The Dollar, The Market, Oil

Okay, so the dollar's meteoric rise of late has begun to collapse. What did everybody expect? I don't think many people who know what is really going on honestly thought that the dollar would do anything but slide in value compared to other currencies when the Fed decided on this zero interest yield on treasuries plan.

It's quite surprising that Oil has continued to fall for the last couple of days. That's not what I would have expected. In fact, I would still expect oil to rise for two reasons. First, OPEC sharply cut production recently. Second, since the dollar is the currency used to buy oil on the exchanges, when the dollar slides in value, the price of oil rises.

The fact that oil has not risen with the slide of the dollar, and OPEC production cuts means that investors anticipate a recession/depression that will be so severe that the demand for oil will continue to fall down down down, similar to what happened in the 1980's. Given the strong upward pressure on oil from the dollar, and OPEC, the fact that oil is still falling says that investors expect this recession to be BAD. I feel the same way, 2009 is shaping up to be a bad year.

I'm staying out of oil stocks for now. There are a lot of unusual things going on in the market and I can't keep track of everything, and even though I still expect oil to rise, I just don't know.

I've still got my long term put options on Goldman Sachs. So far the Bernake/Paulsen insanity has propped up that institution. And I still think that before June they will get battered some more, so I'm holding on to that position.

I have several long term put contracts of RKH, the ETF for the retail sector. After the holidays and everyone announces earnings I anticipate that the retail sector will slide again pretty hard.

The market is kind of grinding higher. I think it will do that while Bernake/Paulsen work really hard to calm everyone down and spend taxpayer money to magically convince everyone that everything is going to be okay.

But sometime in the next 3-5 months, things will tank again, bringing the Dow down to around $5000. Until that starts happening, I'm just going to take it easy in cash. Actively trading the insanely volatile up/down market of the last couple of months is something I'm just not very good at.

Just Riding Goldman Down

You, my loyal readers may be asking yourself, what is Big Jay doing in the market.

Well, I'll tell you exactly what I'm doing. I'm mostly in cash. I've got a small position in AIG (1000 shares) that I bought when it was trading around 2.25/share. And I've got a fairly sizeable (for me) 20 contract position in LEAP Put options for Goldman Sachs. They don't expire until June 2009, so the time decay isn't killing me off. And really, if you look at the GS chart for the last 3 months. It's just ugly. There is still plenty of downside left for Goldman, and I don't see the headwinds letting up anytime soon.

I got out of my JP Morgan puts about 3 weeks ago at a healthy profit.

For my real money speculative trades, I'm looking for companies like Accys Technologies which is currently trading on the Amsterdam exchange, or OTC, for $2.50/share. I like ESLR - Evergreen Solar which is around $4/share. I like these companies because it's extremely cheap to rack up lots of shares. Accsys takes soft woods like poplar, and through a chemical process modifies the wood so it looks and behaves like precious hardwood. Evergreen solar makes solar panels, and is currently undergoing some rough times because their financier was Lehman.

Both companies are positioned well for what I think is going to be the next 'bubble' - namely green technology. The sustainability freaks (like me) are going to want companies like AXS, and ESLR in their 'sustainability minded ETF's'.

I'm thinking that my new approach to speculative investing is going to go like this: Buy certain sectors of penny stocks at random in like, $500 - $2000 chunks. Hold on to them, and don't worry about performance for years. If I had bought Investools stock back when it was first listed on the AMEX in 2002, there were months and months where you could buy shares at .10 cents a pop. I know a handful of people who bought and chilled, then sold covered calls on the shares they owned. That's just beautiful.

Check Into Cash

I still own my JPMorgan Put options. They're up like $30,000. And I plan on keeping them for a while. I still think JP Morgan is going to go down some more. Notice the megaphone pattern forming starting around June 2007. I bought this put option the day it was trading around the $50 level. On Friday the stock went up a couple of bucks. But not because of any fundamentals surely.




And I still think the market in general is going to go a lot lower.

