If you like this e-zine, please do a friend
and me a big favor and "pay it forward."
If a friend DID forward this to you and if
you like what you read, please subscribe by
Apr 24, 2006 - Issue #004
From my vantage point, it is difficult to see committing fresh money to the long side
of the market at this time. While it is perhaps too early to call a bear market, cracks
seem to be appearing.
One gets the impression of watching a car racing uphill as it's running out of fuel.
Breakouts, both up and down, have no follow-through. One doubts this can continue;
something has to give. The phrase, "Sell in May and go away", keeps popping into mind.
Hewlett-Packard (HPQ) $32.96 is an example of what I'm referring to. It's had a good
ride up, so far. One would not be blamed for reducing long positions on a scale up.
In fact, if one were inclined to begin establishing bearish positions, I could see
selling the SSF's (single-stock-futures) in the front months (for liquidity) while
simultaneously buying the nearest in the money equity call options as insurance to
When trading futures, it is generally advisable to operate in the front month contracts,
where the action is, with a view to rolling out to the next series as the floor traders
roll their positions. One always wants to operate in the most liquid markets to better
facilitate the establishing or unwinding of positions.
That being said, always keep in mind we are in a market of stocks rather than a stock
Some stocks have already sold off and may qualify for intial purchase.
Intel (INTC) $19.06 comes to mind. Buying the stock while simultaneously buying the
nearest in-the-money put options (married-put strategy) provides a low risk scenario.
When using derivatives as part of one's tactics, the use of an option pricing model
can not be over emphasized.
Comments? Ideas? Feedback? Let me have it, right between the eyes! I'd love to hear from you. Just reply to this zine and tell me what you think!