Lessons

1. If VIX is under 26, buy the dip. If VIX is over 26, sell the rip.

2. Always trade in the direction of the larger trend. Find the strongest trend in your time period.

3. Nothing as bearish as a failed breakout. Nothing as bullish as a failed break down.

4. Don't worry about the last dollar. Take your money and go to the beach!

5. No more than four positions at a time. Preferably 2-4. Scope out others. Pick the strongest.

6. Buy the strongest; sell (short) the weakest.

7. Nothing is guaranteed. Nothing.

Saturday, November 24, 2007

Retail - Don't Get Too Bullish

Black Friday was good, but it is not a bellwether for the season. We had a strong Black Friday last year, but sales slowed after that.

I think retail will be good in patches - bad in others. Walmart may do well.

My overall opinion on the economy is that several corporations are stronger than reflected by their positions on the stock market now. However, I am expecting a rally, which I will short. I will be researching Proshares Short and Ultra Short funds. My overall outlook on the U.S. economy is quite bearish - because of housing and mortgage.

I also wouldn't be surprised if there is talk of a World slowdown next Spring or summer, or fall.

I will change my Bullish strategy and short the upcoming rally soon.

p.s. Apple is kicking ass.

Friday, November 23, 2007

Buys for Next Week (11/26 -12/1)

Well, I must look like a big loser now, with my Dow 13,500 -13,800 by end November prediction. I'm realizing exactly why most wise men in this business DON'T write these predictions. While the overall thoughts (and instincts) behind the predictions may be spot on, you can't really predict the exact timing. There are too many variables involved.

This doesn't mean we can't project what the market will do, and correspondingly that we can't make long-term purchases. We can. We just need to be careful - as I have been more often than not - and understand that our projections aren't gospel, and certainly not our timing.

Well - having said all that - I'm still looking for a bounce next week, and expecting one (possibly the same bounce) to end the year. The bounce will be led, as I've often said, by Big Tech (wow, I'm acquiring that "told you so tone of all these market prognosticators! Nooo!!!).

Buys for next week:

IBN - LONG TERM CALLS
GOOG - 5 SHARES SO I HAVE A HUNDRED.
NG/ AU Jan or March calls

Possible DIA 130 Puts, if market rises to much, too fast

Sales for next week:

1. Covered Dec call Goog 680-700? This one is to cover for a little insurance + for maximum gains. So, for instance, If Goog is at 700 by Wednesday, I will sell this at $700 for $30 or so.

Average purchase price of shares - $646 (Nov 20 purchase)

Net gain by December expiration (12/21 or so):

If Goog is at $780 - $8,000 (This would be the worst case for me, and if I saw this happening, I would try to buy the call back.
If Goog is at $730 - $8,000
If Goog is at $700 - $8,000
If Goog is at $650 - $3400
If Goog is at $620 - $400
If Goog is at $600 - ($1600); which scenario I don't care too much about, because I'm happy holding Google for the long-run.

So, I'm covered.

2. Uncovered call Goog 720 -$750 for $10? This one is hopefully going to expire worth nothing.

3. Uncovered LFC Dec 85 Calls to balance out the Calls I own. (Look at the FXI or LFC chart. Shit's goin down for a bit.) Perhaps sell these on a high?


PUTS

Goog $550 Puts
Baidu $200 Puts?
Apple $140 Puts

I'LL WANT TO BE CAREFUL WITH ALL THIS - I'M NOT A FULL-TIME TRADER!

Wednesday, November 21, 2007

IBN, LFC, AAPL, GOOG

Top picks for the next six months. Buy LT calls on the dips:

IBN – Totally unconnected to U.S. Subprime or mortgage crisis

LFC – Again totally unconnected to U.S. Is one of the best Chinese ADRs, for a number of reasons. It’s off because Hong Kong is falling. Hong Kong is falling because it went up too fast in expectation of the Chinese funds outflow. Chinese funds outflow got delayed by the authorities, so Hong Kong is tanking. But the Chinese fund outflow will happen in 2008 – the Chinese have to cool the crazy Shanghai market. So LFC will climb.