However. I think we've gone down far enough for now. The next couple of weeks we're going to hear a bunch of talking heads talk about how nobody would have lost money if they would have just ridden out the storm and held on to their mutual funds. We will see a bounce and the DOW will grind upward a thousand points or so for the next 10 trading days.

The VIX will get down to 30 or so.

Right after Obama takes office (or McCain - yeah right) the stock market will crater. It will be a bloodbath. Everyone in the world will still be trying to dump all their money into treasuries.

Eventually, and I'm going to call this... within the next 18 months... the bond market will be in danger of collapsing and Ben Bernake will pull a Volker and crank up the interest rates. The stock market will fall further, and everyone's bonds they bought during the initial market drop will drop in value because interest rates go up.

THEN and ONLY THEN will it be the buying opportunity of a lifetime.

But until then keep your powder dry.

I'm thinking about selling some naked puts over the next couple of weeks. But I'm going to keep all trading positions small. I don't trust my judgment enough on a day to day basis to bet the farm on any one trade (except JPM and I'm not exactly betting the farm there).

Everyone Cashing Out

I think everyone is rattled by the current market situation. Several times in the last couple of days individual stocks, as well as various indexes have reached support levels, and the support was just crashed through. Today it looked like we were in for a bounce, and it sort of happened. But in the last 1/2 hour of trading action the market went right back down to where it opened. I made some bad trades.

No biggie.

Today's trade JP Morgan Puts

I was in cash all day today until the end of the day. I got into a JP Morgan Put option

30 contracts
42.5 Strike Price
March 2009 Expiration
7.75 per share
$23,250 Total Cost

We'll see how it goes.


For those of you who are curious - Here are my trades from the last 3 months. You'll notice - nothing fancy. No covered calls, no spreads. Just plain vanilla directional trades.

