current market Nov 7th

As i scan over the market i notice financials, particulary WM-N, IIC-T and other large financials getting smoked. Is it value time and should i be picking up calls? Nope.

The options for these will have huge time values because of the large price movements. Also i can see no near term catalyst propelling them higher? I will keep them on my watchlist, but as Buffett says you want your long term holdings to have a 'moat' besides just strong fundamentals. By 'moat' i am speaking of some sort of competative advantage. As i see it WAMU or WM-N has neither mentioned. Its a smaller financial with recent accounting fraud accusations and large outstanding residential home loans.

Enough of the bad lets see some good in this market? Well i am happy to report my account only has 2 holdings. IMG-t and BVF-t. Both have suffered slow and steady flat lines and are eroding my purchased calls time value. BUT>

BVF will hopefully paint a pretty picture with earnings out 8:30 am Nov. 8 and IMG reports next Tuesday. I may pick up some calls for IMG with NOV expiry just to play possible earnings upswing. This will consist of only a few hundred dollars capital as the risk is high due to lack of time value.

I sold out of my WAG-N calls. Time was eroding them and i should have sold when it spiked quickly above $40. Could have turned a $600+ profit on $2200 risk in less than a month, but will settle on $100 loss.. mostly due to the lovely rise in CDN $$.

Did i mention that CDN $$$? It is killing me with BVF. I would be up on that nicely but i am slightly down because the US dollar is in free fall mode. I promised myself i would transfer more of my long term RRSP holdings from CDN funds to NON US or CDN funds ie Oversea's.

I have several Oversea's funds and i am happy to report that they have all sucked this year! Why? Because all their loss and then some is because of the CDN $$. So the underlying stocks are performing ok and have little US subprime risk.

Well back to current trade ideas. I have looked at UUU. After its recent smackdown it may be a good one to try a short term (1-2 months) call write. Until today it had $10 support. Now who knows? It has a juicy time value for DEC calls with 10% downside protection on shares held.

Loblaws L-t is another beatin down dog. I may try a credit spread on this one, which would be a sold put $44 perhaps and a purchaed protective put around $40. I have to play with this one some more to see how it's risk/reward is. Until then it continues to slid and allow me a lower entry. The company has good sales but poor margins.

TDG.un and PD.un may be some other plays for covered call writing or using in the money protective puts to preserve capital. Both are drillers than are trading @ or below 2x book value and have rigs in US still working although CDN $$ is hurting them there.

Hopefully my next post will have some positive news to report.
DH

Volatility

Oh the pain and suffering. With today's market downdraft i really should be buying more put options and selling call options. For that matter i compounded my misery by BUYING call options on several stocks yesterday.

I found IMG-T and WAG-N to be lagging or beatin up as of late. So i purchased some calls on both yesterday! Was that smart? I don't know yet? I also sold out of my UUU-T call options today... at a loss. These were shares i picked up when Uranium was sagging. I had to sell today because they expired and i didn't want to buy the shares on Monday (these calls were in the money).

I may buy back UUU-T or another PDN-T but will wait to see how the markets shake out come Monday. I did a quick calculation on my trading account today and figured i lost just over 2% today. The so called 'safe' TSX index lost just over %2 also today! My trading account is presently 30% cash, almost 45% BVF-T common shares, and several call options making up just over 25%.

It's leveraged slightly more than i would like at 25% in options but i should explain why. I have protective puts to cover my BVF-T shares. After including dividends these puts will limit my max loss on this stock to only 5% until the end of Jan.

Why did i do this? Well i do like BVF-T long term, but this account is after all my 'trading' account. If you looked at BVF-T on a 1 yr chart the reasons for 'protective puts' becomes obvious. Ever had a stock 'gap down' on you? No stop loss in the world will save you from a 'gap down'. Why didn't i buy the call option instead?

Good question and i already had is my answer. Tax planning was the name of this game. Dividends are taxed a 'nicer' rate than capital gains so i was just trying to keep a few more dollars at tax time.

Well happy trading. I will post more fun updates as they unfold. My watch list radar today has some stocks for long term such as L-T, ATA-T, and BCB-T. As you can tell by the picks i don't enjoy following the 'hot' picks but rather the beatin down dogs.

DH