Monday, February 27, 2006

What We Are Doing

My gut feeling proved right and the market moved. Not reading too much into this action as the "breakout" that everyone has been waiting for came on a dismal volume. In fact now Nasdaq-100 looks like it corrected up and is positioned to start a leg down. Not calling anything here - this is merely another observation.

A few actionable things happened today:
  • Retailers (RTH) are strong and we are long deltas via stock and April calls. I don't think owining vol is great here but I like calls because they automatically get you bigger as the sector moves higher.
  • Biotech peaked my interest even though I think I missed the meat of the move (somehow I haven't been watching this sector for a while). We're looking to sell puts on BBH with any weakness and are buying calls in a couple of names.
  • Oil is weak as expected and after selling call spreads on midday strength we let them rest easy.
  • Housing is all over the news but the action is non-exciting. Regardless, we're sticking to our bearish strategy and are selling calls in KBH, RYL and other names.
  • Gold seems to have caught the "lack of inflation bug" and that's why people think it's down. To us it doesn't matter. NEM is our vehicle of choice and we're short call spreads here. Again, once the sector sells off, we will be selling puts as well as our view for the next few weeks is neutral.
  • Finally, we like the Drug sector with LLY and ABT being among the favorites. I broke down and advised our fund to just buy stock.
This about wraps it up.

One last thing - I am personally getting long ITF (Japanese fund) as I like the technicals a lot. This has nothing to do with our fund (for now) but I thought I'd through this out here.

Cheers,
/Dmitry

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