Still Too Fragile For Call Options

The Aggressive Portfolio (Options) ended the week unchanged as we are now 100% cash in this portfolio. The portfolio continues to sport an exceptional 244% return since January 2007. Year to date, this portfolio continues to beat the market return by a large margin, an excess premium of almost 20%! As we mentioned before, we do plan to look for more opportunities to make money writing options as the risk premiums right now are quite high given recent market turbulence and the underlying volatility. We may also consider some tax strategies that involve writing puts and buying calls on certain oversold stocks in our portfolios that allow us to take advantage of tax losses before year end. We may also look for an opportunity to buy a long term call option against the market index, although with the market gains last week, prices are not quite as attractive. If there are significant market losses for a day or two over the coming weeks, that may open a buying window for a better price. We are still not quite ready to begin buying straight call options on individual stocks as the short term direction of the stock market is still volatile and difficult to predict. The market is just too fragile and volatile right now, with the 3-6 month outlook very uncertain. We are now 100% cash in this options portfolio and will likely stay mostly in cash though year end unless we uncover very compelling opportunities. We would caution again that investing in options is very risky and is appropriate only for the most aggressive investors who understand the inherent risks.