What we might do next.

Hey everyone,

I was watching oil prices march to my standing prediction this weekend in international trading after Gustav was downgraded to a Category 1, and I thought to myself:

What next?

Since I called a bottom a week or so ago, I'm ready to buy up some more stocks. But the problem is that I'm impatient. I want higher returns now. I could probably getting back into day trading for a week or two if I were so inclined, but since I started this hedge fund, I try to keep myself in a value investing mindset.

Anyway, someone from my high school contacted me a few days ago asking about a few stocks and indicated he had written a covered call for his picks.

While I really didn't like his picks, his use of covered calls in this environment was exactly right.

Why?

When the market drops, it drops like a rock. But a recovery will occur of an extended over a period of time. A covered call provides some protection if the stock price goes down AND if the market flounders for awhile. The only additional risk that he is taking beyond the standard market crash scenario- is that if the market rises fast he'll misses out on making more money than if he hadn't taken a covered call strategy.

Tomorrow, on ICM's conference call, I'm going pitch to the other members that we explore the covered call strategy on some fundamentally strong companies.

-Mansij Hans, E.I.T.
Member, Intigril Capital Management