Yay verily the Market did Rally today...as I said it would...

And Mother was RIGHT again...that is where the money is going....

I read through this Thread and I find U Boyz to be flopping around like Chickens with their heads cut off...going about willy nilly...to and fro...back and forth without rhyme or reason...it is so funny...

so that's what a rally looks like?

It bounced off the 200 day moving average....Your going to see some ROCKY Sledding as the Market Transitions into the Consumer Staples take a look at what Coca Cola did etc

SPX bounced off 200 day MVA. NDX still stuck below it. Yes, market is trying to rally. I'm guessing many investors will be selling into rallies.

Staples doing well, sure enough. Professional investors are running there as hiding places, because they have to be fully invested.

I'm not sure if it makes sense to go there, as an individual investor. If you expect a market decline and want to be safe (and you want to play the short-term game), what's wrong with parking in cash? If you want to try making money during a market decline, what's wrong with shorting?

Russell 1G staples sector has gone up only 1% since recent low 4/17. Of course, if you picked the right stock, you could have done better. KO has gone up 7% in that period. PEP 6%.

But NDX has declined 9% in that period. Shorting NDX with 2X leverage (can do through open-end mutual funds) returned 18%. And you didn't have to figure out which staples stock to pick.

Homebuilder put options are doing fabulous for me. I loaded up 10 more contracts today as the homebuilders bounced on April new home sales rebound.

Nevertheless, I see the market in a correction and nothing worse without a trigger. Of course, I have a high cash position, so up, down, or sideways does not bother me. I am patiently waiting for stronger winds.

Day number 2 of thefking Rally...BECAUSE I SAID IT WOULD....

If this is accepted as a correction and it's over it'll be remarkable. Most other countries are in correction mode big time.

The tax cut rally within the greater realm Bear mkt hit's a bump and keeps on going. Remarkable.

I was out today, didn't get to watch the market. Hmm, maybe time to cover.

Why do I suffer fools so lightly?

Options? Man, you've got bigger cajones than me. Would you be willing to do a thread blogging your options trades like I did a few months ago with my Cramer trades? I'd be very curious to be a fly on the wall and watch.

Oh yeah, and I should warn you, this evening (May 25, 2006) Cramer pumped TOL pretty hard. It was up 1.3% from $28.43 to $28.80 by the end of his show (where I shorted $60k of it ;)). Just a heads up if you have TOL puts. Don't freak out if it gets weird tomorrow morning.SmileWavy

You can put lipstick on a pig. Philadelphia Housing Sector was up 200% from Jan 03. I have a newsletter from Investech that reviews homebuilders that crashed in the early 90s. Homebuilders in the 90s were like tech stocks in 2000. The only danger in homebuilders today is book value. However, their book values are based on overvalued housing inventory and overvalued undeveloped land.

I will compile a summary of my options and post later. I have been lucky the homebuilders have been sliding lately, and my early option buys have doubled in value. I don't plan to drop more than $10-15k in this stuff. I want to average in as the builders bounce. Real money is in 28-day treasury bills. I smell foreclosures around the corner (within 2-4 months). That's where I win my main dough.

JanusCole,
Options Made Easy is a pretty good book. Also, check out the cboe.com site, I think you can register for free and they often do free instructional webcasts.

If you do any options, they don't trade after hours. I got caught holding a position during financial reports on Palm 2 years ago that I got creamed on. Not fun watching an after hours run up just collapse and not be able to get out.

I would be interested to see some Options plays. Especially the multi-legged positions; stradles, strangles, butterflies, etc. I couldn't quite figure out where those made more money than what you were losing on the negative side position.

LOL....BOOK VALUE....like everything else the Market is prone to excess....if MSFT were trading at Book Value you'd see their share price at close to $40 and where are they today pray tell....apx $24....and why is this cause they are outa favor....no rhyme or reason....they have warehouses full of cash that they don't know what to do with.

Foreclosures in 2 to 4 months...and pray tell what are U going to do with those in a downward RE market....U may very well be under water with them by the time they close.

U shouda Shorted TOL when they were $90 or $80 or $70...

tabs, I prefer to make my money the hard way. You needn't worry about peons like me. RE always goes up, or something like that. ;)

I do need to study options more. I am buying out-of-money options to leverage the play money more. I am not sophisticated.

MSFT book value is $4.11. Price/book is 5.7.
TOL price/book 1.5
CTX price/book 1.25
WCI price/book 0.88

Nevertheless, builders are slashing prices across the country, and growing carrying costs are adding to expenses. I did not short the builders last summer, because there was no evidence the decline was here. As of now, the entire sector is breaking through support levels and all are giving lowered guidance. At the same time, brokerages are still pumping the individual stocks, and lots of institutions and mutual funds own the stocks. When those buyers give up, I feel the sector will continue downwards. I believe they will give up another 40-60% before it's all over. The options leverage, so every 10% decline = 100% gain, and then we are in-the-money.

This is just my eneducated opinion. I am trading on my gut. That's why I'm using play money.

Janus,
How did you manage your TOL position today? Looks like it could have been rough going. The only reason why I ask is I've BTDT, figuring out when to buy back is hard.

Seems like NDX is trapped btwn support trendline (connect the lows) and 300 day. Guess I'll stay put until it breaks out, to high or to low.

JanusCole,

Just curious why you think using options is big cajones business, when you are shorting 60K worth of a stock? You could be using options to limit your risk, or increase your profit potentials.

Take for example if when you short a stock you could go out and sell some puts. By selling the puts you are decreasing your upside risk by the amount that you sold the puts for, but you are also limiting your downside profitability. If the stock were to drop through the strike price of the option you would no longer be short the stock. But it is less risky the being absolutely short the stock. This is just the first example of many ways you could massage a short stock position.

911SKB, if you can trade the stock after hours you should be able to hedge your option position to narrow losses. Also if you are long options you can exercise them after the close for 15 or 30 minutes I forget which one it is. If you are short options you are correct there is nothing you can do after 4;00 other than trade the stock against your short option position. Always be aware of synthetic positions. For example realize that shorting the put and shorting the stock is the same as being short the call. Being able to recognize the synthetics would be helpful information after hours.

Another good book on options that is considered, "the bible of options," is Sheldon Natenberg's book "Option Volatility and Pricing." It has all the information on the synthetic positions that you can create with puts, calls, and stock.

I also have a book in PDF format that I could email to anyone that is interested. It is big though so you have to clean out some of those old emails. It is a tough read, but it goes into detail about complex option positions such as straddles, strangles, butterflys, christmas trees ect. PM me with your email address if you are interested. This book is really into synthetic positions.

Rich

I'll have to check with Mother to see how I am doing today...but so far this is DAY #3..of the Rally nad why....BECAUSE I SAID IT WOULD!!