Wednesday, September 17, 2008


I couldn't think of a decent title I am so tired. This is going to be short and sweet. We had another dramatic sell off today but like I tried to point out earlier in the day, the sell off was modest compared to what happened in the credit market.

At the open I was actually a seller. I eliminated a long position (took a loss) and in the middle of the day I actually added to a short. The reaction to the news and what was staring me in the face in the credit markets meant I thought the market was heading lower.

In the last thirty minutes the market melted and I sold a large amount of puts in the last two minutes heading into the close. Since Monday I have exited about 50% of this put position (about 40% today).

If your a short, I think your dealing with a burning fuse. I think the market will most likely have one more brutal move down which could possibly be a panic of 10 to 15%+. I am purely speculating here. I think this could happen Friday on options expiration day heading into the weeked after a volatile day tomorrow and a possibly some sort of recovery. I think it is likely that over the weekend you will have a mass coordinated global government intervention. What exactly I don't know but my guess is this will spark a massive bounce more volatile and stronger than any bounce we have seen. It could last months and move the S&P back up to 1300+. I don't know and like I said I am speculating but though I have not added or created any long positions during this latest route, I think you have to be covering your short exposure locking profits incrementally on the way down and potentially be ready to buy.

What blows this thesis I think is UBS or some other large financial meltdown not visible.

I would like to sell 50% of my remaining position in puts in the next couple days leaving 25% of the original total position if we do indeed have a crash and sell that if we do get some sort of huge rally.

This is all speculation and much more specific than I usually talk about. These thoughts could change tomorrow.

Good night folks, I am going to bed.

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