Date Range 8/1/2008 - 10/2/2008
Trade Date		Action	Symbol/Desc.	Qty	Price	Comm.	Net Amount	Gain/Loss for symbol
10/02/2008	O	STC	.QAAWA - AAPL NOV 105 Put	10	$15.25	$15.00	$15,234.91
09/29/2008	O	BTO	.QAAWA - AAPL NOV 105 Put	10	$13.20	$15.00	($13,215.00)	2,019.91
Total Realized Gain/Loss for AAPL					$2,019.91
ABFS
09/30/2008	O	STC	.FDQVG - ABFS OCT 35 Put	10	$2.75	$15.00	$2,734.98
09/25/2008	O	BTO	.FDQVG - ABFS OCT 35 Put	10	$2.40	$15.00	($2,415.00)	319.98
Total Realized Gain/Loss for ABFS					$319.98
ABX
09/11/2008	O	STC	.ABXME - ABX JAN 2009 25 Put	10	$2.60	$15.00	$2,584.98
09/09/2008	O	BTO	.ABXME - ABX JAN 2009 25 Put	10	$2.00	$15.00	($2,015.00)	569.98
Total Realized Gain/Loss for ABX					$569.98
AET
08/19/2008	O	STC	.AETUH - AET SEP 40 Put	20	$1.15	$30.00	$2,269.98
08/08/2008	O	BTO	.AETUH - AET SEP 40 Put	20	$0.75	$30.00	($1,530.00)	739.98
Total Realized Gain/Loss for AET					$739.98
AGO
09/30/2008	O	STC	.AGOWW - AGO NOV 17.5 Put	10	$4.00	$15.00	$3,984.97
09/25/2008	O	BTO	.AGOWW - AGO NOV 17.5 Put	10	$3.50	$15.00	($3,515.00)	469.97
Total Realized Gain/Loss for AGO					$469.97
AUY
09/30/2008	O	STC	.AUYWB - AUY NOV 10 Put	10	$2.35	$15.00	$2,334.98
09/26/2008	O	BTO	.AUYWB - AUY NOV 10 Put	10	$1.50	$15.00	($1,515.00)	819.98
Total Realized Gain/Loss for AUY					$819.98
BAC
09/09/2008	O	STC	.BACUA - BAC SEP 27.5 Put	10	$0.16	$15.00	$144.99
08/19/2008	O	BTO	.BACUA - BAC SEP 27.5 Put	10	$2.07	$15.00	($2,085.00)	-1,940.01
08/13/2008	O	STC	.BACUF - BAC SEP 30 Put	20	$3.05	$30.00	$6,069.96
08/08/2008	O	BTO	.BACUF - BAC SEP 30 Put	20	$2.01	$30.00	($4,050.00)	2,019.96
Total Realized Gain/Loss for BAC					$79.95
BAX
09/30/2008	O	STC	.BAXWM - BAX NOV 65 Put	10	$3.00	$15.00	$2,984.98
09/26/2008	O	BTO	.BAXWM - BAX NOV 65 Put	10	$2.35	$15.00	($2,365.00)	619.98
Total Realized Gain/Loss for BAX					$619.98
BBT
09/09/2008	O	STC	.BBTUF - BBT SEP 30 Put	10	$0.45	$15.00	$434.99
08/08/2008	O	BTO	.BBTUF - BBT SEP 30 Put	10	$2.40	$15.00	($2,415.00)	-1,980.01
Total Realized Gain/Loss for BBT					($1,980.01)
BLK
08/06/2008	O	BTC	.BLKHD - BLK AUG 220 Call	10	$12.20	$15.00	($12,215.00)
07/28/2008	O	STO	.BLKHD - BLK AUG 220 Call	10	$8.90	$15.00	$8,884.95	-3,330.05
08/19/2008	O	STC	.BLKUB - BLK SEP 210 Put	10	$11.80	$15.00	$11,784.93
08/08/2008	O	BTO	.BLKUB - BLK SEP 210 Put	10	$9.40	$15.00	($9,415.00)	2,369.93
Total Realized Gain/Loss for BLK					($960.12)
BVN
09/30/2008	O	STC	.BVNWE - BVN NOV 25 Put	10	$3.50	$15.00	$3,484.98
09/26/2008	O	BTO	.BVNWE - BVN NOV 25 Put	10	$3.70	$15.00	($3,715.00)	-230.02
Total Realized Gain/Loss for BVN					($230.02)
C
09/30/2008	O	STC	.CWD - C NOV 20 Put	10	$2.87	$15.00	$2,854.98
09/23/2008	O	BTO	.CWD - C NOV 20 Put	10	$2.43	$15.00	($2,445.00)	409.98
Total Realized Gain/Loss for C					$409.98
CL
08/08/2008	O	BTC	.CLIO - CL SEP 75 Call	10	$3.30	$15.00	($3,315.00)
08/08/2008	O	STO	.CLIO - CL SEP 75 Call	10	$3.00	$15.00	$2,984.98	-330.02
Total Realized Gain/Loss for CL					($330.02)
CNI
09/29/2008	O	STC	.CNIWJ - CNI NOV 50 Put	10	$3.80	$15.00	$3,784.97
