Kelly: Sold S&P Puts, SIJ

Jan. 9.08 | About: ProShares UltraShort (SIJ)

Tuesday afternoon I decided to take further profits, selling half of my remaining S&P put position at $6 and my (NYSEARCA:SIJ) position at $65. My large S&P put position has really been a game changer in the portfolio, as the remaining position is now up 120% in just a few weeks. This has rocketed my portfolio higher as the market has weakened, but my sense is that the risks to being short are growing, and therefore, it is time to take some profits. I still think that there is the potential for another big down day to wash out the market, but I think it is prudent to take more profits in the case that we get a snapback from what is becoming a pretty oversold condition.

I currently have a ton of cash (about 35% of the portfolio), and for the first time, I’m actually starting to feel in my gut that we are starting to see some real opportunities begin to emerge. I have to do the legwork to legitimize that feeling, but the opportunistic investor in me can’t help but look at Countrywide and Bear Stearns price to book ratios and be interested. More to come in the daily market wrap…