Posted on September 30th, 2008 by
Mojo
With the general mood being one of shock and scarcity even the best companies are on sale this morning (Tuesday). For long term I still like Bank of America (BAC), consumer products would be Proter and Gamble (PG), Microsoft (MSFT) for software, nothing in the auto business, nothing in the semis, and Altria (MO).
Go look for good stocks that you have wanted for a long time, that are optionable, that are well positioned, good in recessionary times, and are not politically sensitive. These are not technical entries (yet) but mostly fundamentals. For you Fundamentalists out there, today is your day! 
Mojo
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Posted on September 28th, 2008 by
Mojo
Just after I wrote the article on bottom feeding and looking at Bank of America I placed a Bull Put Spread (BLPS) selling the Sept 25 puts and buying the Sept 22.50 puts. This gave me a credit of +.53 and a max ROI of +26%. As long as BAC closed above 25 on Sept expiration I was good. Here’s the chart:
You can see my entry and exit above. I caught the support and runup. I locked in the profit and closed the trade a little early for a +22.8% gain in 3 days!
Mojo
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Posted on September 26th, 2008 by
Mojo
A good friend of mine, Hugues (pronounced OOOOOOOOOOOGGGHHHH, sorry he’s French :) ) got me and few other friends invited to an actual German Oktoberfest. I live near DC so we have lots of diplomatic types around. This party took place on German soil (OK, it was a hangar at Dulles but is officially German country land), three bands (US, Canadian, and German military), and about 2,000 of my closest new friends. :)
All of the food (Brats, Goulash, Kraut and Schnitzel (that I never found)) and beer was flown in directly from Germany and was awesome! To quote a dear friend of mine “And we may have had 1 or 2 or 12 beers”. I was absolutely stuffed and content. I should have worn my stretchy pants!
My family has a good bit of German heritage and we spoke German in our home for five years until my Mother remarried. It was fantastic to hear the language again, eat the food and remind me of how much I miss and love other cultures.
Its always great to hang out with my buddies.
Thanks OOOOOOOOOOOOOOOOOOGGGGHHHH!
Mojo
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Posted on September 19th, 2008 by
Mojo
From my post yesterday on the potential RUT reversal we are up 85pts. Slightly more than the 30 to 50 I forecasted but I will take it!
Now what? I’m going to use this huge gap up (we are up 400 pts pre-market) to close out my bullish positions (short puts, long calls) and look for a reversal. Could it run away from us? Sure… but I don’t believe it will. Regardless I will be trading what the market gives me and not what I think will happen.
Remember - NEWS TRUMPS EVERYTHING! Be careful out there…
Mojo
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Posted on September 18th, 2008 by
Mojo
Its about 1pm ET on Thursday afternoon. The RUT is 675 and the RVX is near 44.
Trading has been very active and pretty profitable. I’m just really, really glad to be an option trader in all of this mess and to be able to make some time decay and protect my positions without suffering through a bunch of stop losses and whipsaws like the stock folks.
Anyway, we now have all of the ingredients for a reversal. I’m not talking about one of those 200 point type deals but something on the order of 30 to 50 points. Here’s why:
The $RVX is a measure of the volatility on the Russell 2000 (RUT). In a sort of simplitist way it measures the fear in the market (really its measuring the ratio of put buying to call buying). When its high (which it is right now), fear is high. When its low, fear is low. Usually the $RVX reaching recent highs is a pretty good indicator of a potential reversal forming. That doesn’t mean it will reverse; only that the ingredients are in place. Once it forms a recent high and reverses then you will likely have a reversal in the market.
Why is that? Simple. Because most people are wrong most of the time. If everyone is short (bearish) and the market does have a good day all of those buy-to-cover orders (stop losses for short positions) will fire off market orders to buy. All of those market orders will likely push the broader market up in the short term. Sounds strange? Take a look at these one year charts on the RVX and the RUT:
No guarantees of course but I’m setting up some trades to take advantage of the potential movement and the volatility decline. If we haven’t seen a reversal in a few days then I will likely close down the trade.
Mojo
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Posted on September 15th, 2008 by
Mojo
A dear friend of mine is in his 80s. He and his wife lived next to me for 10 years (until I moved). Super neat family and always willing to take the time to be chat up. Anyway, here was a guy that worked most of his life for the phone company, made good choices, saved some money and made even better investment decisions. He wasn’t a “throw it in the mutual fund pool and let someone else deal with it” type of guy. He was and is… sophisticated. He already had a good defined benefit pension (remember those??) but continued to invest in real estate, mortgages, and specific stocks. What was one of his favorites??? Yep, Bank of America.
He wasn’t blind to their risks, he understood their business, loved their cash flow and had a fervent belief in their management. Because I believe that the older folks in America have a lot more to teach us than the younger folks I’ve always keep a close eye on this stock. Why am I bringing all of this up? Because I believe that Bank of America is making and will be making some very shrewd acquisitions over the next 12 months.
In the end Bank of America will come out stronger, faster, and better than anyone expects. Much like Goldman Sachs, Bank of America is a leader in its industry. Once the dust settles the weaker players will be gone, their better assets and personnel will be acquired and we will be left with the leaders. Then the money will come flowing back in, straight to those leaders and we will be back in business.
When will all of this happen? I don’t really know but I think we are close enough to the bottom to do a little fishing, sell some time and make some money while we wait. I can’t think of a better time to be option trading. 
Mojo
PS - I just read a similar article from a friend of mine over at ChoiceIsFreedom.com . Smart guy, attorney, investor, and ex-baller. Check it out.
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Posted on September 8th, 2008 by
Mojo
The government has announced that they are going to take over the operations of Fannie Mae and Freddie Mac. They are going to provide operational and financial guarantees hoping to stabilize the market. The stock market futures has gone batshirt crazy over this and is up over 35 pts (SPX) from Friday’s big reversal.
I’m going to use this gap up to close out several Sept positions. I won’t be initiated anything new until I see the markets settle down a bit. Overwhelming enthusiasm can just as quickly become overwhelming pessimism so I’m being cautious. I figure at some point someone might ask the question “If its so bad that the gov’t has to take over shouldn’t I be more concerned??”.
Mojo
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