No huge surprise today

Note: This post was supposed to be uploaded last night but the server was having errors. Sorry.


Fed raised again the quarter point. As discussed in here this was expected. Both desired results were obtained as the rate hike happened and gold sold off. I used the opportunity to begin building my gold position as I purchased 5 call contracts on GoldCorp (GG) with January 2006 expiration and $17.50 exercise price. These are slightly in the money as current share price closed at $19.70. These options were purchased for $3.20 - so $1.00 of implied time premium and $1/19.70 - gives approximate 5% time premium for this 6-1 leverage. This is not necessarily a good bargain - but I liked how GoldCorp acted on the pressure today. We will have to see how things progress during the gold selloff that is beginning.

I am keeping rest of the capital on reserve and am hoping to make another $2k contribution to add to more positions. My vision is becoming clearer or at least it seems so - :). I am also contemplating January 2006 call options on Dow Chemical (DOW) which has negative correlation with Gold and inflation - in that its earnings stand to decline in inflationary environment and expand during disinflationary (espeically with regards to energy). As a result it might serve as excellent hedge of position. I also like the company's valuation and earnings prospects as they are around a 9 forward PE and potential EPS going forward of $5-6. I can pick up the January 2006 calls with $50 strike price for around $30 per contract. I am thinking of buying about 50 contracts - but would like to see price fall to $20 per contract potentially. The share price is around $42 now - but it appears that on another oil/energy spike the stock could decline into the $38-40 area which would give the ideal entry point.

Other ideas always in the back of mind - remain buying the PUTS on Pulte (PHM) or Best Buy (BBY). These have already gone down a ton though and I have not been quick enough to grab them. Also if we have the foreseen sell-off in the Nasdaq I am also looking to pick up the NCTY in the $15-17 range - hopefully 500 shares.....fingers crossed.

Things are moving quickly - please e-mail with questions/explanation request.

Regards,

BG