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The Weak Dollar, GM Losses and High Oil – Bearish Trades on ETFs

The Market news yesterday and today is somewhat discouraging. The trinity of bad news came in the form of GM taking a $37 billion dollar loss on their third quarter profits, China is considering dumping their considerable reserve of US currency for the stronger and more stable Euro and Oil surpassing inflation adjusted highs as it trades at nearly $100 a barrel.

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An audio podcast of this article is available at: poweropt.com/podcasts/2007_11_07_Short.mp3

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This generally bleak overview may lead some investors into thinking the market values will stagnate or deflate. The covered call Investment strategy can be good if an investor thinks a particular stock or sector will increase in the coming months. A bear call credit spread or bear put debit spread can be the right tactic when an investor feels the value of a stock or sector is looking like it will deflate.

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The question on the minds of many investors in the wake of the recent news is what direction will major blue chip losses, a weak dollar, and high oil take us. Also, it may be salient to discuss the reasons why these events are occurring.

GM largely blamed their losses on the lost tax benefits in the US, Canada and Germany. This is because the company will lose deferred tax assets. To qualify for deferred tax assets, the company has to be confident it will be produce taxable income in the coming quarters.

The weak dollar is explained away in a mantra aped by most investment analysts these days: China is soaking up increased production, world political uncertainty makes hard assets more appealing and the Federal Reserve’s policies have weakened the dollar’s value.

Potential Trades:
Where this leaves investors is a little puzzling. But many of the news reports seem to indicate investors as a whole are more bearish. To contribute to this view, we will offer some bearish trades on Exchange Traded Funds. If an investor is bearish about the market in general, or just about a certain sector, it is likely they will find an appealing trade among those listed below.

Here’s a list of the ETFs we searched for using the PowerOptions search engine.

List of Optionable ETFs
ETF Ticker
Biotech HOLDRS BBH
Broadband HOLDRS BDH
DIAMONDS (DJIA) DIA
Fidelity NASDAQ Composite Index ONEQ
Internet Architecture HOLDRS IAH
Internet HOLDRS HHH
iShares Cohen & Steers Realty Major ICF
iShares Dow Jones US Energy Sector IYE
iShares Dow Jones US Financial Sector IYF
iShares Dow Jones US Healthcare Sector IYH
iShares Dow Jones US Technology Sector IYW
iShares Dow Jones US Telecommunications Sector IYZ
iShares Dow Jones US Utilities Sector IDU
iShares Goldman Sachs Networking Index IGN
iShares Goldman Sachs Semiconductor Index IGW
iShares Goldman Sachs Software Index IGV
iShares Goldman Sachs Technology Index IGM
iShares MidCap 400 BARRA Growth Index IJK
iShares MidCap 400 BARRA Value Index IJJ
iShares MidCap 400 Index IJH
iShares MSCI EAFE Index EFA
iShares NASDAQ Biotechnology Sector IBB
iShares Russell 1000 IWB
iShares Russell 1000 Growth IWF
iShares Russell 1000 Value IWD
iShares Russell 2000 IWM
iShares Russell 2000 Growth IWO
iShares Russell 2000 Value IWN
iShares Russell 3000 IWV
iShares Russell MidCap IWR
iShares Russell MidCap Growth IWP
iShares Russell MidCap Value IWS
iShares S&P 100 Index Fund OEF
iShares SmallCap 600 BARRA Growth Index IJT
iShares SmallCap 600 BARRA Value Index IJS
iShares SmallCap 600 Index IJR
MidCap SPDRS MDY
NASDAQ 100 Index Tracking Stock QQQQ
Oil Service HOLDRS OIH
Pharmaceutical HOLDRS PPH
PowerShares Dynamic Market Portfolio PWC
PowerShares Dynamic OTC Portfolio PWO
Regional Bank HOLDRS RKH
Retail HOLDRS RTH
Select SPDR – Consumer Discretionary XLY
Select SPDR – Consumer Staples XLP
Select SPDR – Energy XLE
Select SPDR – Financial XLF
Select SPDR – Health Care XLV
Select SPDR – Industrial XLI
Select SPDR – Materials XLB
Select SPDR – Technology XLK
Select SPDR – Utilities XLU
Semiconductor HOLDRS SMH
Software HOLDRS SWH
StreetTRACKS Dow Jones Global Titans Index DGT
Telecom HOLDRS TTH
Utilities HOLDRS UTH
Vanguard Total Market VIPERS VTI
(For more details click the ticker symbol above)

The trades shown below are easily accessible to any investor with a PowerOptions membership. PowerOptions is an indispensible tool allowing an option investor to indentify trades quickly and efficiently leaving them more time for the important task of researching the market.

