Female Anchor (FA): We are going to need a really big package to make this worth the effort.

Male Anchor (MA): How big does the package need to be to make you happy?

FA: I really think we need something that can go deep enough to put a smile on everyone’s face. The stimulus package will have to penetrate deeply to reach all consumers on a personal level.

MA: What do you have in mind that can really stimulate us the way you think we need it.

FA: The economy needs longer, harder stimulation. It has to be something that doesn’t let the economy turn limp prematurely.

MA: So what you are saying is that stamina is important for what ever Congress whips out in front of us?

FA: Exactly, we’re going to have get Congress to give it up like they always do for the automakers instead of pretending they don’t want it when we all know they do.

MA: I think you are on to something. Government has been massaging numbers for too long. It felt good at first, but we need real hard figures to keep the CEOs from pulling out from their plans for growth that rises to meet expectations, but for how long do you think the Fed can keep it up?

FA: It’s just that the Fed was late in trying to lubricate the wheels of business and now it’s hard to be sure any stimulus package will be able to penetrate enough without leaving us sore with inflation for years to come. The more the Wall Street goes down on this, the harder it is going to be to get it up again. These results could stay limp for a long time.

MA: The new administration needs to find the sweet spot and focus on fulfilling the need at this point. They are going to have to try out some new positions to see what feels best for the people on Main Street. It seems everyone wants a piece of the action at this point and they all seem to be stroking the big ones in charge to get what they want.

FA: Anyone who is receiving already must know someone on top.  Some senators have had their hands all over this for months and many wonder if the larger package will ever come. At the same time, business heads are swelling with excitement.

MA: It’s not just the government, banks will have to be flexible on who they give it to also. Investors are still looking for something big to satisfy them and the banks will have to be part of this three way party. Congress can’t just try to slide something in the back door and expect everyone to like it.  They can’t go both ways forever.

FA: We are in agreement then. We all need the package to be big enough to get excited about it and it might take more than a shot to prop it up. Many Americans including myself are interested to see if the President Elect delivers, he talks about and totes his stimulus package around with him, but I want to see it!

MA: I don’t think you’re the only one. Have a Happy Thanksgiving. I’m on my way to Hawaii to get leid while I can afford it.

* What else have you heard that could fit in this attempt at humor?

This week has seen DRYS bounce from just above $12/share to almost $18/share.  I watched it a lot, but made no new trades.  It closed yesterday at $17.17.  That’d be an ideal close for me at November’s option expiration, but I’m not even close to banking on that.  I could see DRYS dropping $5 back down to $12 again before I could see it gaining another $5 to $22, but since the price doesn’t seem to be moving completely rationally right now and I’m already in I’ve decided to weather it for a while still.  It might be years, but DRYS will come back when the economy does.  After November expiration I might take my losses and move into DSX if I see something change that makes me think the run could have legs.

The most important numbers we need to watch this weekend are going to be in the GA/FL football game at the World’s Largest Cocktail party.  Go DAWGS!

I’ve been talking to him for the past few weeks about what kind of new car he should get.  He’s been thinking of getting a new car for months and finally his car’s engine started acting up.  He took it to the shop, got it “fixed” only to have another problem hit.  He took it back and got the run-around about when they’d have it ready for him.  Eventually, after not receiving a returned call from his mechanic, he was in the area and decided to drop by only to find the gates chained and bolted.  That was last week.  I talked to him yesterday and he got his car back, not fixed.  Looking for a silver lining I have to remind him that at least he is buying a car at a time when dealers will be willing to cut a great deal to unload some inventory.

His blog post on AC/360 is worth the short read.  It’s such a great example of the state of our economy.  It’s interesting to see how a car dealership can go under in the same town where technology jobs are still being hired at a premium for good candidates.  We’ve noticed a slow down in our IT recruiting this month, but not too much considering the headlines we’re seeing for other industries.