AAPL – consumer electronics are still selling. The I-Phone is the favored holiday gift.

GOOG- people across the world aren’t going to stop advertising because the U.S. Economy are slowing down. In fact, they are just starting to advertise on the internet.


Also look at:

BIDU – Somewhat overvalued, but possibly with justification. Buy at about $300. Don’t pay too much for this guy or the volatility will give you a heart attack.

Tuesday, November 20, 2007

Dry Ships? NO! BUY APPLE!

Time to buy Dry Ships?

1. As numerous articles have argued, there is no fundamental reason for the drop in share prices. Panic is the only reason.

2. As the market begins to stabilize, the stock will rise.

3. Sell one Aapl Jan 185 at 13.10; buy DRYS Jan 90?

NO, BUY MORE AAPL. I WANT TO BE IN 1000 SHARES AHEAD OF EARNINGS! OPTIONS AND SHARES COMBINED.

CONSUMER ELECTRONICS ARE STILL KING. READ THIS:

http://blogs.wsj.com/holidaysales/2007/11/20/round-one-whats-on-your-gift-list/?mod=yahoo_hs


BUY MORE AAPL! LAST CHANCE - NEXT 4 DAYS!

Sell Dec OTM calls on BIDU 400s Goog 700s.

Saturday, November 17, 2007

It's the Economy, Stupid

Two interesting, and quite bearish, articles on the U.S. economy by the Economist:

http://economist.com/opinion/displaystory.cfm?story_id=10134118

http://economist.com/world/na/displaystory.cfm?story_id=10134077

The question is: How much will this affect the Stock Market, and especially the multinationals.

The bullish case is that this fear will create buying opportunities in large caps.

The bearish case is that the sinking ship will take everything down with it.

I am siding with the bulls on this one, but I do want to wait for opportunities before investing, buy mostly LT calls, and stay in cash as much as possible.

Two trading points:
1. Revised numbers on GDP are out on November 29, and, according to the Economist, they will likely show close to 5% growth in the last quarter. That will be a great short-term driver, and a great selling point. It may also signal a ST top.

2. I am considering selling one more of my Jan 175 AAPL calls. I have been re-investing those riskier calls in longer-term, more in the money calls and Puts.

Japan - and the Barron's Article

Expect interest in Japan to explode on Monday - because of the Barron's article.

I agree with the article fundamentally, and would like to buy EWJ call options, and JOF stock (for my IRA). I may wait for the fuss to die down, and buy on Wednesday.

BTW, check out the dividend on JOF.

Friday, November 16, 2007

Comment on the Economy

An observation: The Japanese Yen DJI inverse relationship is clear. However, what also seems clear, from recent month charts, is that both the DJI and the Yen are trending upwards. Any one have an answer to this?

I expect the NASDAQ 100 to continue out-performing earnings expectations, through 2008. I also expect select Dow large caps (BA and MSFT for instance) to do quite well - just as I see the consumer getting increasingly pinched, housing falling apart, and the credit crisis continuing.

What's your outlook on this?

Overall View - Important

Just a quick note to remember that I will be shorting the rally I expect next week, both by buying inverse shares and December Puts, which I expect to get cheaper.

Again, I'm expecting a climb up to 13,500- 800 by November 25-30, then a fall to 13,000 or so by December 10 or so, followed by a Tech related rise.

I plan to:
1. Buy DIA December puts next week.

2. Sell a Google December call around November 25-December 4. (Sometime around then Google will announce its bid for bandwidth, which may be a ST Top.

3. Buy back the Google December call around December 10.

4. Buy RIMM December calls on dips in November and December.

RIMM - Alert

RIMM's next earnings are December 20. December options expire December 22. Might be interesting to pick up a couple RIMM December calls on dips in the next couple of weeks, even if I have to get out of Apple to do so. Greater potential upside for RIMM in the short run.

Reasons to be cautious: RIMM is also over-valued compared to AAPL (look at the one-year chart of both companies and the pop RIMM got when it split), so it would help to be careful and to buy on the dips, if there are any. Right now, December RIMM options are going crazy because of a stupid rumor that IBM will buy RIMM. Once that quiets down on Tuesday or so, the option volatility will drop.

