Options Trader: Friday Morning Ideas

by: Philip Davis

OK, first of all, why are you reading this? It's a holiday -- go home, relax, spend time with the family!

So why am I posting? Addict that I am, I had to click on CNBC and the futures look awful. I'm not particularly bothered by it as I cut back on everything before I left, but I will be taking a bit of a cover on the remaining positions if we trend down.

You can't put much stock into the movements on a very low volume day like today but the dollar is a train wreck (as we talked about) and (also as we talked about) only China can save us.

It seems we've gotten caught with our hands in the international cookie jar and the M3 (which we have talked about a lot), which the government stopped officially reporting in March, has been going up very quickly since then!

M3 Chart 25 11 06

Tsk, tsk -- sneaky sneaky U.S. Treasury! Naughty, naughty flooding the world with dollars while telling China to float their currency. The annual rate of M3 change is currently 10%, that's a rate of over $1T worth of dollars being shoved down the throats of international investors every year.

This is more than can sustainably be absorbed!

The situation is so dire that Paulson AND Bernanke are now planning to jet over to Bejing to beg for mercy.

The dollar is at 2 year lows and will rocket gold and oil today, so we can go back to the Barrick Gold Corp. (NYSE:ABX) $27.50s as a momentum trade -- Tuesday they made a quick 15% as we exited at $1.95.

Metallica Resources Inc. (MRB) is back to $4.01 and is always fun but I think this may be a flush for gold shorts and dollar bulls so I'm not going to go crazy until I see what shapes up Monday and Tuesday.

Newmont Mining Corp. (NYSE:NEM) $45s also make a good momentum play at $1.50 but don't go against the price of gold -- get out/don't buy when it pulls back on you!

These are portfolio protection plays only. Also, the Diamonds Trust Series 1 ETF (NYSEARCA:DIA) Jan $121 puts for $1.10 are good protection as they won't kill you on the turn (as long as you maintain a 25% stop) but will be a reliable double if we drop 100 points.

Retail sales look good, better than expected -- despite all the grinchy predictions but

So let's not panic yet but let's have some of these trades tee'd up if our bad open gets worse.

Let's watch our levels for breakdowns and keep an eye on the usual suspects like Boeing Co. (NYSE:BA), Microsoft Corp. (NASDAQ:MSFT), Intel Corp. (NASDAQ:INTC), Sears Holdings Corp. (NASDAQ:SHLD), Texas Instruments Inc. (NYSE:TXN), Wal-Mart Stores Inc. (NYSE:WMT), General Electric Co. (NYSE:GE)...

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