The AMEX Oil Index (XOI) is up almost 2%, but oil ETF USO is down a half percent.  I recognize they aren’t tracking the exact same underlying issues, but that’s a big difference when both are tracking oil.  INO has an interesting take on it.  Check out the video they posted yesterday:

Crude, wasn’t it supposed to hit 200 dollars a barrell?

I’m sitting tight on my USO position for now.  I want to see how next week rolls out and then I’ll sell covered calls on it.  Based on their commentary, I should probably sell in the money calls on it now.  It’ll be interesting to watch.  At the least, expect gas prices to go up on local shortages from refineries being down and pipelines shut down too.

Tidewater Inc (NYSE: TDW) is listed in the services sector under shipping industry, but is really heavily tied to the energy industry since those are the ships and vessels they service.  With oil at all time highs, TDW seems fairly safe, even if oil is cut by 30-40%, these guys are going to be in high demand.  One thing that strikes me as odd and makes me wonder if I’m missing something is that the PEG ratio is only 0.17.  I can’t figure why the price is so low if the earnings growth predictions are even close to accurate.  I’m typically happy to buy a company with a PEG close to 1.0, so this is good, but possibly too good to be true.  TDW pays a dividend also and just increased the payout recently.  That shows me that the insiders think they have cash they can afford to give back to investors rather than save to cover their potential turn of fortune.

With all that in mind I had to chart TDW to find my entry point.  It closed on Friday after coming less than $1 away from its 10 day moving average.  I figured it’d hit that line and pull back that dollar before moving up too much.  I also saw the 20 day moving average was a little bit above 65 and it has been a better line of support.  Not far below that, the 50 day moving average was around 62 plus change and rising.  It hasn’t broken support since before April.  Add all that together and 65 seemed like the safest/most profit likely trade. 

On Monday, at 2:22 pm, while at TDW was trading at $68.46, I sold one TDW July 65 naked put and received $199.25 after commissions.  When I put the order in the bid/ask was 1.70/1.80.  My order was for 2.10.  I actually thought it’d be the next day before it hit and thought I might even miss the trade because I was pricing it partly for the psychological price point of getting $200 from the trade.  I do that too often – price my trades at a round number, to get what I want after commissions.  Sometimes I think that works in my favor since the other side, the fear side, buys the puts once it crosses the psychological amount.  With that point in mind, I get to point out that I sold my put at the high of the day for that strike and TDW closed at68.58, off the low when it touched the 10 day moving average.

In the end, selling only one put is a smaller trade than I should be making for my account balance, but two 65 strike trades would be at the top end of what I think I should risk and this current market is so crazy that legging in (selling one option at a time) makes more sense right now.  If TDW drops some or even rises in line with the 10 day moving average, I might sell another naked put at a lower premium at the same strike.

9:08AM Overstock.com issues press release related to Reg. SHO (OSTK) 20.15 : Co announces that “yesterday marked the 800th trading day that the co has appeared on the Regulation SHO threshold list”. The CEO said “While this may seem paradoxical, the facts can be reconciled. One need only understand that our capital markets have been hijacked: our settlement system no longer settles, our New York financial media no longer investigates, and our regulators no longer regulate. For further explanation, see the fine example of investigative journalism that appeared this week on DeepCapture.com”.

Deepcapture.com posted a long (about the size of a small book) article about the corruption in shorting stocks on Wall Street including names of the alleged culprits.  I have no idea if this is true, but it’s a great read.  I didn’t get through all of it due to time constraints and thought many of you would enjoy reading as much of it as you have time for.

If the markets stay at a 8-9% annual clip, selling naked puts is the way to go.  Once you get closer to the previous average in the high teens it seems more productive to buy calls.  Either way, investing with options is the best way a mature investor should work the markets.

