After being on the wrong side of two earnings plays, I'm now left hoping for a market meltdown.
The Option Alert model portfolio had been bearish on CEC (CEC - commentary - Cramer's Take), the Chuck. E Cheese Group since last May when I bought some September 30 puts as the stock traded around $34 a share. I got myself tangled into calendar spread when the stock moved down to $28, and then took off half the position for a small profit. Pop, stopped out. Still have enough loose change for a milkshake.
This confirms my track record at earnings plays is lousy, and I should have closed the position early in the week. Instead, I have a repeat of Panera (PNRA - commentary - Cramer's Take), as CEC jumped some 20%, and I was stopped out giving the position a loss, small, but a loss nonetheless, because I overstayed my welcome.
This morning I get greeted by Laboratory Holdings (LH - commentary - Cramer's Take), in which I bought calls last week when the stock was $68 a share. Again, I paired the position to take partial profits when the stock crossed $71; but it will not be enough to offset the 7% decline back to the $67 level. These calls still have a few months remaining until expiration, so I think I can now set a stop and hope for a little rebound and get out without too much damage.
My one hope of salvation is that I did reload my inventory of Spyder Trust (SPY - commentary - Cramer's Take) puts, so if the S&P 500 Index can continue to melt away, such as seeing the SPY's decline below $125, I can peel some off and stop pulling the hair out of head.
Steven Smith Blog Good Trading Opportunities May Be Here 7/23/2008 4:19 PM EDT Sector rotation among the financials and energy should provide some openings for aggressive types.
Steven Smith writes regularly for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He was a seatholding member of the Chicago Board of Trade (CBOT) and the Chicago Board Options Exchange (CBOE) from May 1989 to August 1995. During that six-year period, he traded multiple markets for his own personal account and acted as an executing broker for third-party accounts. He appreciates your feedback; click here to send him an email.To read more of Steve Smith's options ideas take a free trial to TheStreet.com Options Alerts.
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