trades

I took advantage of today's rally to do three trades. The ITB index is already overshorted, so I looked at more homebuilders. KBH has rebounded to just over book value. So I shorted that stock at $32.13. I also shorted RIO at $39.62. That's 15% over its lows. RIO is a trading move. If I have to hold it until there's a recession, I will. But if I get a 10%+ profit, I'll take it. The third trade is a bet on a consumer slowdown through the Christmas season. I bought an AMZN Jan '08 50 put for 1.10. AMZN is at $74.66 with a P/E of over 100. If we have a recession, I think the P/E could drop to 50 and the stock could drop to $35.

All these trades have two lines of thought behind them. 1. Debt cat bounce (Winterism). 2. I'm betting that the weekend is likely to bring more bad news than good news. This is the opposite of the late Friday runs on merger-arb speculation earlier this year.