8/1/2007 – The sky is falling, the sky is falling

Is there reason not to be long, absolutely. Is there reason to panic, not so much.

Is there reason not to be long, absolutely. Is there reason to panic? Not so much. Panic does nothing but cloud my judgment to look for opportunity. It is very interesting to hear the Bulls spin their case, and the Bears to spin their case. I will also be interested in seeing how the interconnecteness of the global economy continues to feel what is going on over here. A hedge fund in Australia has been effected by the the sub-prime issues over here. Our years of cheap money may have an underlying effect of selling what the hedgefunds can, rather than what they would like to sell. A Demon of our own Design was a very appropriate read a few weeks back. But as far as my trading goes, “The Why doesn’t matter”, although, it does seem to be kindling for this fire.

From Scott Snyder @ Red Option
“Bottom line is to stay cool and not to panic. No need to. Public customers are famous for selling these panic bottoms. I could be wrong, but if we get a big down move EARLY this morning, I believe this will put in a temporary low.”

The are some fireworks to be had today.
I didn’t have my eye on the ball for 1490 resistance, I should have. It would have been a pretty easy call. I did however make some nice position shuffles. Today I will stay objective and keep my eyes open. I will add positions only under the right circumstances.
And with Bear Sterns BSC:

Bear Stearns Cos., manager of two hedge funds that collapsed last month, blocked investors from pulling money out of a third fund as losses in the credit markets expand beyond securities related to subprime mortgages.

This seems to be akin to accounting irregularities. There may some big drops in this today, and in the future
ACLI – Touched the downtrend line @ 22.75. I am looking to add to my non-directional position.
ONXX – This spread is inverted right now. But there are no takers for these inverted prices. The P/L looks terrible on my acct statement, but my actual risk is .01/spread + Commission. pretty darn survivable. I would like to own 100’s of these if I could.
Trades –
DCP – Exited for a slight loss (.05). I didn’t want to be holding on to call options with the VIX this high. It could be a mistake, but it helps me focus on better trades It was also bumping against the down trend line for a day and a half. I initially put the trade on as a breakout, but it gave me a head fake. I actually feel ok about only loosing .10.
AFL – Sold 1 unit for .20. Very nice overnight trade. I still have 1 unit on.
CQB – I bought 1 unit of Jan/Feb 17.5p for .01. Very nice. Earnings play tomorrow. I am looking to pull in more of this. I sold this in the afternoon for .17. Nice quickie.
SPF – This home builder is crushed. Down another 2.50 today. I am at max loss with my dynamic hedge. It was just a 200 share trade. It is down 50% ($10) since I bought it. But that is OK. The 2 unit hedge of 15p Jan/Dec Calendar I picked up for .075. I just sold between .22 and.35. Killer!!!! There was just a HUGE order. My loss on the SPF trade, has been trimmed to $309.
In the afternoon, as the housing mkt stabilized I bought 2 units of the Dec/Jan 15p calendars for .075, and 2 units of the Dec/Jan 12.5p for .05. Very nice.
Nice afternoon rally. The SPY bounced HARD off the 61.8% retracement 143.90. Up 25 off the lows, to finish up 146.5. The current down trendline is 147. If this gets broken to the upside. Pay special note of Retracements:
38%- 148.37
50% – 149.72
61.8% – 151.10
And the 149 (previous support) level.

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