> Today's closing price for Feb 65 puts are 5/8 x 3/4; Feb 75 puts are 2 11/16 x 2 3/4; unwinding would get him just under two bucks a contract. Ouch.
You want to hear about pain? I re-bought my MUNLs near Tuesdays close, expecting Wednesday's action to be somewhat like Tuesday's, giving me some opportunity to get out with a small profit (if necessary). Boy, was I wrong!.
As usual, MU mirrored the SOX.X, NASDAQ, S&P 500, and DJIA; the intra-day graphs of these are all quite similar. The daily charts of these are more different (not so similar), but it is usually acknowledged that the DJIA is the most widely-watched overall indicator and it usually "calls the shots" for any major move.
The DJIA has been trading in a fairly tight range (9200-9400) for the past two or three weeks, having entered this pattern after dropping from a clear peak the week before (9600+).
Looking at the daily chart of the DJIA, there are four periods that show a similar pattern: the first two weeks of December 1998, the last half of July 1998, the first three weeks of August 1998 (separate examples, although back to back), and the first two weeks of October 1998. As we know, all of these cases were resolved by significant and rapid breakouts; in the first three examples, to the downside. It also seems like the longer period of time the index stays in a narrow range, the more severe the eventual breakout (coiled spring theory).
Ok, maybe I'm grasping at straws, but one of the main reasons I bought puts in the first place is because the market seems ready for a significant correction. And what better vehicle with which to ride it down than MU? (Not necessarily a rhetorical question; any suggestions?)
Today I started hearing several long-time "bears" capitulating and saying: "what the hell, may as well go long with everyone else." There is no surer sign of an imminent reversal than rampant bear capitulation.
Anyway, even if I'm wrong about all that, I think it makes sense to hang on a bit longer looking for the massive volatility here (in MU) to provide some kind of a more favourable exit point.
Land_Lubber |