Bear Put Debit Spreads – Foreign Financial Sector
Symbol
Last
Price
Sell
Option
Expire
Info

Bid
Buy
Option
Expire
Info

Ask

Pot
Ret
%

Net
Cred

Break
Even
DIA 136.51 (+1.30) DAZWF 07 NOV 136.0 (10) $1.45 DAZWG 07 NOV 137.0 (10) $1.95 $100.00 -0.5 $136.50
IWM 79.96 (+1.48) IOWXB 07 DEC 80.0 (45) $2.85 IOWXD 07 DEC 82.0 (45) $3.85 $100.00 -1 $81.00
IWM 79.96 (+1.48) IOWXB 07 DEC 80.0 (45) $2.85 IOWXC 07 DEC 81.0 (45) $3.35 $100.00 -0.5 $80.50
DIA 136.51 (+1.30) DAZXF 07 DEC 136.0 (45) $3.20 DAZXH 07 DEC 138.0 (45) $4.20 $100.00 -1 $137.00
QQQQ 54.68 (+0.61) QQQXC 07 DEC 55.0 (45) 1.76 QUEXD 07 DEC 56.0 (45) 2.28 92.3 -0.52 55.48
RTH 95.50 (+0.65) RTHXS 07 DEC 95.0 (45) 2.9 RTHXT 07 DEC 100.0 (45) 5.7 78.6 -2.8 97.2
XLE 77.75 (+2.51) XTGWY 07 NOV 77.0 (10) 1.13 XTGWB 07 NOV 80.0 (10) 2.94 65.7 -1.81 78.19
OIH 198.19 (+6.58) ODLXT 07 DEC 200.0 (45) 10.1 ODLXB 07 DEC 210.0 (45) 16.15 65.3 -6.05 203.95
QQQQ 54.68 (+0.61) UQQXC 07 DEC 55.0 (54) 1.9 UDLXF 07 DEC 58.0 (54) 3.75 62.2 -1.85 56.15
XLB 43.21 (+0.99) XLBWQ 07 NOV 43.0 (10) 0.65 XLBWS 07 NOV 45.0 (10) 2.05 42.9 -1.4 43.6
XLE 77.75 (+2.51) XTGWY 07 NOV 77.0 (10) 1.13 XTGWD 07 NOV 82.0 (10) 4.65 42 -3.52 78.48
RTH 95.50 (+0.65) RTHWS 07 NOV 95.0 (10) 1.15 RTHWT 07 NOV 100.0 (10) 4.7 40.8 -3.55 96.45
XLE 77.75 (+2.51) XTGWZ 07 NOV 78.0 (10) 1.58 XTGWC 07 NOV 81.0 (10) 3.75 38.2 -2.17 78.83
XLF 31.80 (+0.53) XLFXF 07 DEC 32.0 (45) 1.58 XLFXI 07 DEC 35.0 (45) 3.75 38.2 -2.17 32.83
QQQQ 54.68 (+0.61) QQQXC 07 DEC 55.0 (45) 1.76 QUEXH 07 DEC 60.0 (45) 5.42 36.6 -3.66 56.34
MDY 161.83 (+2.41) MDYXE 07 DEC 161.0 (45) 4.3 MDYXH 07 DEC 164.0 (45) 6.5 36.4 -2.2 161.8
IWM 79.96 (+1.48) IOWWB 07 NOV 80.0 (10) 1.48 IOWWG 07 NOV 85.0 (10) 5.15 36.2 -3.67 81.33
OIH 198.19 (+6.58) ODLWT 07 NOV 200.0 (10) 5.35 ODLWB 07 NOV 210.0 (10) 12.7 36.1 -7.35 202.65
IBB 85.62 (+0.19) IBBWQ 07 NOV 85.0 (10) 0.8 IBBWR 07 NOV 90.0 (10) 4.5 35.1 -3.7 86.3
QQQQ 54.68 (+0.61) QQQWC 07 NOV 55.0 (10) 0.96 QUEWE 07 NOV 57.0 (10) 2.44 35.1 -1.48 55.52
(For more details click the ticker symbol above)

For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.

PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.

[tags] bear put debit spreads, covered call investment strategy, investment strategy, poweroptions [/tags]

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