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Cramer Regrets Staying Too Bearish


Greedy bears get slaughtered just as swiftly as greedy bulls in this market. Maybe faster.

Last week, when all heck was breaking loose and it looked like stocks were headed south fast, I surveyed the landscape for some puts to buy. I usually have a set list of companies I want to bet against when I think that the world is coming to an end, but I also do some ad hoc thinking.

Right about the time when "ugly" defined the tape, I spotted two beautiful contracts, the

U.S. Airways


June 65 puts and the

United Technologies


June 90 puts. At that time, U.S. Airways was trading for $71. The puts were trading for a buck and change. UTX was hovering around $94, while the puts were at 7/8.

What made these puts beautiful to the eyes of this beholder? Not a lot of capital, first of all. If you want quick insurance and you don't want to make too big a bet against yourself -- as I told you faithful readers I was

buying the dip -- these puts make a ton of sense. Neither would be misses if they went out worthless. That's the key to quick protection.

Second, both were within five to six points of pay dirt -- acceptable considering that these two stocks have exceptionally high volatility.

Why U? Rumors of an


meeting were roiling the market. Even though I regard OPEC as no more effective than the

League of Nations

, I still know that journalists can be counted on to take any statement from Geneva, or wherever they are meeting, at total face value. So the airline stocks, leveraged to fuel, would get hit. U has been up a lot, and even though I do not question its fundamentals, these puts looked too good to pass up. (No, I did not consider that a U pilot

saved my life recently when the plane I was in was struck by lightning. I never confuse U, the stock, with U.S. Airways, the company.)

I didn't question the UTX fundamentals either. But UTX supplies aircraft engines, and anybody who has picked up a paper in the last six months knows that


(BA) - Get Boeing Company Report

is hurting -- so a little guilt by association could take hold at any minute. Anyway, it is a $90 stock, and there are always people who liquidate high-dollar stocks in any pronounced selloff. That's enough for me to do a trade if the market's looking terrible.

The next day, UTX dropped to $87 and change. I asked


to call some analysts, all of whom said UTX was doing great. So I immediately rung the register on a triple. Hey, terrific do, considering that the fundamentals did not favor this result. I could have bought the common and then ridden it up for a nifty trade, too, as UTX rallied quickly to $92. But I wanted the position off my sheets.

But letter U, now that is a different story. I really screwed this one up royally. The very next day after I put the trades on, the wires were filled with doom and gloom about the OPEC emergency meeting. Thanks press boys! The price cuts got reported as a new level of discipline for OPEC, and the airlines immediately got hit.

The puts flew up in value to $2 and change as U dropped to $67 and a fraction. Did I sell the puts? No, not me. Did I do the smart, textbook trade, buying common stock against the puts to play U to the upside when the fraudulent OPEC meeting was revealed to all? Nah. I was no different from that deer I saw eating the roses this morning when I went to work. I just stared. Stared and took no action.

I could have bought a ton of U against those puts and then had the virtual free shot north as U ran to $75 in a straight line. I, on the other hand, went for broke. I paid no attention to my own advice that this dip had to be bought and instead "hoped" that U would keep falling.

Now, with one week to go, I have a wasted asset that will do me no good and an eight-point move on the stock that those puts would have assured. Now my head juts silently from the wall of the guy who sold me the puts, just another trophy to indecision.

That's what you get for staying too bearish in an oversold market.


Random musings:

If you want to see what a bottom looks like, take a look at the action in

America Online


since that "savage" Heard on the Street column.

TheStreet Recommends

Peter Brandt

must be laughing wherever he might be these days...


takes a backhanded swing at the

Trading Goddess

, portraying her as just another device to get circ. Those who have followed her advice will think twice about reading


business coverage. But since it's free on AOL, I never mind reading it. Great business model there!...Right now, I am sitting pretty in the stock contest, unless this is one of those Battle Creek jobs where no


employees can participate...Tree falling in the 7:23 a.m. woods department. Did anybody see my impassioned defense of


(INTC) - Get Intel Corporation (INTC) Report



besides my dad? At least he liked it...Has anyone gotten my 13-year-old nephew yet in customer service? His mother wants to be sure he was polite...Does anybody else get the


stock picks on some bogus email list? How do I remove myself from this farce?...The online boys have to come up with a better term than "default" browser.



first went down when



picked it as a default browser. Stock traders took "default" as a negative. Maybe a legacy of the junk-bond era?...Was anyone as appalled as I was by that hot-headed I.R. at

Banker's Trust

who left the demeaning voice mail on






are rolling over in their graves, and this guy has the guts to insult Herb for pointing out a textbook case of what G and S were worried about? I suggest Manners 101 to augment P.R. 101 for this smarmy know-it-all. Surprised that

Frank Newman

, a high-roader and one of the best CEOs in the business, tolerates that kind of behavior. Newman is one of the most honest, professional guys I have ever spoken with in any business. It is not his style to rant and rave when someone raises a legit concern. And it should be no I.R.'s mantra to suggest not to call. Had Herb not called, it would have been a perfect little item for Brill's Content, a magazine many of us are eagerly awaiting. Shame on that I.R. Let me know when he apologizes...

James J. Cramer is manager of a hedge fund and co-chairman of

At the time of publication, the fund was long AOL and Yahoo! and had a position in U.S. Airways, though positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column by sending a letter to at