[...]Inverse ETFs vs. LEAPS puts – The Sovereign Speculator[...]…

Thanks for the info on LEAPS strike prices. Very helpful.

If my stats are correct, the low in the DOW lately was about 8,175. It has risen about 14% to 9,325. It’s reaching toward the 25-30% you mention, but it still has quite a ways to go this time around.

Before the crash, I would look at something like IYR and say to myself that it could go to 20 (from say 70) by Jan 2010. I’d look at the various strikes and see that if it did fall to 20 I’d get say 6x my money with 50-strike puts and maybe 15x with 30-strike puts. Of course, with the 30s, you have the risk that it only falls to 30 and your puts expire worthless. I was pretty certain that the 50s would be in the money by expiry, so there is a risk-reward balance here and your risk-preference will determine which you favor. I

That’s about it. Every security is unique. I have bought in the money puts and super deep out of the money ones. These days, with option premiums so high, I’m not buying much, since it is hard to see very many of these returning better than 2-3x the premium.

A year ago, I was putting a lot of my money into puts, so I would typically not try for home runs, since I wanted to minimize the risk of losing a big chunk of my net worth. I used to look for 4-5x in just a 30% fall in the underlying. Those are now in the money, and I’ve sold a bunch of them and am letting the rest ride so that taxes are pushed into ’09 or because I think they have a little juice left in them. I wouldn’t be buying most of them today.

I’d wait for a really big rally before buying again. I’d want the VIX under 40 and the Dow up 25-30% from its lows before shorting again. Then I’d go out as far as possible on expirations and look at deep out of the money puts.

Can you say anything about how you determine which strike price to go for on the LEAPS puts?

If you have a broker with broad international market access, buying foreign Treasuries should be no problem. Unfortunately, I can’t recommend one for a US-based individual. Maybe Peter Schiff’s Euro Pacific can do it. They specialize in foreign stocks.

But US Treasuries are ideal right now. Don’t be afraid of the dollar anymore.

“The balance saved can be kept safe in treasury bills (of foreign governments if you like), and those could be a lifesaver if things get really hairy and the markets are compromised. ”

How do you invest in the treasuries of foreign governments?

Thanks