09/26/2008	O	BTO	.CNIWJ - CNI NOV 50 Put	10	$2.65	$15.00	($2,665.00)	1,119.97
Total Realized Gain/Loss for CNI					$1,119.97
DEERE AND CO
09/09/2008	S	Sell	DE - DEERE AND CO	100	$61.14	$14.95	$6,099.01
02/11/2008	S	Buy	DE - DEERE AND CO	100	$82.86	$14.95	($8,300.95)	-2,201.94
Total Realized Gain/Loss for DE					($2,201.94)
DIA
09/23/2008	O	STC	.DIAVJ - DIA OCT 114 Put	10	$5.45	$15.00	$5,434.96
09/19/2008	O	BTO	.DIAVJ - DIA OCT 114 Put	10	$3.70	$15.00	($3,715.00)	1,719.96
10/02/2008	O	STC	.DIAXA - DIA DEC 105 Put	10	$7.00	$15.00	$6,984.96
10/02/2008	O	BTO	.DIAXA - DIA DEC 105 Put	10	$6.35	$15.00	($6,365.00)	619.96
Total Realized Gain/Loss for DIA					$2,339.92
DRE
09/30/2008	O	STC	.DREWE - DRE NOV 25 Put	10	$2.95	$15.00	$2,934.98
09/26/2008	O	BTO	.DREWE - DRE NOV 25 Put	10	$2.35	$15.00	($2,365.00)	569.98
Total Realized Gain/Loss for DRE					$569.98
DRQ
09/26/2008	O	STC	.DRQWJ - DRQ NOV 50 Put	10	$6.70	$15.00	$6,684.96
09/26/2008	O	BTO	.DRQWJ - DRQ NOV 50 Put	10	$6.00	$15.00	($6,015.00)	669.96
Total Realized Gain/Loss for DRQ					$669.96
EPI
08/06/2008	O	STC	.EPIJX - EPI OCT 22.5 Call	40	$0.65	$60.00	$2,539.98
04/08/2008	O	BTO	.EPIJX - EPI OCT 22.5 Call	40	$3.70	$60.00	($14,860.00)	-12,320.02
Total Realized Gain/Loss for EPI					($12,320.02)
FINISH LINE INC
09/09/2008	S	Cover	FINL - FINISH LINE INC	1000	$10.86	$14.95	($10,874.95)
07/28/2008	S	SS	FINL - FINISH LINE INC	1000	$10.39	$14.95	$10,374.99	-499.96
Total Realized Gain/Loss for FINL					($499.96)
GOLD
09/30/2008	O	STC	.GUDWH - GOLD NOV 40 Put	10	$4.20	$15.00	$4,184.97
09/26/2008	O	BTO	.GUDWH - GOLD NOV 40 Put	10	$3.40	$15.00	($3,415.00)	769.97
Total Realized Gain/Loss for GOLD					$769.97
GOOG
10/02/2008	O	STC	.GOPWF - GOOG NOV 430 Put	10	$53.40	$15.00	$53,384.70
09/29/2008	O	BTO	.GOPWF - GOOG NOV 430 Put	10	$51.40	$15.00	($51,415.00)	1,969.70
Total Realized Gain/Loss for GOOG					$1,969.70
GS
09/24/2008	O	STC	.GSMD - GS JAN 2009 120 Put	10	$15.15	$15.00	$15,134.91
09/23/2008	O	BTO	.GSMD - GS JAN 2009 120 Put	10	$20.45	$15.00	($20,465.00)	-5,330.09
09/30/2008	O	STC	.GSWD - GS NOV 120 Put	10	$12.20	$15.00	$12,184.93
09/29/2008	O	BTO	.GSWD - GS NOV 120 Put	10	$10.20	$15.00	($10,215.00)	1,969.93
Total Realized Gain/Loss for GS					($3,360.16)
HON
09/09/2008	O	STC	.HONUJ - HON SEP 50 Put	10	$2.30	$15.00	$2,284.98
08/08/2008	O	BTO	.HONUJ - HON SEP 50 Put	10	$1.95	$15.00	($1,965.00)	319.98
Total Realized Gain/Loss for HON					$319.98
KGC
09/30/2008	O	STC	.KGCWW - KGC NOV 17.5 Put	10	$2.65	$15.00	$2,634.98
09/26/2008	O	BTO	.KGCWW - KGC NOV 17.5 Put	10	$2.35	$15.00	($2,365.00)	269.98
Total Realized Gain/Loss for KGC					$269.98
KO
09/03/2008	O	STC	.KOUX - KO SEP 52.5 Put	10	$1.65	$15.00	$1,634.99
08/08/2008	O	BTO	.KOUX - KO SEP 52.5 Put	10	$0.80	$15.00	($815.00)	819.99
Total Realized Gain/Loss for KO					$819.99
LCC
09/30/2008	O	STC	.LCCWU - LCC NOV 7.5 Put	10	$2.65	$15.00	$2,634.98
09/26/2008	O	BTO	.LCCWU - LCC NOV 7.5 Put	10	$2.40	$15.00	($2,415.00)	219.98
