Tech and semiconductors are hated right now.  I don't know how low processors can go or when they will bounce, but I did a risky little trade today to take advantage of the current conditions. Basically, I'm betting Advanced Micro Devices (AMD – $12.89) won't go backrupt.

On Tuesday I sold (shorted) Jan 2009 $10 strike puts (VVVMB) at $1.12.  Should the puts get exercised against me, my cost basis would be $8.88 a share.  I'm quite happy owning AMD at that price, unless the company is in backruptcy.  But I don't think that will happen.

On Oct 7, 2007, AMD did fall all the way to $3.10 a share, but even if the stock goes to zero my loss is "limited" to $8.88/share. 

Because I have an aversion to unfunded margin calls, I can put some cash into a treasury note with a similar maturity to the puts in case they are exercised. (Jan 15, 2009 3.25% notes (yielding 4.65%) to be exact).  If AMD rallies and the puts I sold for $1.12 drop in price to under $0.30, I'll just buy them back, freeing up cash for other trades.

Disclosures and Confessions: I own a small (1/6 max size) position AMD that was painfully acquired last July at $17.40.  It was part of my buy tech in the summer trade.  I neglected to sell this small position (regardless of price) in December/January as was my plan.  In this case, I was neither lucky nor good.  This is known as poor execution of a good plan.  I also have the put position described above.

_{Disclaimer: Nothing in this trade log is meant to be specific financial advice or a recommendation to buy or sell. I do not give investment advice. Do your own research. Do not rely on anything in this weblog to make investment decisions. I do not log all my trades here. I only describe or mention those that I think might be interesting. Consult an investment professional familiar with your specific financial situation before buying or selling any security. Options may be for me but they are are not for everyone.  Futures are highly speculative.  You can lose more than your initial investment in futures}