RIMM is already selling in China and India. Apple is not yet in China and India. I'm fairly certain that RIMM will make a killing in India and China. It will therefore have a good quarter, reporting high numbers from CHINDIA, and up guidance.

As usual, I expect Big Tech (AAPL, GOOG, FSLR) will come back post RIMM earnings. It's ok to pay a little premium to buy Big Tech December calls.

I am planning on selling a Google covered call some time in the next month and will set the call price accordingly - i.e., in expectation of this end of year bump.

Me so cool

So I'm glad I stuck to my bullish bent. A somewhat anxious day, but I think we might just have gotten the upside momentum I was looking for - and, finger still crossed on this, but it seems as if the Nasdaq might be leading it. Which would be friggin awesome.

Of course, we'll watch carefully on Monday, but given the upcoming holiday season, I think people will realize that people, especially people in Europe and the rest of the world, are still buying IMACS and IPhones and IPods.

AAPL, GOOG, FSLR, and RIMM - should rule. Fundamentally, they should rule. Here's why, in very, very brief, cause the wife wants to spend time with me.

Goog - Is bidding on wireless spectrum auction in Jan. And anyway, Goog has a PEG of 0.97. Case closed.

AAPL - Will be stepping into China, and then India soon.

FSLR - Check out the recent earnings.

RIMM - Already in China. Check out the analyst estimates. No, all the analysts aren't dumb. China demand will kill numbers.


Full disclosure: I own AAPL and RIMM calls, and GOOG shares.

Thursday, November 15, 2007

Oh!

Well,

there goes two-thirds of my bounce. We're hoping for another bounce tomorrow - but hope isn't really worth much in trading. I'm re-assessing my Dow 13,800 by around Thanksgiving (late November) theory. I guess I could be wrong. Which really might just be a first. That I am wrong on a prediction. (No, I'm not being tongue-in-cheek.)

Any way. If I am wrong, and even in the short-term (next week), we are not expecting a bounce but are trending towards lower highs and lower lows, I should short tomorrow.

I am looking to short Retail (how original!). Not sure what else I can short. I don't want to short Tech, because I still think that they are the ones who will bring this carcass back to life.

Tuesday, November 13, 2007

Ha!

Nice bounce - I asked for one, and I got it.

I think that there is a good possibility that this bounce will explode all the way up to 13,800 in two to three weeks, at which point we will start to again worry about the Fed meeting on December 11. So, 13700 - 14,000 by November 30, and then we might come down to reality - about 500 points, I'd say.

So, here's how we will play this scenario:

1. Buy Puts as we go, but ESPECIALLY past Dow 13,500

2. Try one lucky shot. Wednesday - Buy 5- 10 Infy November 45 calls for about 0.20 each. Batterred stock might jump to $48 by Friday, which will mean 1000% gains. Will play this with a hundred or two hundred bucks.

3. Bought some more Crox March 45 calls, on an analyst upgrade (JP Morgan). BTW, most analysts are still very bullish on Crox. If the economy doesn't tank, this stock will zoom in 2008.

4. May exit the Google caller, and sell Google, to free up money to buy more Apple and Crox today. Might even buy a google caller. Yay!

Tempting Tuesday

Looking for a bounce today. The Hang Seng had an up day, which may be the start of a good trend. Or it might be nothing. The BSE jumped. Here, I'm barely confident enough to temporarily hold off on adding Puts. Maybe.

Found some excellent reading material - Brett Steenbarger's blog and his website. Please check out the links on the left.

On his blog post today, Brett indicates that why the market might be at a bottom - and how to know if it isn't. (Link on the left.)

By the way, each of the links on the left is fantastic reading for traders.


Looking to buy LFC, IBN and SLT today. Ignoring the Citi call on BIDU - call premiums too high.

Sunday, November 11, 2007

Moody Monday Morning

BUY SOON:

1. QQQQ and DIA Dec Puts. Is a bigger fall coming?

2. NG/ AUY December Calls

3. Barrick Gold?


RESEARCH:

Gold Miners.


