[Weekend Summary]
Dear Member:
I can only speculate what would have happened Tuesday if the Fed had not acted to reduce rates substantially. In a sense, at least, it was a capitulation day, but late action Friday suggests there may well be more downside to come. The Dow has managed to hold at the 12,000 level and was actually up modestly for the week. The S&P 500 held at the 1300 level and wound up about flat for the shortened week. The Nasdaq Composite has been able to hold its head above water at the 2300 level. Interestingly, the homebuilders showed some renewed life this week with the reduction in interest rates. All in all, the markets remain volatile and I would definitely not be surprised to see a further drop to shake out the market before the next upturn. It is time to keep powder dry or at least exercise great care in entering and protecting positions.
I really like the comfort of limited risk positions such as spreads at times like these. I know the most I can lose at the time of entry and, in many cases, can adjust if there is enough time left. I did exactly that in my spread on SPY when I closed the short leg for a $4.25 profit before the slight commission and then sold a lower strike to create a new spread and bring in 97 cents more cash per share at the same time.
The spread on Mbia Inc (MBI) is holding its own and is safe (and profitable) as long as it stays above the $10 strike I am short. As of close Friday, it remained around $14.
I also opened a $1 spread on the Diamonds (DIA) this week and only have 77 cents at risk for a potential 30% return on risk if DIA stays below 125 and I make no adjustment. It closed at a little over 122.
I did take profit on my Rambus (RMBS) puts and wound up with a gain of 9% before the small commission in only 6 days.
The Sirius Satellite Radio (SIRI) is just bumping along with no reason to do anything for the present.
As I indicated before, Genitope was put to me and I then sold it resulting in a 43 cent a share loss.
Thanks for subscribing. I hope some of these trades are good illustrations of some ways to deal with highly volatile markets such as the one we are now facing.
Bill
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