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

To: Smiling Bob who wrote (110924)	3/17/2008 1:42:43 PM
From: ChanceIs	Read Replies (1) \| Respond to of 306849

RE: COF Several thoughts: 1) Rose Colored Glasses/Denial: I reported from the AEI last week that in the opinion of the panelists, the country's senior financial management (FEDs, Wall Street CEOs, analysts and journalists) are in denial. Look at S&P's call last week. The President is either in denial or telling the big lie. Bottom to subprime???? OK. Maybe the bottom is 100% written off, but then we have to consider Alt-A and prime. 2) COF looks like a great way o get a piece of the credit card bust. Its a volatile puppy, so its great to sell options against it. 3) COF is levitating - just like DSL and MBI. Kept aloft by item #1 above. 4) I left soooo much on the table selling covering puts against DSL and MBI. Of course the premiums were fat, and its a safer way to go. I added some naked $50 Mar calls on Friday. You can get still get $0.60 with the underlying at $46.20. I have covering $45 Mar puts short. Cost me $1.55 to buy them back. On the one hand, if it drops $1.20 and stays down thru Thursday (early expiry) then I realize $2.75/46.20 or about 6%. Not bad for holding three more days. Denial - #1 above - is working for and against me. How many times since I started shorting this sector in early '06 have I been toasted by the starry eyed buying on a rate cut. Its just like the internet meltdown. All of the idiots expecting to Ciena to go back to $150 in just a year. With Bear, I think that the message might be sinking in. The FED can't help. But still the DOW is only down 147 on the most significant bad economic news since Jimmy Carter. The DOW is only off 14% from its all time high. It dropped 33% in the 200o blow-off, and things were much better then. In short (pun intended) COF is a keeper. Its an MBI and DSL type opportunity. If I sell more puts, it will only be against 1/4 of the position - and $5 to $10 OTM. Maybe sell more if it starts plummeting. I will be cheap and see if I can't get through Thursday w/o buying the $45s back. I am getting paid handsomely to stay put. (Pun also intended.) ;-)