The Options Box

[bbgold]

Morning Fred,
The Big Bear Growleth Eh? <GG> Yes, I know what you are going through with seeing some choice stocks being depleted by these slides. That is why this year my goal has been to be mostly cash whenever the market starts to turn down. So far this year it has been saving me a few headaches. It must be fun to go over different strategies and scenarios with your daughter. I hope that the 'lessons' have not been too severe.

It sounds as though your account is taking a bit of a beating. Have you been using fairly tight stop orders or buying Puts to hedge your downside? One strategy that I have seen, but not used, is to constantly purchase Puts on your stocks. I know that it can be expensive to do but if we do get big slides, like we have been having, the Puts can usually make up for some of the losses. The idea is to then sell the Puts when they are most profitable and roll over the Puts to the next level down. Again, I have never used this strategy but can see how it would work for a declining stock. The other part of the Theory is that you use some of the Put profits to average down on the stock so that you are constantly accumulating shares for when there is a recovery. Anyway, something to think about.

BTW, has the Mud stock been sliding for a while now or just recently? If you have been following the MKTSS board then a good thing to remember is that whenever the Dow or Nasdaq move Below their 320SMAs then the Plan is to be Bearish. You Might want to start to use that Bearish signal to enter a Put position or set a tight stop loss order, maybe.

So far it does not look like much of a selloff according to the Futures. We both know that can change pretty quickly though. IMO we are due for another Bounce from here. I don't think that it will be much of a reversal though, not yet. If we get a bounce back to the 320SMAs and cannot make it back above it then you might want to exit some more positions or make sure and get some hedge positions. Lately, buying Puts on the Dow would have been a pretty good hedge.

I sure hope that we do not get much more Panic. The more money that is Lost in this market is less money to eventually come back in. If the short sellers are making money shorting the market then will just continue to do so. That would be a Scary situation if most of the traders in the market are Sellers and Short Sellers and the Buyers are staying away or Broke.

I hope that things will turn around for you and your daughter Fred. I am sure that she is learning a Lot of lessons as these markets have been pretty unforgiving. It sounds as though she has a Great teacher though and will be able to pass this Test.
Take Care Fred and daughter! Sincerely, Bob :^)

Good Luck to All! :^)
PLAN the TRADE and TRADE the PLAN!