SURVIVING THE GAME
NOVEMBER 20, 2008
VOLUME 1 NUMBER 20


Flat now in DIA NOV option positions. It worked out well today. Exited the 80 puts at $136 each then we rallied. I kept ratcheting up the stop on the 92 puts and when we rolled over and sunk in the afternoon, was stopped out at $965. Actually managed to turn a profit on the NOV positions despite market collapse!

I am attaching position summary that shows all the fills from last week and yesterday. Portfolio hanging on but still sinking slowly. You will notice that the positions for the 4 uranium mining shares and the SLV are now deleted. My single paying subscriber, who is trying to market this newsletter to clients, has requested them to be removed. His argument being that they were initiated before I even started the letter and nobody could have been in on those trades. I am not in favor of this but have agreed to remove them. You and I know that they are in my personal holdings so if one day you hear that either uranium or silver have rallied huge, you know I’ll be a happy camper. I have included current closing prices for the positions we have been stopped out on. As much as I was disappointed at being stopped out, look at the huge losses that would have been incurred if we had “hung on for a bounce” as the talking heads on TV like to say. Preservation of capital is far more important than trying to catch a small gain on a bounce. We can always re-enter on the long side when the markets finally turn up.

Now is not the time to be a hero, but rather to hunker down, get really defensive and see how things unfold. This is serious stuff, not a craps game at the casino. We are still in BNS, NUE and AAPL but barely above stops. The ECA, UDN and DIA options positions are all doing fine even with the market turmoil. This shows the advantage of these options strategies over buying stocks directly. You can sustain huge movements against your position without the catastrophic losses.

It is time to adjust the DIA DEC positions down again. We currently have the 88 straddle. Buy back the DIA DEC 88 puts and sell the DIA DEC 84 calls and puts. This will result in a small credit of approx $150 per position. Keep the DEC 88 calls and place an order to exit at $350 each. Also place an order to buy back at $100 each. This makes the DIA DEC position more neutral with 8400 on the DOW as the middle instead of 8800. The exit stops will be at 6900 and 9900 on the DOW. Place an order to buy back ½ the DIA DEC 95 calls at $40. This converts the butterfly into a spread, altering the profit curve in the event of a rally between now and Dec 21st. The 95 calls closed at $98 today.

Again I must state my disappointment at having a negative return thus far. The fact that the major indexes are crashing to new lows and are down 40% or more is of little comfort. My job is to preserve your capital and position you for gains if market conditions are favorable. This does not mean we need a rally. Sideways movement would be fine. The DIA straddle positions will show tremendous returns when we get a sideways market. Until then, we are positioned to benefit handsomely from a rally or sideways action and will be stopped out quickly if we continue down, limiting losses. I am surprised that the S&P and NASDAQ have broken to new lows. As I have said, I am no market guru when it comes to direction, I simply react to what is happening. If I do have an opinion, such as shorting the $US, I will put on positions to benefit from being right while limiting losses if incorrect. My opinion is that the lower we go, the tighter the spring is being wound. A snap back up is inevitable…but when? Will react when that event occurs.

Dave Knight
Editor
Surviving The Game