New Allocation of Funds

Written on December 16, 2008 – 9:14 pm | by admin

I have had a plan for a while to buy long dated puts on the general market should it rally to the 1000 range on the S&P (on news that is not game changing).  Since we are getting close and I don’t believe that any of the actions lately have really solved the problem, I am going to create 2 open orders to buy 1 put contract.  I am probably looking to buy mid-late 2009 puts in the 70-85 strike range.  I am placing a $1000-$1500 bet that the market will re-test the lows or break through.  This amount of money is less than 5% of my current portfolio size so its not a big hit should it expire worthless.

My main reason for not thinking that the market has bottomed is that the fed moves have not really done anything to help the people with underwater on their mortgage.  Sure the person buying their house can get a good rate but the person selling will not get enough to cover their mortgage at a higher rate.  And since their credit is now in the toilet, they won’t be able to refinance either.

The other reason is that I don’t think Obama’s stimulus plan will work to the degree that he is hoping.  I don’t see the tens of thousands of white collar workers from AT&T, MS, BAC, GS that are getting laid off trying the blue collar construction worker route for quite some time.  Thats a lot of pride to swallow.

I would really like to see the VIX hit 40 again as the premiums would be that much smaller but I am going to place the orders tomorrow and will update my posistions as they are filled.

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