Which Way is Up?

Over the years I’ve gotten a little more sophisticated in the kinds of trades that I make and obviously, the stakes have gotten higher, as well.

Like an addict, there’s a need to trade, a need to get a greater thrill and to wonder what’s coming next.

And then you die an inglorious death in the streets, with your feet ensheathed in Baggies, lucky only in the fact that you had enough plastic ties to secure your booties so that your trusted pet goldfish wouldn’t float away.

Maybe that’s a bit of an exaggeration, but you get the idea of what excess can do and just how worthless the more expensive Zip-Loc is when it comes to securing the bag to your foot.

Do you remember that song “Want a New Drug”?

The problem is that when the drug does quit, you may not really be sure which way is up.

Not to cherry pick lines from songs, as there are billions available for any situation, but “You may ask yourself, how did I get here?”

It used to be very simple. There was a time when there was just wine. But even then, by the time the room stopped spinning, you rarely knew which way was up.

As I was writing the Option to Profit book, I received a call from a friend in California wanting to know if I had any stock recommendations. It was about 11 AM on the East Coast. She told me that her broker was drunk and she needed to get out of cash.

Being drunk is probably not a good way to make investing decisions, unless it’s for someone else’s money.

Seriously? Who cares if it’s other people’s money?

GAAs time went on, beer and wine begat hard liquor. For purposes of this piece, marijuana was the gateway to LSD, heroin and cocaine. I’m so hopelessly out of it, that I can’t really write with any level of expertise on more modern mind benders. Sure, Crack, crystal meth, PCP, ecstasy. Heard of ’em, but it ends there.

I never even had a Four Loko

Regardless of the drug, they all threw your balance off and altered the perception of reality.

Welcome to my world.

When beer and wine were all there was, so too were individual investors limited in the recreational and investing choices. For me, those are one and the same.

Back then, all you had to know was up and down. Your stock went up or you stock went down. End of story,

As I was getting ready this morning for another week of trading, I looked at my holdings and potential holdings and had to make an increasing and varied series of mental notes.

At least this Friday is the end of a monthly options cycle, so I don’thave to think about which one is a weekly and which is a monthly.

I don’t own many Freeport McMoRan shares at the moment as I’d like, having just lost some to assignment. I want those shares back. I’ve had them on and off, mostly on for the past 3 years, going from a pre-spli $22 to a post-split $52.50, but I don’t want to pay $55.

So I want that share price to go down. Simple enough.

But now, take Google, as another example. It was hit hard on Friday, down about $15 or so on the heals of a $30 run up.

But I still want it to go down because I sold $520 calls expiring this Friday. Granted I got good premiums last month and this month, but it would make me happy to be able to keep my shares and “…..go back Jack, do it again.”

That seems simple enough to keep track of, Google down. Down good.

Certainly, it’s also simple to keep track of the fact that I want Mosaic to go up, but knowing that its just gone up about $10 in the past week makes me less than optimistic for a rerun. But, if it gets near $72.50, I’ll be selling a call contract expiring this Friday and then hoping it stays right around there.

Again, simple enough, just a little bit woozy on that one.

Then there’s the Spreadtrum Communications deal. I had some puts expire this past Friday and I still have others due to expire this Friday. But, I also was just assigned some shares, so now I own shares, as well.

Now it’s getting a bit complicated, but as the room is slowing down, I think I want my shares to move up.

Yeah, that sounds right. I think I’ll try to sell $17 call options for this Friday and hope that Spreadtrum closes above $17, since I really don’t want to be holding a Chinese company of any kind for any amount of time.

But since I don’t like taking losses, I’ll see if I can’t make a go of it for a week.

On the other hand, the Sirius $2 puts I sold are expiring January 2012. I suppose that it would be good to see a nice price rise and then buy back the puts to close the position. But if it goes up too much, too fast, I’d feel like a fool for not having purchased the shares outright, even though I know that I would never buy a $2 stock.

Why not? I don’t know. Don’t make me think, I’m getting a headache.

Alright, what’s this I see. I also have shares in the Proshares Ultrashort Silver and have sold calls on it, as well.

Let me try to get this one straight. Man my head hurts. The price of silver goes down, and then the price of the ETF goes up. Oh, and its 2:1 leveraged as well.

My cost basis is $17.02 and received a $1.02 premium for the most recent $17 call sale. Friday’s close was at $16.86.

I have no idea of what I want.

Do I want silver to go up or down? Too much thinking involved. Way too complicated.. I may need something to bring me down off this bad trip.

I need some Rocky Road ice cream, maybe a little Chocolate Marshmellow.

But here’s the thing.

After the headache goes away, after the room stops spinning and once I know up from down, I just want to do it again.

Anytime the opportunity presents itself, it’s just time to do it again.

I’m sure before it’s time to cash in my literal and figurative chips the investing choices readily available to an individual investor like myself will increase even further.

Sooner or later it won’t matter. In a world where up is down and down is up, the Mad Hatter reigns.

I wonder if a yarmulke counts?