Diamonds and Returns

Ok, I have been talking to my local group of investors about buying some 81/82 or 83 strike calls on the diamonds (DIA) since Friday. As we were going into earning seasons there were several reasons to believe that earnings were going to beat estimates and expect a short upward run.

Some of the reasons:

Estimates were soft.
Cost cutting was raising balance sheets. (Not actually increase in margins and sales)
Enough of a PSYOP campaing when Alcoa (AA) announced a shortfall in expectations and guidance.
The market doesn't makes sense.
Upgrades on Goldman Sachs
Revised unemployment numbers
etc. etc. etc...

Any of those strike prices bought on Friday are up well over a %100. I just got back from a business trip and have been slowly watching the DOW rise while my mobile trading platform is stuck in upgrade mode. No I can't complain to anyone, much, since it is a free third-party platform for TDAmeritrade and I don't like AMTDW.COM wireless for time sensitive trades and its lack of insight into charts and volume.

So now I feel like I did the week of 9 March 2009 when I was on vacation and had cash tied up in puts, which wasn't a bad thing in a bull-run (bear rally market) but certainly not a 2.50ish FAS or 1ish UYG trade, or any of the banks for that matter. Yes, I had planned on buying FAS that Monday morning but was busy waiting in line for an airplane and trying to close some of those puts to free up some cash.

Anyway. So the data is out, GE, C and BAC report tomorrow, does it matter, C is owned by the government, A shot that GE should be worth $2 and BAC has its own MOU rumors. So if their earnings are bad does it matter and how will it affect the market.

With IBM and GOOG reporting good earnings it wasn't enough yet for the market to gurantee a rally, futures are down at this moment. Anticipation on C, GE and BAC are holding them back.

If they do report well and more importantly guide well, I would be buying the 85$ DIA July calls around 10 am with a TS €or limit of your choice. If they are bad would be buying August 83/82 or 81 DIA calls and taking advantage of the added time benefit and pullback that is academic in this traders market.

Let's see what happens... Yes, I am expecting to get my first half of my ESLR shares tomorrow!

Happy Trading.