I did find a few stocks worth mentioning though.  Before listing them, I happened to check out the put/call ratio which signaled heavily bearish.  That could help explain the dump the market took on Friday (expiration day) and why yesterday faired so much better.  Once those options were out of the way the market could resume a more normalized cadence.  Monday morning still included a lot of the clean up from Friday.  That cleared and we headed back up.  I’m interested to see the put/call ratio in this coming week’s paper to see what type of change we’ve had. 

Anyway, to the stock picks…

On page M7 Kopin Tan keyed in on refining stocks VLO, SUN and TSO.  All are down right now, but could be due for a big run again soon.  SUN might have support at 70.  VLO could find a floor at 65.  TSO might bounce off of 45.

On page 23, Jonathan Laing focused on SHLD and thinks it could go as high as $300 if broken up and even $200 if Lampert turns it around.  I thought about this with most of the articles this weekend where they seemed to end with “If management can turn around this company it’ll be a good buy…”  Isn’t that obvious?  It’s like saying if a company starts making bigger profits it’ll be worth more.

On page 26 Andrew Bary tried to make MNST sound enticing, but I’m having a hard time buying a job posting site while the economy might be slowing.

On page 56 WMT was given a reasonable outlook in large part to its lower historical p/e ratio.

I had to move on to Smart Money magazine’s November 2007 issue to find any possible picks I like outside of Kopin’s.  I found three on page 102 that seem to fit my style possibly.  The article’s focus was on companies with strong balance sheets which could be wise investments with such turbulence out there now.

COH looks like it might be near support at 40.  This could make the December 37.50 or even 40 naked puts worth a sell. (EDIT: About an hour after I posted this COH missed earnings and dropped more than $5)

DHR is nearing support at 80 making the December 80 naked puts worth considering.

UTX is riding the trend line near 75 making the December 75 naked puts interesting.

JNJ was highlighted, but the option premiums aren’t rich enough for me.

Last and least I saw an advertisement that amused me.  There’s a new ETF for agribusiness with the ticker MOO.  That might sum up my attitude the past few days -  Not anxious about stocks, but amused by an ETF’s ticker. 

This week all three summaries painted a fairly bearish picture.  (Admittedly, Kopin Tan who is often the bullish one of the bunch didn’t write this week.)  On page 13, Michael Santoli pointed out that even with a potentially believable bullish case the markets are up 10% in a month and 15% since the intraday low on August 16th. 

On the other hand, a few of the stock picking articles seemed like they have ideas that could work out.

RRD – Writen about on page M4.  The premiums aren’t worth selling options.  I might have to think about buying calls based on the 25-30% upside Barron’s thinks it could have within the next 18 months.

CVS – Writen about on page 21.  These premiums could be worth selling naked puts, but I’d like to target the December expiry which aren’t available yet.  Hopefully it will wait before climbing too much too soon.  Otherwise I might have to buy calls farther out based on the 20% growth potential CVS has over the next year.

NOV - Writen about on page 25.  The premiums are rich on NOV.  Selling naked puts seems like a good move here.  They report earnings next Wednesday, the 24th.  I might wait until after that which will mean there’s less risk and less return.  Volatility will plummet after earnings are announced.  A trade early after the announcement could still pocked good gains.  The article figured 15-20% upside remains in it for the next 12 months.  A play to avoid the earnings announcement is to sell October puts that expire at the end of this week, before earnings are announced.  Small risk, decent return.  The current bid and ask show it’s already heading higher.   If you are not reading this post on www.mytradersjournal.com you are reading it from a site that has plagiarized it. 

FTEK – Writen about on page 26.  Closed at 26.46 on Friday, but the current bid and ask show it’s already heading higher too.  The article said it could go as high as 40-45 in the nearer term and even 100 in 2-3 years.  I’m thinking of buying calls, but at a minimum selling naked puts seems safe.

NTDOY  – Writen about on page 51.  No options available, aka not optionable.  With a possible 25% upside, I might have to consider this as a buy and hold for my IRA. 

Technorati Tags: naked puts, investing, stocks, options, covered calls, options strategies, trade, finance