Oh boy.. could the past week get any wilder?  First, Lehman Brothers reportedly will be filing bankruptcy sometime in the next 12 hours due to failed talks between LEH and suitors.  The Fed tried to broker a deal between LEH and Bank of America / Barclays, but talks fell through at the end due to the Fed not wanting to bank some of LEH’s toxic paper as was done with JPMorgan and the Bear Stearns mess.

Lehman Brothers, R.I.P.

On the flip side, Bank of America has offered to buy Merrill Lynch for $29 / share, or close to a 75% premium over Friday’s close.  Talking heads are saying MER was the firewall holding up the rest of the financial system and with BAC’s purchase, the transaction has helped to offset some of the instability from the LEH mess.  BAC’s on a takeover tear.  First Countrywide and now Merrill.  Anyone worried BAC may end up turning into another Citigroup?

Futures right now are pointing toward a 300 point lower open tomorrow.  Asian markets are closed due to holiday (Autumn holiday?).  Personally, my portfolio is split evenly:  6 calls and 6 puts.  Hopefully my puts actually fall because I know sure as hell my calls are going downhill tomorrow!

Keep your battle gear by your bedside because tomorrow bulls and bears alike will fight the epic battle.

Okay.. my head hurts from today’s action.  Luckily, my hedges kicked in.  Something tells me Monday’s going to be a big day, one way or another.

Yesterday’s action consisted of 2 contracts sold for a profit of $268.  I think the contracts I sold were WFR.  Probably.  Yeah I’m almost sure.

Today’s action?  Well after the wild swings and rumormongering, I decided to take a big chunk of profits off the table, even if their trends hadn’t broken.  This may or may not play out in my favor but if the Fed is bailing out FRE and FNM, I don’t care to take chances on the short side with financials.

Today’s action consisted of 10 contracts sold:  Remaining LM contracts, remaining WFR contracts, and my entire TIF lot.   I may re-enter TIF Monday or Tuesday but I’m not entirely sure yet.  I had a decent gain on TIF and since I’d prefer to have the cash on hand I’ll take the profits.  No reason not to take profits, right?

Profits for today:  $1,229.  That’s right, I took $1,229 from the market today.  And yes, my account once again has hit a new high.

In all honesty, I think the past two-three weeks has been fairly easy to trade.  If this continues, I should hit 10k by the end of the month.  However, a couple of things to note.  First, I think the run on the financial sector’s done for now.  If the Fed is bailing out FRE and FNM, I’m expecting a modest rally in the XLF.  Second, my risk has remained the same since I went on this winning streak.  According to the rules I have in place, I should be trading about twice the position size per position with the run up in my account.  That being said, I haven’t increased my risk due to the fact that we are in a bear market.  I’ve been so delta negative I was not about to risk losing everything.  The new risk rules will go into effect at the start of August.  Just gotta make sure I haven’t lost my account by then!

So for now, I’m running at a reduced position size for the rest of the month.  I’m currently 2:1 short with some DIA/SPY puts in place as a hedge.  The Investing Adventures’ account is now at a new high.  Total return on investment since I started last year is about 62.5%.  It can be done.  You can survive in the stock market!

I’m off to Pittsburgh Monday for a conference.  I’ll be bored trading over there.  Enjoy the weekend!

Busy weekend this weekend, eh?  First on the docket is the financial sector.  Lehman this weekend had some sort of secret meeting with its board.  Remember the last time a financial met secretly over the weekend (Hint:  BSC!)?  Over the weekend, LEH has officially removed their COO and CFO and may be in talks to sell the company.   Blackstone I believe purchased a 30% stake or is looking to purchase a stake in the company.  This morning, LEH posted it’s first ever loss coming in at a whopping $2.8 billion.

More news on the financial front involves AIG.  Over the weekend, AIG CEO Sullivan was removed and replaced by a former Citigroup executive and current AIG chairman, Robert Willumstad.  No clue about Willumstad, but apparently he may have ties to another former AIG CEO, Maurice Greenberg, whom I believe is currently under investigation by the SEC.  In any event, I’m sure all three will prosper handsomely hah!

Finally, not only is medication cheap in Mexico, but so is gasoline.  San Diego folks are actually traveling to Mexico just to fill their gas tanks.  Scary stuff if you ask me.

Short and sweet since I’m feeling a bit under the weather.  I need to learn to not leave so much money on the table.  It’s frustrating and starting to get on my nerves!

Trades Taken

• -1 x JASO June 25 Call
• -1 x LVS June 65 Put
• 1x VLO June 45 Put

Profit / Loss on the Day / Open: -$58.00 / -$95.50

Closed out my JASO calls around the high this morning only to see it fade the rest of the day.  Solar play may be over for now especially with oil potentially fading from these levels.  LVS took off like a rocket and hit my intraday stop and as a result I exited with little damage.  VLO looks ripe for the drop so we’ll see what happens.

Okay.. someone explain to me what the heck just happened.  Here’s a 1 minute chart of the Q’s.

Around 2:30 (yes, that 2:30 reversal period), the Qs and the rest of the market went right down the toilet.  I think the bears were mocking the bulls and were loading up just to give them some false sense of hope before they brought out the bombers and obliterated any rally today.  Now that the carnage is over, how’d I do?

Trades Taken

• 2 x NQ
• -1 x JASO June 25 Call
• 1 x LVS June 65 Put
• 1 x BBD June 25 Call

Profit / Loss for the Day: $132.50

Profit / Loss Currently Open: $32.50

I think something odd happened when I sold half of my JASO position.  I sold one JASO contract at $2.75 for a profit of ($2.75 - $1.25) $150.  However, my P/L for the day in JASO is $87.50 (JASO declined during the nasty selloff).  Anywho, on the NQ front, I managed to escape with $80 on the day.  I need to begin letting my NQs run a bit more.  I could have easily captured another 5-10 points on the NQs had I let them run and watched my indicators.  But that’s how one learns.  It’s a matter of learning by experience.

Took a position against LVS near the close.  LVS in the past has been very good to me so we’ll see if it cooperates with me this time around.  I have a very tight leash on it with an entry near $72.20 and a stop around $72.50 + 0.5%.  I also went ahead and increased my max risk level on BBD.  Over the past couple of days, I’ve noticed BBD consolidating.  While it’s close to violating my trendline, it’s still in play and so I increased my position to my max risk (using the initial purchase price for my BBD contracts).

Options expiry is Friday and I’m glad I’m done with my May options.  Another options cycle is close to being in the books.  Any thoughts on what tomorrow’s action will bring?