Wednesday, April 05, 2006

What We Are Doing

A lot of columnists are saying that the market is still "range bound" but I beg to differ. I'll skip the fluff (my apologies for terseness, but I am swamped) and get right to the meat of it:

The market is heading for new highs and I have taken a positively bullish stance: We're buying dips (by cost averaging May calls) and selling rallies (on select issues). We're also scaling into long OEX calls, a strategy that I don't really like but given the VIX levels it actually makes sense to buy index options here.

On the sector level I am excited about three things and my readers already know what they are:
  1. Oil. What a trader! Our long futures positions are fluctuating a staggering amount of dollars every day but overall, every dip has been byable. In fact I am still a very aggressive Oil bull. Oil equities look great (APC, KMG, NE, etc.) and OIH has been a decent proxy as well (althrough it does feel "heavier" then separate issues).
  2. Housing. The rally finally came and being overloaded with long front month delta we're not only breathing a sigh of relief but are also reaping profits. I think the stocks are headed higher from here, even though a single day "wipeout" is likely. So, if you'd like to get long, the right strategy is to put on some size here and that way for a scary dip to complete the position. Note that I am saying this in the context of being a longer term Housing bear and the short signal on the sector is still intact.
  3. Gold. Nothing new to say here. The spot has been an amzing performer and equities held up well. I continue liking the spot itself over the equities. We've been adding long GLD stock with every opportunity.
Other things of interest:

Miners. I think a few things are overdone here and buying puts on PD will work well (for the patient types). Again, use scaling to put on that position.

Biotech. It's a mixed bag. We're short BBH call verticals and at the same time short put verticals on select names. I am not really a bear on biotech but I see no technical catalyst in the sector. "Languishing" is what comes to my mind.

Semiconductors. We're short SOX put verticals. We also liquidated all long delta on stocks. Feels weird but that's probably good. :)

Retailers. Nothing to write home about but we're short put verticals on RTH.

That's about all, folks. I'll be posting our performance update for Q1 sometime soon, so stay tuned for that.

Cheers,
/Dmitry

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