Can Gold Drop Further?

I think gold is headed lower in the next month. So one might ask...why the heck did you close out your short position? Answer: I saw a nice profit and I took it. Plain and simple. I still believe in the trade, so I picked up three Feb $97.00 puts on (GLD) @ $0.33 each.

Here is how I am looking at this trade going into it, I'm playing with the houses money. I made a few hundred bucks on my earlier short, so I take some of that money and triple down. If the trade goes against me, I still make money overall. If I am correct in my thinking, then I should make a very nice profit.

The Weak Consumer

I'm betting against the consumer heading into the rest of the summer. Specifically some of the speciality retailers. I am in the process of shorting Aeropostale INC (ARO). Looking to short this company via the October 30 puts. The bid/ask is currently at $2.55/$2.75, so I split the difference with the hopes of a pullback within the next 30 days.

Latest and Greatest

Finally got into Vasco Data Security INC (VDSI) via an options play. I bought a Sep 10 call for $3.70 and I like the fact that I have until Sep to let this trade play out, which is the great thing about options. I am still a newbie to the world of options and still have plenty to learn. In this volatile market, it has been my investment in calls/puts, which has earned my the most money this year. If you are an investor interested in learning more about the options, I would recommend checking out this book: "Understanding Options" by Michael Sincere. He lays out the basics in very understandable terms and it has been the book I reference the most.

Just wanted to bring everyone else up to speed on some recent trades. I have added to my position in Sterlite Industries Limited (SLT) and re-entered into Companhia Vale do Rio Doce (RIO) in after market hours trading. HAGO Justin

Sold QQQQ's

Sold my QQQQ Feb 52 puts @ $3.09. Nice little pop.

QQQQ Put

Picked up 1 QQQQ Feb 52 put at $2.57. It traded as low as $2.30, but climbed back up a bit and I think will increase in value during tomorrow's trading day.

Options Expiration

As the mantra in my blog states, "lessons learned good and bad," Tomorrow I have a bunch of put options that are going to expire worthless because I was over zealous with my purchases. I fell into the classic trap of buying "out of the money" puts because they were cheaper when compared with their "in the money" counterparts. One thing to always remember, when you are a buyer of puts/calls time is your ENEMY and conversely when you are a seller of puts/calls time is on your side and you want that option to expire worthless, so you can pocket that premium and then turn around and sell another option against the same 100 shares of stock. I actually find myself in this situation because back in Nov I sold a Dec 25 call on VDSI for $1.20, so looking at the price right now it is likely to expire worthless tomorrow. I am also currently contemplating selling some covered calls against my position in RIO.

Christmas Sell-Off?

I think the market will be down at the end of this week. The factors that play into my thought process are year end taxable events, market still recovering from only a 0.25 rate cut, and people closing out positions to lock in year-end gains for themselves and/or stakeholders. There are a few sectors, which I think will be weaker in the near future, so I will keep an eye out for some weakness on Diana Shipping (DSX) and Dryships INC (DRYS). I will also look to short or pick up some puts on Transdigm Group (TDG).

Waiting For a Fed Move

It looks as if a bit of uncertainty is slowly creeping its way into the market place prior to the fed's anticipated rate cut on December 11th. Here is where it gets interesting, initially the market was falling all over itself trying to coerce the fed for a rate cut. It looks as if the market will get its wish, which is why I believe the market was up so huge last week. Anyhow, I feel the market is getting too greedy and talk is abound about how the market may be hoping for a 0.5 basis cut. So what happens if the market gets the lesser of the two? In my opinion the market will take on a downward trend.

To be honest, I have a few put plays in the options market, which expire in December and are not looking to hot right now. However, I still hold out some hope that the fed cuts rates by only 0.25. If for whatever reason they don't cut rates at all then the market better brace for a large drop in market share and increased volatility. I will continue to monitor the market until the fed makes its move, but I am not looking to make any additional large moves in either a bearish/bullish direction.