Alea iacta est!

With today's trades, I am now fully invested in the options account. I bought two positions. The first was an MCGC call. The second was Citigroup puts.

Here's my thinkin on the trades. The first was an MCGC Jun'08 12.50 call. It cost 0.75 with MCGC at $10.99. The stock is dirt cheap at this price. It should be trading at $15. I took this position to double down on MCGC.

The second position I just couldn't resist. It is two Citigroup Dec 30.00 puts for 0.65 each. C was at $32.46. This bet translates into a 2% chance of C falling 9% over the next month. I think we will see a repeat of Countrywide getting their bailout from BAC. I think this is an absolute no-brainer.

The market is now gripped by perhaps more fear than on Monday, when the market plunged. The fear comes from short sellers covering. Unfortunately, I didn't cover anything Monday, like I should have. I was thinking about it, but I thought the odds were on more than one day of fear, especially for homebuilders. This week marks the announcement of new and existing home sales. As I expected, existing home sales were below already dismal expectations. No problem, this is an opportunity to short more, and I have taken it.

One more trade (yesterday):

Bought 9 SKF (Powershares Ultrashort Financials) at $106.72 on a 6% fall. It's down again today, but I think that the ABX, CMBX, and CDX bond indexes, as well as the Citigroup bailout, the Fed bailout, and the Shumer probe into CFC and the FHLB are signalling VERY bad news right around the corner.

Bottom line is that I will remain extremely bearish short term. I am looking for the VIX to spike over 35 and probably over it's intraday high of 36.5. It's fallen today from over 28 Monday to almost 24 today, but it hasn't been under 20 since 11/01. That's a powerful base of volatility.