The Volatility Trader
105 W. Monument Street
Baltimore, MD 21201
Wednesday, February 21, 2007
Email – #250
Dear Subscribers,
This is a very interesting time in the markets. While the major indexes are pushing new highs, I’ve noticed some stocks falling by the wayside, including tech heavyweight Microsoft (Nasdaq: MSFT).
Whether we’re looking at a healthy market pullback, or a reversal is yet to be seen.
But with this in mind, I’m keeping a very close eye on our S&P 500 ETF SPYDR (AMEX: SPY) March $146 calls. If the S&P 500 takes out today’s low in tomorrow’s session, we will close the position. This action is meant to preserve premium, should the major indexes turn down. However, by forcing today’s low to be taken out, before closing the trade, we at least give the index a small chance to run higher.
NEW TRADE
Given the overall uncertainty in the market (and today’s news on continued inflation risk), we are going to buy a protective position in gold.
And, there’s plenty to the story here…
Petrodollar-rich countries are stocking up on gold right now… with rumors swirling that Middle Eastern governments may have bought as much as 100 tonnes in 2006.
What’s more, global gold production has been falling over the last decade, and, at present, it costs roughly 2.6 times the price of gold to locate it.
Finally, new Gold ETFs are expected to commence in 2007 from Germany, Belgium, Italy, and Luxembourg – a development that will help paint a continued positive picture for the precious metal.
Buy the Goldcorp (NYSE: GG) July 2007 $25 calls (GG-GE) for no more than $5.10. Initially, we will stop out of this trade, if the underlying stock CLOSES below $26.50. However, I may adjust the stop, if the situation calls for it.
Exit is everything,
Mark Whistler
Current Portfoli
Goldcorp (NYSE: GG)
July $25 calls (GG-GE)
Purchased: NEW
Current Price: Buy at $5.10 or better.
Boston Properties (NYSE:BXP)
March 07 $130 puts BXP-OF
Purchased: 2/08/2007
Current Price: $ 3.90
Simon Property Group (NYSE: SPG)
March 07 $110 puts SPG-OB
Purchased: 1/29/2007
Current Price: $0.51
Diamonds (AMEX: DIA)
Mar 07 $126 puts DAW-OV
Purchased: 1/18/2007
Current Price: $0.62
Tyson Foods (NYSE:TSN)
Apr 07 $17.50 puts TSN-PW
Purchased: 12/18/2006
Current Price: $0.20
S&P 500 (AMEX: SPY)
Mar 07 $146 calls SFB-CP
Purchased: 11/16/2006
Current Price: $1.50