BUY SLOWLY:

Long-term LFC, BIDU, IBN calls

The biggest thing to watch out for this week is Dow 13000. If the Dow closes below 13,000, it will go straight down to 12,500 very soon. Which might actually mean the end of the great bull market. But I think we are going to hold at 13,000. Not enough bad news to break the bull market. So, as opposed to my position one month ago, I am actually bullish on Internet and China on a 2-3 month time frame.

I am selling all my AAPL shares at a small profit ($1/ share, after factoring in the price of the November option sold) to buy options on LFC, BIDU, and IBN and Put protection. I am an options guy, and I need to take advantage of this great opportunity. I already have a 100 shares of Google in the LT portfolio, and I plan to keep selling covered calls on that as it shoots up.

Of course, it seems as if this leaves me extremely exposed to one sector - Internet stocks, but that's not necessarily bad, because it fits my bias. Also, LFC, BIDU, and IBN are foreign plays. BIDU is as much a China play as an internet stock.

I want to wait for the Beta on BIDU to come down a bit before buying options (want the calls to be a bit cheaper). I think that will happen; BIDU is a momentum play and the momentum will go away for about a month or so. LFC might be in the same basket. IBN might not. By the way, IBN call premiums are ridiculous!

Saturday, November 10, 2007

November Forecast # 1

November 10, 2007

NEXT WEEK or TWO (November 10 - 24):

Overall view:

Things might pick up early next week, but I may use any rise to sell out of a couple of the Jan AAPL 175 calls I bought last week for an average price of $17. I think Apple (and high flying tech) may move sideways for a couple of weeks - which will reduce the Beta and hopefully the price of calls by late November, before the end-December rise. I'll be happy to get out of one or two calls next week for around the average purchase price, and reinvest the money in Puts.

I WILL BUY NOVEMBER OR DECEMBER INDEX PUTS ON EVERY UP DAY NEXT WEEK, TO COVER MY CURRENT NAKEDNESS.


1. LFC – Zacks.com comes out with good call, but stock is trending down. Watch the chart. I will buy LT calls in one or two weeks, or when I think the fall is over.

2. IBN – What did they do with the extra capital raised by the shares they recently issued? The additional shares brought the EPS growth down to a oh-so-terrible (tongue-in-cheek) 30 percent or so, but is whatever they are doing with that extra capital factored into analyst earnings estimates? I want to buy India because that is one of the first places that will trend upwards when people start seeing straight. Watch charts for a stop in the downtrend. Perhaps around 56?

I am concerned by the reports on IBNs debt-recovery practices, but I am encouraged by the fact that they are doing a lot in Micro financing. Hopefully, the press will keep the recovery people legit.

VE = Over-priced Utility OR cheap Water play. VE is the "Biggest Water Company In the World," according to someone I read recently. Well, it is certainly not the cheapest, and so, at the moment, I think it is a bit over-priced, but it might go still higher because of the dollar's fall. Everyone and their mother want to buy water and Euros but they don't realize that 1) the European Union is only forecasting 2.4% growth in the next couple of years, 2) there is a good chance that America will acheive the same, and 3) If #2 is true, and if people are still expecting America to fall, America will be underpriced in late November (from a six-month to one-year perspective.)

Wait till late November to buy calls?

GOLD – miners, GG. I am bullish on Gold. Gold miners haven't been rocketing like they were a couple weeks ago, which, technically, might suggest an oncoming correction. Some people are taking profits on miners, because a lot of newbies are piling on without regard to miner fundamentals.

I don't think a big gold correction is coming, but I do think some miners are risky bets. I like Nova Gold (NG), and I hold November calls.

GOOG - Remember the "G-Phone," whatever it is. The stock will not die any time soon. No matter what is happening to the rest of the economy. In fact, I want to hold onto it as a pillar of strength, and I suspect it will be the same for many others. Also remember that Tech is strong this time of the year.

One scenario: Google might come up next week, if Google announces a news conference, fall on the news that there is no immediate profit to the bottom line, and rise again in January.

