Covered the Short
It was a nice trade. The market is still somewhat overbought, but wanted to cover before the Fed Minutes.
I am still not expecting a cut this go around, but the minutes maybe interpreted as a cut is coming and rally the markets. (So I wanted to take my profits from the trade.)
Why a cut is not coming… the Fed is busy working with banks to straighten this mess out. As evidence by the ease in regulation letters via Citi and BofA posted on the Fed’s site. I think the Fed is doing everything they can not to cut rates, and make the banks absorb the hit on this one. (That is why I think during earnigns time via the banks there will be a asset and earnings re-valuation.) Inflation is controlled, but not controlled enough for a rate cut. And if the fed cares about inflation, as they pointed out in every single meeting/minutes, they will not cut.
August 28th, 2007 at 10:41 am
Smart man….closed out my puts on the SPY and Q’s a little early, missed the last 20 cents of upside, but I do love booking profit. Word from Dougie Kass on Realmoney.com is that there may be a pre-Fed meeting rate cut. Bought some JPM January 42.50’s on that notion. Financials are starting to hurt again, but it’s a small speculative position. A pre-meeting rate cut would certainly benefit the money center banks.
August 28th, 2007 at 4:11 pm
Wishing I had not sold the puts. Could go down to 12700.