January Effect 2006 Message Board

STOCKTALK

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Strategies & Market Trends : January Effect 2006

IWM 259.65

-1.4%

Jan 30 4:00 PM EST

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To: RockyBalboa who wrote (19)	12/30/2005 2:49:46 PM
From: RockyBalboa	Read Replies (2) of 79

I've added many more stocks today; and in order to take away some market risk I decided to hedge my bets with Russell-2k puts. Those ones don't cost the house (like 1% premium, or 1.6% for the Feb 20 maturity) and can protect the portfolio in case of a sudden market meltdown. Thanks to the high beta of the stock I own, i bought 2 russel equivalent puts for each one unit of stock. Because the market was so weak today, I had to pay up 10% on the puts. I do not expect to lose on both sides... Doing that last year would have spared me some nasty losses when the "January effect" mostly took place in December and the January was a horrible smallcap month with the Russel tanking 4.2% until monthend January (during the month in the third week, the R2k showed a loss of 7.2%)

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