[Weekend Summary]
Dear Member:
Even with the huge bullish day on Tuesday, the Dow, Nasdaq Composite, and S&P 500 stayed within a stone's throw of their close last week. Volatility reigned supreme and increasing volatility is often a sign of a continuing downward direction in the market. The Fed is certainly trying to keep the lid on and there is even the thought that if may lower interest rates as much as a full basis point. Of course, the problem with that is it could feed inflation which is also a market enemy. Bear Stearns (BSC) lost almost half its value today on a downgrade with the suggestion it go become worthless. Clearly fear is driving the markets for now. The good news is this isn't the first, and quite likely, won't be the last time that fear has ruled. In my view, and as I have been contending for quite some time, it is not yet the time to dive onto the bull cart. That time is coming, and when it does, there will be an abundance of candidates.
As you probably know, I am long some cheap out of the money 2010 LEAPS calls on Blackstone Group (BX). I have been using that position to sell shorter term calls to attempt to earn on the investment in that underlying position. This week, I closed my short Mar 17.50 calls to realize a 20 cent a share gain on that position. The gain represented a before commission return of 9.3% on the original investment in just 19 days. Thereafter, I sold the Apr 17.50 calls for 40 cents and if I don't do anything with them and BX stays below 17.50 until Apr expiration, I will enjoy another 18.6% return on the original investment in little more than a month.
Following the same general format on SPY by repeatedly selling short term calls against my longer expiration long position has also continued to work well. The same is true with the Sirius Satellite Radio (SIRI) spread and it looks like I may soon be able to realize another gain on the short leg of that playl
Companhia Siderugica Nacional SA (SID) moved up from Tuesday but formed a "hanging man" candlestick at resistance today. That formation often foretells a downward move and that is what I am looking for with my Jun 30 put position.
The bear call side of the Lehman Brothers (LEH) certainly looks like it will expire worthless which is what I want it to do to maximize my profits on that side of the original iron condor. I did take a loss on the bull put side of the condor a while ago so the overall play will probably be a modest loss, but controlling loss is one of the most important things a trader can do.
Have a great weekend and thanks for subscribing.
Bill
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