Has anyone else noticed how eerily quiet it has been lately/
Aside from the 17,000 thousand stories about the Microsoft (MSFT) / Yahoo (YHOO) merger and Google’s (GOOG) foot stomping and breath holding antics, it seems as though the market is just floating around. Google actually brought up the word “monopoly” despite owning over 70% of the search market. See what I mean by strange?
We are up 100 today, down 100 tomorrow. It seems that everyone is just looking towards the summer and ignoring today. What they think they see is bad so it seems there is just a bit of investor paralysis out there. The traders are able to take advantage of it and jerk the market around for a few quick bucks here and there without any conviction either way.
It is the kind of market that makes me want to do something but like the rest, I wonder if there is another “shoe to drop”. If there is, I really do not care and in fact, would welcome it as a chance to pick up more favorites cheaper than today. The converse is the urge to assume this is “the bottom” and start buying because or the boredom.
That being said, I hesitate to invest “just in case” so to speak.
What to do? Sell more puts. An example:
You want to buy more Citigroup (C) but are afraid it will tank again from the $27.70 it trades at on Tuesday. You can sell a June $25 put and receive $158 for it. That means, that if Citi drops below $25 around the expiration (June 20), you must buy the shares for $25, even if they trade at only $25. But, because you received $158 for the put, your actual cost is only $23.42 ($25-$1.58) per share. Should Citi not go below $25, you just keep the money and go out to dinner.
Now, this only works for me because I only sell puts in companies I would own should I get “put” shares. That way, even if that happens, I own stock in a company at a price I am very comfortable owning it at.
This strategy works for me because it give me a chance for a little action with very little risk and keeps from satisfying the occasional urge to “do something” with something stupid.
Disclosure (“none” means no position):None, Long Citi
