Hedged for Earnings

Well, I was essentially a day late in doing this. The futures last night were up initially and I was glad because I was wanting to get into some put plays on a rally because I figured we would roll over at 850 given the fact that we haven't seen any earnings yet to support higher prices. But the futures sold off heavy and opened up lower so I didn't get the chance to hedge ahead of time.

From a bullish standpoint stocks rallied into the close to finish at the 835 level which was previously resistance and now support. This is supportive of higher stock prices and we saw the McClellan come off it's oversold levels.

I was pissed that the entire day my one hedge was going against me and not being a hedge at all. It's almost hazardous to be short anything with all the rumors of takeover going around it had my ESRX up all day until it eased off at the end.

I gave back some today but took the opportunity to balance myself a bit more for the uncertain times of earnings season. I doubled my number of positions and now have a 3:4 put/call ratio, so I am still bullish but much better than my previous 1:3. I think conservation of capital will be key right now so I can get ready to play the next leg, whichever way that happens to be. I have a dilemma because I could have either closed out all my positions and just day traded for the next few weeks, or hedged myself. I like the idea of not being exposed to gaps in either direction but hopefully I have taken care of that now. Depending on how this earnings season goes I may change my strategy in the future. I have 2/3 of my capital at work so if needed I can take advantage of day trading opportunities or longer term trends that present themselves.

I hope my relative strength and weakness plays work out mostly in my favor. I am actually fairly bullish however you never know what will happen with earnings. If financial stocks have decent earnings I think we have an uptrend for pretty much the rest of the year but we'll see.

Total Return for 2009: 96%