Finding Hope in Bad News

Today’s option trade detail is at the bottom of this post, but thought this was cool enough to share first.  Check out the x-rays from my neck below.  You can see the screws and metal plate from my neck surgery (ACD) in March 2007.  I had two disks removed and my vertebrae fused in two spots.  The bad news is that my upper fusion came apart, that’s the gap you can see between the top and middle screws.

Since I try to look for good in most situations, I see a silver lining that this explains my increase in pain recently and renews the hope that I’ll be able to get off of the pain meds again sometime.  The other positive spin on this is that the bad news brought by this x-ray means that I’ve used up all bad for our family this week and now my wife and I should both get new job offers this week before our current jobs end next month.

I’ll get some of my new stock picks posted later today or tomorrow after my next interview.  A few minutes into the open today I see that RL and MOT are both down.  I have a good cushion on my RL options still, but I’m in-the-money on MOT more than $1 now and will have to consider exiting early for a loss or selling naked calls on it with the assumption that I’ll be assigned the underlying shares before long.

One of my limits already hit this morning for a new option trade.  Kopin Tan wrote about Dreamworks Animation SKG, Inc (DWA) in this week’s Barron’s on page M6.  He sighted the good p/e, a profit margin of 27% and strong cash flow as reasons to look for a good run.  Of course I came back to the chart before entering my limit order.  From the trend line I drew, I figured DWA would come down closer to 30 before bouncing back.  The December 30 puts closed at 0.45 on Friday, but the bid/ask was higher before the end of the day without a new trade.  Based on my belief it would continue to fall before finding footing I put a limit order in at 1.25 per option. 

Two minutes into the trading this morning, with DWA down to 30.03, my limit order hit and I sold three December 30 (DWAXF) naked puts and received $262.75 after commissions.  The fear of such a quick drop in two days brought implied volatility up over 35 for this strike.  My theory is that the stock will stop falling and fear will subside as I keep the premiums with no money out of my pocket for it.  It’s now 40 minutes since my trade and DWA is back up to 30.34, still down 1.03 for the morning.