Thursday, September 03, 2009


I've been stalking the discount stores. You can find them here
on FINVIZ. (Also all charts are click to make larger). This group has been the beneficiary of the 'story' of the trade down. My theory (okay MY story) was that

(1) These stocks have already been a beneficiary of such move.
(2) If the economy were to improve, money would go back into trade up retailers
(3) If the economy stayed in stinkie land, it was unlikely that these stores would receive materially more business.

I'm too scared to short in any size, but I did accumulate some puts on them. And I was very much underwater yesterday as FDO ran up along with DLTR's good number. I had a $1.50 basis in these puts. And I doubled my position by buying more at fifty cents. Yes, after being underwater so much and violating every tenet of not adding to a losing position etc., I did it.

It was a bit of a stupid stock trick, as I did not realize that they were reporting today. (I did that with HERO one time, and was a beneficiary of that stupidity. I would have never bought the stock or added to my position had I known.). It' also something I typically check.

Well they reported and the numbers were just terrible.

The options soared. I didn't get the $2.59 high of the day, but I nabbed $2.30. I just reflexively put an order in at the upper end of the range for the entire thing. If it goes to $20, I will not care. Short-term hold; really nice payback.

It's important to note that it could have easily gone the wrong way, and I'd have a big loss on my puts. But, I've learned to not risk option premium unless I'm 100% okay with waving it all bye-bye. I'm not very good with options, but I've had better success by having some strict disciplines.

Many await the jobs numbers tomorrow....there is always a wait and see in the market, isn't it? That's why I recommend Mamis's book The Nature of Risk. Too often, perhapse even now after reading it several times, I want to find certainty before making a decision. Paralysis through analysis, you've heard frequently. I've been there. I may even be there now! I'm heavily cash, but I've some positions that I've been taking opportunistically.

Gold is benefitting. I sold my TGB into the strength. I had some Great Basisn Gold (GBG). It has been a laggard in this run up, but I believe it is because it is not one of the 'names'.

As you can see, volume has been massive: 3.55 times normal. There's all sorts of news floating about regarding Hong Kong becoming a gold center. They are physically moving gold out of London to HK (hmmm...sounds like a "24" series where Jack Bauer averts would be terrorists from intercepting the gold!).

Where gold ultimately heads is for the future to tell us. You do know that Mercury goes into retrogade on the 6th. Miscommunication and travel mishaps can be expected. The last Mercury retrograde (and you know that I take all this was lots of salt), I had 40% of my rolling stock undergo some trouble.

Agricultural chemicals are having some trouble, though today they performed pretty well. I bought some BG OCT $60 puts.

In hindsight, I might have waited. But there is some vulnerability there. It might be a stupid stock trick. The nice thing about putting it in the blog, is that I can go back to it and give you an update.

Finally, this chart on COST just plain bothered me:

That's an awfully big rocket launch. I bought a few Sep $55 puts which seemed terribly cheap. It seems like a decent risk reward.

So today, I'm quite happy. Remaining thoughtful and disciplined on my next choices will be a requirement. I may not have done that very well today!