High Risk Trading Opportunities: USD and Negative Market Exposure

This Trading Alert is a follow-up to my free public post titled "High Risk Trading: Portfolio Allocations & Specific Opportunities."

1) As described in the public post, the first trade is a continued bet against the U.S. Dollar.  Specifically, I am purchasing puts against the ProShares Ultra Short Euro ETF.  This is a bet against the US Dollar.  I've taken a position in the May 22, 2010, $17.50 puts at a price of $1.45.  If the dollar weakens against the EUR this trade makes money.  I'll be watching this one carefully, and I plan to take profits when they become available which will likely be well before the option expires in May 2010.

2) As mentioned in the public post, the second trade is based on speculation that the US Equity Market will decline in the near term.  The first position is accessible to most investors with an ordinary brokerage account.  Specifically, I've purchased Call Options on the ProShares Ultra Short S&P500 ETF.  More specifically, I purchased Nov 21, 2009 Calls with a strike of $42.00 (currently trading around $41.55), at a price of $2.85.  And for the more sophisticated investors, I've taken a short position in two stocks that don't make any money (negative earnings), but benefitted from an extreme price pop today and they're now due for a downward correction regardless of the performance of the overall market.  If the overall market does fall, these two stocks should fall even more: Peoples Educational Holdings, Inc (PEDH, currently trading at $2.59), and DepoMed, Inc (DEPO, currently trading at $5.62).  Regardless of the overall market move, I expect a near term correction on both stocks of at least 10%.

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[Mark D. Hines]

UPDATE: Shares of Peoples Education Holdings, Inc (PEDH)are down big this morning. I've closed the position at $2.10 for a profit of 18.9% (minus transaction costs). Not bad for less than 24 hours!