Additional Short Positions Put On

On Friday, the following short positions were added to the model portfolio:

Short 200 shares of KBH at $28.
Short 300 shares of DHI at $14.25
Short 400 shares of BZH at $9.75

Here is the rationale for all of the above - the charts on the above homebuilders are all signaling the potential for the stocks to go to zero. That's right zero. With stops placed at $35, $18 and $11.5, the UD ratios are very attractive.

The above trades are putting a lot of stock in the collapse of homebuilders and finance companies, since we already have CFC as a short position in the portfolio. There are times however when it is prudent to put 'a good portion' of your eggs in one basket. This is one of those times. Go read the HOV earnings (or lack thereof) report if you need more convincing.

Another way to play the downfall of these stock is to buy some longer dated out of the money puts. The premiums are high, but if you go out into the March/April timeframe, you could absolutely make a killing.