[Weekend Summary]
Dear Member:
What a tumble for the markets this week. I did manage to capitalize on the plunge by buying the Dec 40 puts on QQQQ. As you probably know, the "Q's" track the Nasdaq 100 and they dropped along with the index this week. As of Friday close, my put position was up 44.8% in 8 days. I also entered a bearish call credit spread on the "Diamonds" (DIA) that track the DOW and brought in a 40 cent a share credit on a $1 spread. If DIA stays below 113 until June expiration, that would represent at 66% return on risk before commission in a month.
On the downside, the condor on Unit (UNT) turned out badly. The worst thing that can happen with a condor is a whipsaw in which the trader buys back both short legs and that is exactly what happened in this case. Most of my collars have been good to me, but this one wasn't.
When markets turn, as they surely did this week, I really like to be in hedged positions and I do have open spreads in the Biotech Hldrs (BBH), Micron (MU), Sirius Radio (SIRI), the SP-500 Spdrs (SPY), and the Tech Spdrs (XLK). In these situations, at least one leg is making money and offers many opportunities as long as there is time left. In these instances, there is time left and the short legs are quite profitable for MU, SPY, and XLK. If the market turns back up next week as there is some suggestion it might, I'll be taking some of the profits from those legs. If the market continues its' fall, I'll just continue to ride the tide.
I still have my puts on Morgan Stanley (MS) and they have been gaining value. Over the last couple of days, it looks as though the downward move has at least slowed, but the stock closed Friday near the week's low. I'll close the position on an upturn and that will finish the original straddle. The straddle on Conoco Phillips (COP) has gained some volatility along with the market, but I'd like to see another sharp directional move.
I did close my bearish calls spread on Ryland (RYL) and enjoyed a 14.6% realized gain before commissions in a week.
By day's end Friday, each of the major indices hinted at an upturn, but the hints are not yet confirmed. I'll be closely watching the markets early next week for a reversal so I can get as much of the current profit out of the bearish positions and legs I hold.
Have a good weekend.
Bill
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