I hold 100 Google shares in my LT portfolio and because I am so bullish on Google in the short-term, I don't want to sell December covered calls UNLESS it goes up a lot very fast - in which case I may sell calls before any big announcement.

Two Strategies:

1) Hold shares in LT portfolio. When expectations climb, stock will come up close to 690 again. Perhaps even past 700. Sell December Calls when Goog is very high. Perhaps December 730s, because I expect the stock to rise in December and January.

2) Sell Google shares when up. Buy LT Goog options sometime in November (late this month?), when Goog is down. Problem with this option is that Google calls are so damn expensive and it's so damn difficult to predict when exactly Google will go up.

Perhaps a combination of 1 and 2. Hold the shares and sell covered calls when high. Buy LT calls when Goog is down? Sure. Will all my millions.


AAPL - Jan estimate 220. If stock price stays stagnant, Jan calls will get cheaper. I will sell a couple of Jan calls on an up day next week, and buy them back later. Hopefull this will work, and Apple won't rocket up sooner than I can say hello. In any case, I need to free up a little capital.

Price Ranges:

November 160 - 180.
December 160-200 (towards the end of December.)

November 10 Lessons

Something is not working, or I wouldn’t be down 10% in one week.


LESSONS FROM CSCO EARNINGS

I got a bit unlucky with CSCO and CTSH this year. I also trusted the GS calls blindly, going into earnings, and didn't buy any real protection.

Lessons:

1. I will NOT hold onto uncovered calls going into earnings. I will buy some Puts. Even if analyst expectations are great, I will COVER MY ASS with good Puts.

2. I did a good job on getting rid of expensive CSCO calls ahead of earnings.

3. I need to focus on fundamental analysis: Buy long-term calls in undervalued firms that will come up.

4. I will always have Puts in place. Even if I am one day ahead of Options expiration, even if the market is headed down.

5. I will expect my Puts to become worthless. I will first buy the next month's Puts, then sell this month's Puts.



LESSONS FROM NASDAQ FALL, WHICH I HAD PREDICTED

I guess I could argue that I got a bit unlucky this past week. I had been expecting a NASDAQ fall, for more than two weeks now. I had even predicted it to Chach. My largest options holdings were QQQQ puts. But I sold them all for little gain the day the market started falling, because I had one eye, or maybe BOTH eyes, on options expiration.

So, actually, I didn't get unlucky here. I just made a mistake. My MISTAKE was that I wanted to NOT LOSE money on my Puts. I had made stupid last-minute calls on CSCO and CTSH, and I didn't want to lose another buck on my Puts.

I need to think of Puts as money that is gone. The minute I put it in, it is gone. It is my fee for the gains. My insurance for the calls.

Also, I didn't realize that the market would keep falling. Because I wasn't in Predicting mode, sit-back-and-laugh-at-the-fools-panic mode. I was in stardust-in-my-eyes look at the dollars falling from the sky mode.

So I guess the lesson (and I have realized this a couple of times already) is that I don't trust my long-term insights enough. I get too wrapped up in day-to-day trading and forget about what I had written in my diary, or in my Word Document. Which is why I want to keep referring back to this blog, on a regular basis, to read my previous posts.

I need to remember that my biggest gains come on my LT predictions, and that LT predicting is my strength and my style.

1. Put buying – I will always hold Puts. Even when Options are expiring and market is going down. If I am naked, I will buy Puts even when the market is going down.

2. Because of # 1, I will stop having huge down days. That’s over now.

3. LT Value investing verses ST Earnings Plays –

I will spend 90% of my investing time forecasting the future and writing about it, and finding values. I will spend 10% of my time looking at my portfolio. Fundamentally, because of who I am and want to be, I am more comfortable sitting back and reading and hiking and meditating than I am glued to my computer mindlessly watching tickers go up and down. As I have seen, I am better at forecasting than most others. It is when I get caught up in the day-to-day jumble or panic that I lose my forecasting edge. Because I am not a technical analyst that is also when I make mistakes - such as buying too soon when a stock is going down.