Thursday
Jul132006
Picking Up Solid Stocks in a Falling Market
July 13, 2006 at 2:44 PM 1. Added to position in 3M (MMM)
Now at 3/4 Position
2. Added to position in Citigroup (C)
Now at a Full Position.
3. Sold January 2007 40 strike puts on Mastercard (MA) Option Symbol (-MAHM) for $2.00.
My cost will be $38 if the stock is below $40 by January.
4. Closed out the rest of my June 30 Russell Reconstitution trades:
4.1 Bought to cover short in Warner Music Group (WMG)
Down 16% on a negative European merger ruling meant I was lucky rather than right.
4.2Bought to cover Kyphion KYPH.
5. Sold December EEM 70 Strike puts for(MSCI Emerging Markets ETF) puts at $3.00.
I love selling puts on emerging markets into panics as implied volatilities are on the rise. In this case, the emerging market index has to fall 25% for me to be underwater. And if I do buy that market down 25% in December, I'm happy. After all, I love that old Brazilian saw that says, "Buy Christmas and Sell Carnaval". There will more on that as December approaches.
The key with these sorts of out of the money put selling strategies is that you have to keep it small and keep enough cash on hand that if you are forced to buy the falling market. If you do decide to take a loss on this trade you want it to be becauase you have an opinion change on the trade not because you have a cash management issue.
Disclosure:
I own every position described above.
Nothing in this blog is meant to be specific financial advice or a recommendation to buy or sell. I do not give investment advice. Do your own research. Do not rely on anything in this weblog to make investment decisions. I do not log all my trades here. I only describe or mention those that I think might be interesting. Consult an investment professional familiar with your specific financial situation before buying or selling any security.
Now at 3/4 Position
2. Added to position in Citigroup (C)
Now at a Full Position.
3. Sold January 2007 40 strike puts on Mastercard (MA) Option Symbol (-MAHM) for $2.00.
My cost will be $38 if the stock is below $40 by January.
4. Closed out the rest of my June 30 Russell Reconstitution trades:
4.1 Bought to cover short in Warner Music Group (WMG)
Down 16% on a negative European merger ruling meant I was lucky rather than right.
4.2Bought to cover Kyphion KYPH.
5. Sold December EEM 70 Strike puts for(MSCI Emerging Markets ETF) puts at $3.00.
I love selling puts on emerging markets into panics as implied volatilities are on the rise. In this case, the emerging market index has to fall 25% for me to be underwater. And if I do buy that market down 25% in December, I'm happy. After all, I love that old Brazilian saw that says, "Buy Christmas and Sell Carnaval". There will more on that as December approaches.
The key with these sorts of out of the money put selling strategies is that you have to keep it small and keep enough cash on hand that if you are forced to buy the falling market. If you do decide to take a loss on this trade you want it to be becauase you have an opinion change on the trade not because you have a cash management issue.
Disclosure:
I own every position described above.
Nothing in this blog is meant to be specific financial advice or a recommendation to buy or sell. I do not give investment advice. Do your own research. Do not rely on anything in this weblog to make investment decisions. I do not log all my trades here. I only describe or mention those that I think might be interesting. Consult an investment professional familiar with your specific financial situation before buying or selling any security.
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