Volatility Still High After 2 Down Days

The market was down sharply again ending the day more than 5% down, and 10% over the past two days. Frankly, there was not a whole lot of new information released today, investors must be getting jittery with the post election blues and the realization the economy is pretty bad. But everyone already knows the economy is bad, as Employers continue to cut jobs and consumers restrict spending. We still think the market is trading at attractive levels despite the turmoil in the economy. Yes, there could be further drops, but we think the market is closer to that bottom. Option prices continue to reflect the high volatility in the marketplace. With two days of significant drops, we decided to sell a December put option for the current high premium betting that the market won't go too much lower. There is certainly risk to this position if the market continues to move down and if that happens, it could take a really big tumble if it breaks through old October lows. We likely will buy a put option a little farther out of the money in order to minimize our risk on the downside. Hopefully, the market will bounce back over the next few days so we can get that insurance at a lower cost. We also purchased today a long term call option on the market index to take advantage of the low prices and the pessimism in the marketplace. We think the value of this option will increase significantly over the coming year. For more on these purchases, please review the transaction details on our website, www.marketbeatingstocks.com.