Sticky markets, LPS add, and Cisco trim

The markets are getting back a little bit of what we gave up and the broader indices remain near highs. “Sticky” is how you could describe this action as the markets are “sticking” near their recent highs like an old piece of tape on your dashboard.

Is it possible that some tight, sideways action for a week or two is the most unexpected outcome for the near-term, making it the most likely?  The bulls aren’t very scared, but the bears seem almost complacent too — they seem to simply expect the markets to crash again on due course. I don’t know, but I’ve been told, you don’t short a quiet market. Sticky markets are usually also quiet.

Anyway, here’s what I’m doing today as far as trading goes —

I’m looking to add to my LPS puts. I’ve got a lot more analysis for you on the LPS/bank topic later today, but it’s in front of my editors right now. A put is a bet that a stock will fall and if I buy the LPS puts that expire in June with, say, a $17 strike price for $2 while the stock is today at $19, then the stock would need to fall at least $4 before the end of June for that put to pay off, or I’d need to sell i for more than $2 in the next few months before the June expiration comes.

Options typically expire on the third Friday of each month, by the way. All option bets are very risky because of the time limit you put yourself for the stock to move in the right direction. It could take years for LPS to truly fall to single digits, so betting on a June time horizon is risky. I’ve also got LPS common stock that I’ve borrowed and sold short back when the stock was in the $30s, as you long time subscribers know, and I don’t ever really plan on covering all of that short, as I think the stock will eventually even someday stop trading as worthless. Point being, there’s no time horizon on buying and shorting common stock while all options do have time limits on them, so keep that in mind.

And if you don’t want to trade options, then simply consider calling your broker (even your online broker’s 800#) and ask them to help you see if you can borrow some LPS stock to sell short. Have him explain the risks because you can also lose an infinite amount of money by shorting a stock, and that’s not a good thing either.

More details on all this in my upcoming book that we are working every day for hours a day on to finish right now for you guys. Tentative title: “Investment Basics 101 with Cody Willard”. Thoughts on the name?

I’m also looking to trim a little more Cisco calls. We’ve got a double and triple in these things over the last few months as Cisco has quietly powered to new highs and with earnings coming up, I want to lock in some profits and perhaps buy some new Cisco calls, dated out longer and with higher strike prices.  Let you know if and when and what I’m buying if and when I buy back more Cisco calls.