Total Realized Gain/Loss for LCC					$219.98
MCK
09/30/2008	O	STC	.MCKWK - MCK NOV 55 Put	10	$4.00	$15.00	$3,984.97
09/26/2008	O	BTO	.MCKWK - MCK NOV 55 Put	10	$2.85	$15.00	($2,865.00)	1,119.97
Total Realized Gain/Loss for MCK					$1,119.97
MMR
09/29/2008	O	STC	.MMRWE - MMR NOV 25 Put	10	$3.90	$15.00	$3,884.97
09/26/2008	O	BTO	.MMRWE - MMR NOV 25 Put	10	$2.60	$15.00	($2,615.00)	1,269.97
Total Realized Gain/Loss for MMR					$1,269.97
OIH
09/19/2008	O	STC	.OIHJM - OIH OCT 165 Call	10	$7.20	$15.00	$7,184.95
09/12/2008	O	BTO	.OIHJM - OIH OCT 165 Call	10	$8.20	$15.00	($8,215.00)	-1,030.05
09/11/2008	O	STC	.OIHVK - OIH OCT 155 Put	10	$9.30	$15.00	$9,284.94
09/09/2008	O	BTO	.OIHVK - OIH OCT 155 Put	10	$7.85	$15.00	($7,865.00)	1,419.94
10/02/2008	O	STC	.OIHWG - OIH NOV 135 Put	10	$12.20	$15.00	$12,184.93
09/29/2008	O	BTO	.OIHWG - OIH NOV 135 Put	10	$10.85	$15.00	($10,865.00)	1,319.93
Total Realized Gain/Loss for OIH					$1,709.82
RIMM
09/29/2008	O	STC	.RFYWT - RIMM NOV 75 Put	10	$14.15	$15.00	$14,134.92
09/26/2008	O	BTO	.RFYWT - RIMM NOV 75 Put	10	$9.20	$15.00	($9,215.00)	4,919.92
Total Realized Gain/Loss for RIMM					$4,919.92
RKH
09/11/2008	O	STC	.RKHMS - RKH JAN 2009 95 Put	10	$8.20	$15.00	$8,184.95
08/08/2008	O	BTO	.RKHMS - RKH JAN 2009 95 Put	10	$7.80	$15.00	($7,815.00)	369.95
09/09/2008	O	STC	.RKHUP - RKH SEP 80 Put	10	$0.05	$15.00	$34.99
07/28/2008	O	BTO	.RKHUP - RKH SEP 80 Put	10	$2.45	$15.00	($2,465.00)	-2,430.01
Total Realized Gain/Loss for RKH					($2,060.06)
RUT
09/23/2008	O	STC	.RUTWJ - RUT NOV 750 Put	10	$57.40	$15.00	$57,384.67
09/19/2008	O	BTO	.RUTWJ - RUT NOV 750 Put	10	$37.00	$15.00	($37,015.00)	20,369.67
10/02/2008	O	STC	.RUYWJ - RUT NOV 650 Put	10	$49.30	$15.00	$49,284.72
10/02/2008	O	BTO	.RUYWJ - RUT NOV 650 Put	10	$39.60	$15.00	($39,615.00)	9,669.72
Total Realized Gain/Loss for RUT					$30,039.39
SII
09/26/2008	O	STC	.SIKWM - SII NOV 65 Put	10	$6.20	$15.00	$6,184.96
09/26/2008	O	BTO	.SIKWM - SII NOV 65 Put	10	$5.00	$15.00	($5,015.00)	1,169.96
Total Realized Gain/Loss for SII					$1,169.96
SPY
09/23/2008	O	STC	.SPYVT - SPY OCT 124 Put	10	$5.50	$15.00	$5,484.96
09/19/2008	O	BTO	.SPYVT - SPY OCT 124 Put	10	$3.80	$15.00	($3,815.00)	1,669.96
10/02/2008	O	STC	.SPYXH - SPY DEC 112 Put	10	$7.85	$15.00	$7,834.95
10/02/2008	O	BTO	.SPYXH - SPY DEC 112 Put	10	$7.20	$15.00	($7,215.00)	619.95
Total Realized Gain/Loss for SPY					$2,289.91
SYNA
09/30/2008	O	STC	.QYGWG - SYNA NOV 35 Put	10	$6.10	$15.00	$6,084.96
09/26/2008	O	BTO	.QYGWG - SYNA NOV 35 Put	10	$5.70	$15.00	($5,715.00)	369.96
Total Realized Gain/Loss for SYNA					$369.96
USO
08/21/2008	O	STC	.IYSIQ - USO SEP 95 Call	10	$6.40	$15.00	$6,384.96
08/14/2008	O	BTO	.IYSIQ - USO SEP 95 Call	10	$4.60	$15.00	($4,615.00)	1,769.96
Total Realized Gain/Loss for USO					$1,769.96
WM
09/12/2008	O	STC	.WMVH - WM OCT 4 Put	10	$1.97	$15.00	$1,954.98
09/12/2008	O	BTO	.WMVH - WM OCT 4 Put	10	$1.77	$15.00	($1,785.00)	$169.98
Total Realized Gain/Loss for WM					$169.98
Total Realized Gain/Loss								$36,005.67

