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Options Trader: Thankful Friday -May 08, 2009 2009/05/10

Options Trader: Thankful Friday 

May 08, 2009 | about stocks: DIA / FAZ    

I am very happy we cashed out.

We cashed out our longs, as planned, very close to the top and yesterday, at 1:47, I sent out an Alert to Members titled: “Not Being Greedy With May Shorts” in which I said: “At this point, with our put plays all back in black – we need to start stopping out if they get the market back over 8,400 (our goal was to get to cash and this is a gift). With a 50 point Dow trailing stop if we head lower than 8,360. Ideally, we should be out of any May puts (or May anythings) and cautious about June. If it’s a real sell-off, we use the cash to scale into June puts (which would include FAZ calls of course).” That was a FANTASTIC call (if I do say so myself) as we bottomed out at 8,358 at 3:33, by which time we were already cashed out ahead of the usual stick save.

It was a perfect day as we stuck with our plan from Wednesday night to press our short bets into the gap up open we expected, and we’re now in cash and are likely to day-trade a few short-side bets this morning but cash is still going to be king going into the weekend. This will be a short post as I am already working on our next round of bank plays for members as we also cashed out most of our sample $100,000 Hedged Portfolio ahead of the stress tests and are itching to take up some new positions so I wrote a new post entitled “Stress-Free Investing In Stress-Tested Banks” with plenty of new entries we’ll be looking to make into next week.

The Jobs report showed a loss of “only” 539,000 jobs but last month was revised up 69,000 which everyone seems determined to ignore. Unemployment is up 0.4% to 8.9%, the worst since Sept 1983. If the government hadn’t added 72,000 jobs (mostly census workers) this would not be at all pretty so we will be shorting the Dow at the open as a day trade and taking off our put covers against our long DIA puts, perhaps recovering into the weekend if we get a nice sell-off.

Oil is back at $58 so we’ll be shorting that into the weekend (I’m shorting the futures now below $58 with a stop there) as Toyota (TM) and Honda (HMC)gave poor reports with poor outlook. We know our auto industry sucks but if those two can’t sell cars either then the people buying oil are certifiable and we are happy to take their money.

Asia was up a point and Europe is up about 1.5% on bank fever but I see projected losses of up to $599 (not $600) BILLION by our 19 largest banks alone if the economy does not improve. So forgive us if we hold onto our cash over the weekend while we wait for people to sober up.

Have a nice weekend.



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