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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: XoFruitCake who wrote (76327)	4/19/2007 8:21:00 AM
From: jcole05	Respond to of 306849

You make good points, both about the uncertainty in timing with puts, and in the high premiums currently required to buy them. I'm not as concerned about the premium, because if I/we are correct about the future of DSLs business, puts will still provide the leverage to make a very high return. I am, however, concerned about the timing required, and the market reaction to yesterday's earnings only increases my concern. I'm accustomed to wall street anticipating the future and valuing companies accordingly. This is why I have been interested in puts. Even if DSL isn't yet showing a large % of non-performing loans on the books, and may not for a number of months, people usually start heading for the exit when they see the train on the horizon, not when it's running them over. There may be more resistance on the street to the bearish case than I thought. I personally don't like shorting stocks when I want to make a big bet to the downside. Too much capital tied up and too much risk if, god forbid, someone does buy the company, etc. Finally, versus homebuilders, subprimes, etc - DSL really hasn't had a substantial leg down at all. Even NDE is down 30% this year. I agree that there isn't too much to be squeezed out of NFI and the like, and more upside risk with news, but DSL is still within striking distance of its highs. If the Cramer effect can carry this into the 70s, I'll buy some May puts without thinking twice.