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December 30th, 2008 at 11:38 am
Wow, DB the Bear! I think short semis may be a little played out and short BBY and WFMI with no cover makes me nervous too. I think you can cover those by going long on the Qs or the QLDs. The QLDs I like a lot because they are just so low here. You can offest the premium of the July $20s at $8.90 by selling the Feb $28s at $2.25 which puts you in the $8 spread for $6.65 and, of course, the Feb $28s can be rolled to Apr $33s and that’s your double. Covering the emerging markets is really tough but maybe go long on China (the best of the worst) by playing the FXI up. FXI 2010 $20s are $10.65 ($2.30 premium) and you can pick up $1 for the Jan $30s which can roll to the Feb $33s etc. etc.
OIH and XLE still red so I’m liking today so far.
LINE/Pharm – Yes Barrons stood behind their 21% dividend and we missed it yesterday and I sure wouldn’t chase it today.
V/Fab – I hate to say it but I don’t remember anymore. I know I looked very closely at them in the Spring and decided V was the stronger contender overall but they both fell a ton since then so it’s probably a toss-up but V is very well behaved in their range and that’s reason enough to like them. I would like MA more back at $120.
RIMM/Texas – If you are 25% in at $37.52 why not set up for another round by selling the Feb $35 puts and calls for $8.60. It drops your cash basis to $28.92 and pays you more if called away at $35 than if you simply sold $40 calls now right? If put to you, you will be 50% in at $31.96, a nice drop from where you are now as you would need RIMM to fall to $26.40 to get the same basis on 2 rounds. This leaves you nicely protected into the holidays and you can always spend a buck or two to roll the caller higher if you don’t want to lose it and you would still be no worse off than if you simplly covered with $40s now.
UYG/Drum – If C is stagnant, they are probably stagnant too although today they are up 3.5% with C flat (BAC is red too). If your basis is $5.58 and you are not looking to write the Feb $5 puts and calls for $1.85 (which I favor) then just selling the Feb $5s for $1.17 lowers your basis to $4.41 with a 15% gain if called away and that’s not very exciting but it is fairly safe. You can also move to 2x the June $3s at $2.88 and sell the Feb $6s at .68, which nets you more per month and has more upside potential (and more downside risk) than just owning the stock with this low VIX.
Wow, up over 100!