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Portfolio Review

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The Running of the Bulls!

Today's activity in the equity markets had one thing in common with Spain's annual San Fermin festival in Pamplona: The bulls were definitely on the run! Share values tumbled in the wake of another spike in crude oil prices and data from the Commerce Department showing that the U.S. trade deficit soared to a record $665 billion last year. The Dow finished down 112 points at 10,633, while the NASDAQ Composite fell 19 points to 2,015, and the S&P 500 index slid 9 points to 1,188.

The resiliency in the OW portfolio was again very impressive with the February positions enduring relatively small losses. The March plays were also quite sturdy, considering the number of technology-related issues, and we were very surprised to see Sohu.com (NASDAQ:SOHU) finish the session "in the green." Some traders thought that SOHU might retreat sharply after announcing it will delay the filing of its annual 10-K as it tries to comply with the new Sarbanes-Oxley rules. Fortunately, the company reported that it has identified no material adjustments in the unaudited fourth-quarter results and no material weakness in financial controls. They expect to file the 10-K by March 31.

As far as new positions, a search of technically bullish issues revealed less than 50 candidates and almost none of these had viable option prices. It's clearly a market for "the bears" in the near-term and if we had a portfolio of naked calls, there would certainly be some favorable candidates. In fact, that approach may be necessary if the selling pressure continues and anyone who would like to see that type of position offered (when the trend is clearly bearish) is advised to send their comments to the new management. In the interim, there are few candidates worth publishing but we will watch for signs of buying support in the coming sessions and do our best to find some optionable stocks (with premium) that have not been significantly affected by the recent downturn.

OW Staff

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