Wait on it

There is something in the air. I can smell it just like my great grandpa Enus can feel when its going to rain in his left knee. The air smells like… Fed. It’s going to be another rate cut, another step in devaluing the American dollar. Another step in helping the immediate stock market, at the expense of the long term market. Bernanke will soon start pouring money from all orifices, and I’m here to collect.

I bought calls in C (yes, again). When I bought them they looked like a good deal. I went with the barely ITM (in-the-money) calls while getting the April 2008 (or Apr08) options so that there is a little time value in the options while having the least amount of intrinsic value I could get.

Of course, since buying the options the value has already dropped over 6%, which is over $260 in value. I was right yesterday when I bought C calls, but chose to obey a stop limit I set when I bought them. There was a loss taken, which should have never happened.

Had I chosen to ignore the usual stop, I would have profited over $200 today instead of losing over $220 yesterday. This is a new lesson for me which I have actually been following the whole time, but now I have concrete proof of this: not all rules should be followed.

That change of over $400 would be over 15% of my account value!

So when is a good time to follow a rule and when isn’t? That’s going to be a harder lesson for me to learn than actually following a rule and putting a stop in. I know that the original Tim has a rule of putting in a stop immediately after buying, but I’m not nearly as smart or successful as Tim so why copy?

Here’s what I have done this morning so far.

Buy:
C Apr08 $20 calls (CDD), 20 @ $1.80
stock price entered $20.19

I’m not looking to hold onto these until expiration, but I won’t be selling for a loss. All you bloggers that want to read about another failure of mine can read history here (or here), but this trade will be raining on me with golden shower profits.

Wait for it. Fed and the Bernanke-mobile will shower the market with happiness and free money. Watch for Ben to get too excited while speaking and instead of dropping75 points or maybe 100 points, he’ll realize that he can drop over 200 points and later just say it was an error in last minute judgment. OK, he won’t drop 200 points, but 100 points is definitely possible.

Anyone want to help me exchange my USD for Japanese Yen?

And though the historical chart looks bad for C, you can see whenever there was a spike up it was caused by the Fed helicopter.