Attempting To Recover

My lack of posting recently has been due to a lack of decent internet access and action until today. I had bought some MSFT puts last week and closed them before the weekend and took my 50% profit in case we had a bounce and to avoid time decay. The odd thing that happened was that I literally did not get filled until the closing bell which made me say "well I bet we go down on monday because they wanted them back." So far monday and tuesday we have continued to break down.

Many stocks are confirming Head and Shoulder or Double Top patterns. Materials are definitely struggling and facing some headwinds however many of their individual stocks are right at their neckline support and have yet to break. Until they break down obviously the long attempt is the way to go if you want to take the risk. I am taking the risk thinking we could get a little bounce before we really break down. Because a majority of the material sector has not broken yet, I decided to get some exposure via the UYM. This position will likely be made or broken by the results Alcoa reports and the reaction the stock has. I have hedged the UYM position with a short OTM call position on AA. Since AA is a significant portion of the UYM if we get positive news out of AA I should see a decent pop in the etf and benefit from the volatility decay because right now IV is 109% and the next month is 75%. If we assume a collapse down to at least 75% that is nearly a .35 cushion against an unexpected upside surprise.

We shall see what happens, if we break down I should benefit from my short option positions. If we have a bounce back rally I should benefit from my long option positions so I would consider myself decently hedged.

Total Return for 2009: 140%