If you were like many investors, you were waiting to see if Big old Ben Bernanke would release QE3. Sure enough the Fed agreed to buy $40,000,000,000 a month in mortgage securities.  Interest rates fall, securities go sky high, and all is well.. for today.

QE3 is a done deal, but how long will this rally last?

With the Dow Jones closing at 13,539 (around 2007 highs), it’s easy to think this rally has to give out sometime soon. In fact, if the rally continues, I’m going to be worried about some other macro picture things in my life (inflation).


I personally am under the opinion that if you want to be bullish pm about anything right now, it should be commodities due to threat of inflation. I personally invested in Silver (Symbol: SLV) and it has panned out nicely.

As of today, I am completely mixed on which way the market is going.

So I explore my options of straddling an index fund (taking options both up and down, hoping for extremely high volatility that will make 1 option worth enough to cover both options costs and profit.)

DIA (1/100th Dow Jones ETF) really seems to be fairly priced in it’s options risk/reward. A straddle expiring 8 days from now would run about $2, a straddle expiring 36 days more in the $4 range.

Translation to me: Do I think the Dow will go up or down more than 200 points in the next 8 days, and do I think the Dow Jones will go up or down more than 400 points in the next 36 days. Remember that with a straddle it doesn’t matter which way it moves, it just has to move a lot for gains.

When it comes to the Dow Jones, I’m completely split. All I do know is that I expect there to be a good deal of volatility from now till the end of the year, and I suspect very high resistance at 13,000 and at 14,000 (but that isn’t exactly a lot of oracle insight).

Look, my personal opinion? The Dow Jones is destine to go above and beyond 14,000, but I just plan on having a few corrections before a long-term growth above the 14k mark.

What am I in right now?

  • Short on JCP
  • Short on BBY
  • Short on GE
  • Short on FB
  • Long on F
  • Long on Dow
  • Long on Cat
  • Long on ESI (very small position)
  • Long on SWY (very small position)
  • Long on QQQ
  • Long on SLV

What am I eyeballing?

Long

  • Seagate Technology PLC (STX) – Low P/E and growing revenues.
  • More Commodities
  • MetLife (Symbol: MET)
  • Citigroup (Symbol C)

Short

  • Potentially how the market moves, DIA (Dow Jones Index)
  • Bank of America (But Odds are will just avoid)

 

 

Filed under: InvestingPersonal Portfolio Update

Like this post? Subscribe to my RSS feed and get loads more!