Last Friday's promising heart attack on Wall Street has given way to a quasi-vegetative state that holds no particular opportunities for either bulls or bears. What to do? We'll sit on the cost-free put spread that we legged on in the QQQs, but my hunch is that we may be glad we bought some cheapie call options on the side. That's assuming, of course, that the aforesaid vegetative state does not persist until�spring�summer�autumn�? We watched some out-of-the-money January puts expire ingloriously, having purchased them with the rationale that a mere 2 percent decline in the underlying index would yield sufficient gains to pay the mortgage and a few other bills. In retrospect, we now know that a 'mere' 2% was asking for too much. Also, in retrospect, we know that, when we had the chance, we should have shorted some offsetting puts on the 1% decline that actually did occur. Although I agree with those who thinks it's a good idea to always have a few put options in inventory, the sobering fact is that, since the 1987 crash, there have been only a couple of times when buyers of puts felt something akin to exhilaration for more than 2.5 consecutive days. That number is off the top of my head, but can you recall a period lasting any more than a couple of days when it would have been a mistake for a put holder to take some profits? I can't, and that's why I've embraced the strategy of buying puts only in spreads where we have taken in as much in premiums as we've paid out. *** Why I Hate Disney Yesterday I took a swipe here at Disney's announced purchase of Pixar for $7.4 billion. I'm not optimistic that the deal will improve the fortunes of either company
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