4.50, $165 puts sold for $12.50.
It was very easy to buy and sell on momentum yesterday, unlike the IronBIDU, which was unfillable, the Applefly play has cheap enough entries on the puts and the calls we bought to be able to buy them naked and THEN sell the cover. Feel free to check with me tomorrow for timing issues if you haven't filled yet, with this set of entries I'll be looking to DD on this play if possible.
Aside from Apple going up $3 and down $8 during the day we are also taking advantage of the fact that there are lots of buyers for the close plays (so they are "bidding" up the price) and less for our out of the money covers. Also, remember our goal is to roll the outside puts and calls $5 closer to the money for $1 to cut our risk, which can only be done the play is going AGAINST that side so it will feel like throwing good money after bad but it's an investment worth making.
I think we can blame WFC's CEO Jon Stumpf for today as he said at the MER conference: "We have not seen a nationwide decline in housing like this since the Great Depression." This is why they shouldn't have an open bar at these conferences – don't these guys know the press is there? Strumpf also said that WFC has very little CDO exposure but that doesn't get the same kind of headlines as the D-word and he cost his company 5% of their market cap ($5Bn) with that little statement. I'm starting to like WFC down here around $30!
APPL and GOOG continued going down but not as bad as yesterday but BIDU got mugged so badly I had to turn around and cover my puts as it was getting ridiculous. RIMM also got oversold and we took out our callers there as well, it was a crazy kind of day where we were long and short on FSLR at different points and going short on the DIA's at 12:17 and flipping back to buying calls at 3:18 – it's not easy to go with the flow when the direction does a 180 every 180 minutes!
Strumpf was right, the market is depressed and subject to wild mood swings. Many investors are giving up hope, interpreting all news as bad news but there is still a strong International growth story out there and we just need to focus on the winners, who are being taken down in this general market sell-off for no reason.
Do you not want to own Apple because it is back near the year's open? Do you not want Google at $120 off? When people are depressed, they don't feel like doing (or in this case) buying much of anything and, while a prolonged depression can be very bad for the global economy, a short bout of depression in the market represents a tremendous opportunity for us to put some money to work in SAFE, WELL HEDGED positions. Because you never know, those depressed people may just be right!
SBUX had a depressing outlook but earnings were up and guidance was really just a little below expectations and THEY ARE WRONG about their outlook because it's based on their depressing belief that commodity costs will not ease off. When you are depressed, everything looks bad but it's very unlikely that consumption will fall off AND commodity prices will remain high, and that's essentially what their guidance entails. I'm going to BUYBUYBUY more '09s ($25s) and also SOME Dec $22.50s at the bell as I think cooler heads will prevail and SBUX is way oversold in after hours trading.
So cheer up guys! I see lots of bargains….
