LIVING OFF DIVIDENDS & PASSIVE INCOME

I covered my puts on WCI today. Carl Icahn put in a bid for $22 a share when it was trading at $19.80 yesterday. So in today’s market where every was down, WCI was up 15%!!

I had enough second guessing the home builders. The real action was in the Lending stocks and I missed most that action. Anyway, CountryWide’s CEO was on CNBC today, lying about how great business was for home builders and that his company would do well by taking market share from all the sub-prime lenders. I was thinking of shorting the stock last week and I didn’t and its down 10% since then. I think this subprime malaise will spread to the prime lenders eventually.

Anyway I bought some June puts. Hopefully they’ll pan out. If they lose 50% of their value I’ll close them out. I’ll keep you posted.

The stock market suffered the biggest loss today since the terrorist attacks on September 11th 2001.

They were allegedly caused by profit taking in China caused by the governments comments on cracking down on the rampant stock speculation taking place and by Greenspan’s comments on the US facing a mild recession later this year. Even Oil and Gold were down today. So was every other sector!

The only green mark in portfolio was URPIX which was up 7% today, but I didn’t own enough to offset my losses. Still, the losses are to be expected and a 30% cushion still isn’t bad. Hopefully WCI will drop even further and I can actually profit from my remaining puts (which are currently underwater)

I did use the drop in GDX (gold mining ETF) to sell some March puts. If they expire worthless, then I’ll have made some money and if they don’t I’ll own some GDX shares for less than what I sold them during the last options expiration period.  Read more... (203 words, 8 images, estimated 49 secs reading time)

Since WCI was up sharply, I closed out the January $20 Puts. There’s only 2 months left and like someone famously said, “Markets can remain irrational longer than you can remain solvent”. Better to take a small loss now than a bigger loss later on.

I still think the underlying fundamentals are bad so I’ll keep my other Puts and bear Calls in place. I think I should’ve entered into Spreads instead of just selling out of the money naked Calls. That would’ve reduced the premium I collected but it would’ve limited my losses. Of course, I could still implement that strategy, but its going to be a bit more expensive since my out of the money Calls are now in the money.

I expect the stock to wind down a bit going into the long weekend. I might close out some of the March positions at that time.  Read more... (197 words, 8 images, estimated 47 secs reading time)

OUCH! Yesterday WCI was up over 10% on twice the normal volume. About 5 million shares traded hands at about $17.5 which makes it nearly $100 million dollars worth. I was wondering who was buying up so much of this crap, and then I find out today thats its Bill Gates. His charity indiscriminately bought several builders stocks. This is a great time for the insiders to bail on the stock!

I was wondering whether to bail on the stock[close my short option positions] and eat my some small losses or to ride it out and incur either smaller losses or maybe much larger ones. However looking at the MACD it seems that just over $18 was the short term peak and its due for a pullback, which might offer a better place to exit. I could get more puts at this juncture but I’d rather just bail.
No point letting my ego get in the way.  Read more... (198 words, 8 images, estimated 48 secs reading time)

In a previous post on WCI, I had mentioned that I had sold some March 2007 Calls.

When you sell a call and you own the underlying stock, its called selling (or writing) covered calls. In my case, where I don’t own the underlying stock, its called selling naked calls. I gave someone the right to purchase a stock from me at a certain price at a certain date in the future and in return I collected a small premium. [That's right, I don't own the stock yet I sold the option on it and collected some money. Makes me feel like I'm in the insurance biz!]

There is unlimited risk in selling naked calls (or puts). If the stock rises beyond my strike price [which is $17.50 in the case of WCI] I stand to lose the amount that it rises minus 17.50 minus the premium I collected up front.  Read more... (579 words, 8 images, estimated 2:19 mins reading time)

Apparently some builders are so desperate, they’ve started suing buyers who are walking away from their deposits. Several of my friends have received letters stating that the builder will be suing them for damages and for fraud. Of course, the builders are just shaking the tree trying to see if anyone will buckle and send them some money. They must be really hurting!!!!

I’ve been bearish on WCI [which builds condos in southern California} for several weeks now and RealEstateJournal.com has an article on it.

Investors Struggle With Aftermath Of Condo-Investing Fever

By Amy Hoak
From MarketWatch

People camped out for the chance to buy a unit in Radius, a condominium development in Hollywood, Fla. The building's 285 units sold out in just over 10 hours -- half a year before construction was even set to start.  Read more... (1391 words, 8 images, estimated 5:34 mins reading time)