Jerry, for what it's worth, I spoke with Terry Bedford today and he still thinks our OEX Puts will be O.K. before expiry. He is amazed that the tech stocks move higher purely on technicals. For example, take Microsoft which split recently. When a $160 stock splits, theoretically the stock moves to less sophisticated investors that would rather own an $80 stock than a $160 one. For MSFT to have gained the equivalent of $16 pre-split this morning is pure speculation. Unless there is something fundamentally improved with a company, the higher prices aren't justified. If, in fact, the seasoned investor is sellling into these rally's as we've discussed before, then we are set up for a correction, not on bad news, but on good news. Seems contradictory doesn't it?
Think about it. What do investors do when a stock is beaten down and more bad news just doesn't bring much further price erosion? If the fundamentals are in place they use it as a buying oportunity if the long term outlook is still good. They are buying at a discount.
Conversely, when "good news"...goldilocks environment...good book-to-bill ratio are all we hear, and volume starts drying up then we could expect that a lot of the buying is being done by speculators rather than long term investors. I think that volume is the key thing here. If this scenario holds any water, I would look for the OEX to start down by tomorrow. Let the good b-t-b numbers have their way with the market for today and maybe tomorrow morning, then I'll look to see if we start getting some profit taking and some retracement of the OEX.
Terry says he is looking to see several down sessions starting tomorrow. If the OEX is not down to 715 by Friday then re-evaluation is called for.
Wish I had spoken with him earlier before posting the recommendation to sell the puts this morning. I held onto mine, looking for a run up of the OEX early on and then hoping for a pull back mid morning to early afternoon for a selling oportunity (at a pretty good loss, btw).
Hope Terry's scenario works out for all us Put holders.
Regards |
