The drunk is helping me in the freefall market

It is brutal; no question about it! As long as you have long stocks, you have to endure the paper loss in this kind of market. No one can be totally immune from it unless you have all cash and/or gold/silver. However, when the time is right, you should always consider to add a few short positions for those companies which are doomed to fail. This may significantly help you to minimize your risk and help you better manage your portfolio. This is what I have been doing and is greatly helping me to hedge against the market gyration risk.

Three months ago on May 8, I wrote: "I'm short PHM. I think it is especially a good time to do so now. I'm not sure if PHM can survive long and less so in a house market that has officially entered the double-dip phase. In addition, the overall market is facing a D-day, the end of QE2 in less than 2 months. A big sell-off may happen anytime. A struggling stock will be hit more in a depressed market." (see here why I considered PHM a drunk). It was around $8 then. Today it is $4.16 at closing, about 50% plunge in 3 months.  As you can see below, my way of shorting it has brought me with 77% profit on paper as of now. My total profit target for this one will be over $6000. I think I don't need to wait too long for the target.

PHM Jan 19 '13 $10 Call

0.27

$250.00

-50

$1.24

$4,806.41

76.98%

Before I started writing blogs, I also entered another 2 short positions: one for GCI which is a newspaper company that publishes USA Today etc, a business of obsolescence. Since I shorted it about one and a half year ago, it has dropped about 50% in value. I have almost reached my shorting target. GRMN is the famous company for the GPS brand Garmin. While I like to use it, its products have lost its advantage in the fierce competition and its business has lost the momentum. Again, I have almost been there to get the full profit.  

GCI Jan 21 '12 $22.50 Call

0.05

$-0.00

-20

$2.20

$4,274.65

96.59%

GRMN Jan 21 '12 $45 Call

0.10  $-0.00  -15  $3.53  $5,107.25  95.59%

  These are just a few examples in my portfolio on the short side. Together with other short positions and my long positions for gold and silver as well as world dominating companies, I'm safely swimming in the risky stock ocean.