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Mandarin Monday Meltdown – Again!


Didn’t we do this last week?  

Hmmm, let’s see – Massive Chinese inflation and a popping bubble of an economy cause a sell-off in Asia and renew concerns of EU stability causing a relative rise in the Dollar that tanks commodities and melts down the global indexes.  Yep, check, Check and CHECK!  I’m not only going to say "I told you so" and I’m not going to even bother telling you again as you can just read last week’s postwhere our plan was to short oil Futures (/CL) at $97.50 (now $95, up $2,500 per contract) and our trade ideas from the Morning Alert to Members were:  

If you want to play a pullback in China, I like 10 FXI Jan $40 puts at $1.90, selling 5 Aug $40 puts for .40 as a bearish spread.  That knocks 10% off the purchase price with 5 more months to sell so it’s a nice way to stake a starter hedge on China.

Also, of course, I loves my EDZs.   The Aug $17/19 bull call spread is .55 and can be offset with the usual suspects (any bullish short put you REALLY want to own) or the short EDZ Aug $15 puts .50 on the assumption EDZ doesn’t drop another 10% or, if it does, that’s not a bad place to commit long anyway as it would be below the 52-week low (and good options to sell).  

We were bearish all week (see Stock World Weekly for a nice summary of the week’s events and trade ideas for the week ahead) and, although the market didn’t seem to agree with us, we simply scaled in and rolled our short positions higher – taking a couple of protective longs on Friday’s dip – just to get a little balance but, as you can see from our weekend reviews of the $25K Portfolio and our Income Portfolio – we are still leaning pretty…
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Stocks: EDZ, FXI, USO