Bailout Trades

Okay, so my strategy for the last couple of weeks. Buy puts on everything. It's been awesome.

In the last couple of weeks I've made 5k+ each on goog puts, rut puts, aapl puts, rimm puts, citigroup puts, dia puts, gs puts, and . Boo yah. Do you like apples? How do you like them apples!

Since I'm not sure exactly how the bailout is going to shake out, I closed all my positions before the market closed today. You know how it is.

I'm hoping that the house of representatives keeps a tight hold of their cojones and votes this down tomorrow. Sheesh.

And you know, I realize that we're talking about some financial turmoil when that happens. We could be talking about A LOT of financial turmoil. I've been trying to think through possible scenarios, combined with reading a bunch of possible scenarios and I've come up with some freaky stuff.

I still don't think the government, funded by the taxpayer is the proper entity to deal with gummed up credit markets. That scenario chills me more than all the others.

Bought back NVDA Call Options

Wow the market sure tanked today didn't it? It went down 4% today. It was all over the radio on the way home. I had briefly checked my trading account at about 2:00 PM eastern time, and noticed that my limit order for NVDA had been filled. That brings my account up after 7 days, and 2 trades from $50,000 to $52,400. That's a gain of 4.8% in 7 days. It's funny. The gains are in virtual money so basically it doesn't matter. I mean, I could go out and buy 2400 virtual double cheeseburgers at Mac Donalds with those virtual gains. Now I've got to figure out what trades to get into next. No big deal, and no hurry.

Just to review. The trade I made today was actually the second leg of a trade I entered into 7 days ago. Last Wednesday I sold 15 contracts of NVDA June 35 call options. That means I took upon myself the obligation that if the stock went over $35 by the third week in June, I would have to sell the option buyer 1500 shares of NVDA stock at $35 per share. At the time I placed the trade NVDA was selling for $33 per share. It was making a series of lower highs and lower lows, so it was trending down, and it seemed to be at resistance. I was paid $2.40 per share for the options (or $3600) and I put in a buy order for $1.70 (or $2550). If the price continued on the down trend, the option would continue to go down in price (which is what I thought would happen), and if time passed and the price remained the same, I knew the option price would decay as time passed. Today when the market tanked, the NVDA options dipped down as low as 1.65.

In the future, I'm not going to sell naked call options. That was a stupid thing to do. My technical analysis was correct, and the stock did what I expected it to do, but naked call options are never a good idea. I don't know what crazy gene invaded my body, but in the future I will cover my short call option positions with a deep in the money option, or with actual stock. Or I'll sell naked puts (which is the same risk profile of doing covered calls).

Even better than my virtual trading account flourishing, was my friend Kenny calling me up on the phone. So I want to briefly channel Jim Cramer and shout out to Kenny "Boo Yah!"