Market - Last week, the market staged a huge selloff that pushed it below major support levels. Earnings have been decent, but that was already priced into the market and Q1 guidance has been cautious. Economic releases have been fairly good, and gradual economic growth is still plausible. Credit is the big concern as the situation worsens in Europe. Greece and Spain have both had their credit ratings downgraded. Portugal tried to auction short-term bills last week and they could not generate enough demand to fill their needs. Portugal, Italy, Ireland, Greece, Spain, Latvia, Lithuania and Bulgaria are the problem spots. The rest of Europe is also treading on thin ice. Burdened with massive deficits of their own, the "stronger" countries are not in a position to bail out weaker EU members. Austria has already nationalized one of its largest banks and another is perilously close to the same fate. The credit crisis has spread and major banks in France, Germany, England and Switzerland have a great deal of risk exposure. The ECB is oblivious and they aren’t grasping the gravity of the situation. They could have calmed nerves this weekend by holding an emergency meeting – they did not. They need to draw up contingency plans to restore confidence. Unfortunately, the European Central Bank already stated that it would not bail out Greece. That spooked investors and Greek bond yields skyrocketed as risk was priced in. Their government plans massive cuts to try and get their budget balanced in three years. Labor unions in this socialist country don't like the sound of cutbacks and they plan to go on strike. As Greece and other European countries cut their spending, economic conditions will contract. The best case scenario is that Europe goes into a prolonged recession. The worst-case scenario is a credit crisis that starts in a handful of countries and snowballs into the global banking system. Bad loan decisions and excessive spending must run their course. In the last year, risk has simply been shifted from the private sector to the public sector. Governments have deeper pockets and they should be able to shoulder the risk during hard times. However, decades of increasing debt are catching up with them. The old adage "the bigger they are, the harder they fall" applies here. Over the weekend, the IMF met in Canada. While the credit situation was discussed, there were not any solutions. This potential crisis will keep a lid on the market. You can't predict when the first major event is going to rattle the financial markets, but I feel it is only months away. If investors back away from sovereign debt, the problem will escalate quickly. The US is in a similar situation. With extremely high debt levels of our own, additional stimulus will put us even further in the hole. I believe you need to sell the rallies once they stall. Last Friday, the market staged an intraday reversal after making a new relative low. As you can see in today's chart, those patterns have represented buying opportunities. Previously, each of those rallies took place while the market was still in an uptrend. That trend has been broken and greater caution needs to be used. This snapback is likely to run out of steam soon. Earnings season is winding down and the economic releases this week are very light. They include wholesale inventories, trade balance, initial claims, retail sales and consumer sentiment with most of these releases hitting Thursday and Friday. The gambler in me wants to trade this rally and there are some good values. I have a stock that has held up well and it wants to run. The trader in me tells me to be patient and to wait for an opportunity to get short. When the big hurt comes, I want to be ready at a moment’s notice. I hope we do get a rally. It will reduce option implied volatilities and we can by our puts cheaper. We will take a small put position this week with the idea of adding on weakness. The credit crisis in Europe is dire. Poor leadership at the head of the ECB and a lack of unity within the EU will cause the situation to unravel quickly. We will use a balanced approach this week that has a slightly negative bias.

Bullish	INSP
Stock Option Trading Strategy Buy back month call options
Stock Option Trade Buy 5 INSP July $10 calls (INSP 10G10.00) @ $1.40 - Day. This stock is strong and it wants to move higher. this is a long term position. We will scale in and buy more over time. Buy 5 INSP July $10 calls @ $2.20 - Day. filled 3/9/10
Stock Option Target None
Stock Option Stop None
Stock Description InfoSpace, Inc. develops search tools and technologies that assist consumers with finding content and information on the Internet. It offers search services that enable Internet users to locate and view content, information, merchants, individuals, and products online.
Option Trade Rationale Last week, the company said that revenues for the fourth quarter of 2009 were $70.5 million, reflecting a $33.7 million, or 92%, increase from the fourth quarter of 2008. Revenues for the year were $207.6 million in 2009, reflecting a $50.9 million, or 32%, increase over 2008. Net income for the fourth quarter of 2009 was $10.1 million, or $0.28 per diluted share, compared to net loss of $7.9 million, or $0.23 per share, for the fourth quarter of 2008. Net income for the fourth quarter includes tax benefits of $5.7 million which includes a $3.3 million one-time tax benefit from a net business tax refund. Net income for 2009 was $9.8 million, or $0.28 per diluted share, compared to net loss of $18.7 million, or $0.54 per share, for 2008. Cash, cash equivalents, and marketable securities totaled $226.4 million as of December 31, 2009. At the end of the year, the Company had no debt obligations. The stock trades at a forward P/E of 17.
Trading Game Plan “InfoSpace delivered another strong quarter, capping a year of solid growth and profitability," said Will Lansing, president and chief executive officer of InfoSpace. "Much of our success in the quarter and in 2009 was due to the strength of our distribution business and our ongoing efforts to improve operating efficiencies. In addition, we continued to invest in new initiatives in our owned and distributed search products, as well as in initiatives beyond search.” For the first quarter of 2010, the Company expects revenue to be between $60 million and $65 million. The Company expects Adjusted EBITDA to be between $6 million and $7 million and net income to be between $0.5 million and $1.5 million, or $0.01 and $0.04 per diluted share. The company has great earnings and revenue growth and the balance sheet is rock solid. Current Assets exceed Total Liabilities by $5.70/share!!. The stock has held up well during the recent market sell off and it wants to move higher. Support at the breakout held and buyers are stepping up.
Stock Option Track Record 2/8/10 - Bought 5 INSP July $10 calls (INSP 10G10.00) @ $1.40. 3/9/10 - Bought 5 INSP July $10 calls (INSP 10G10.00) @ $2.20

Bearish	HBC
Stock Option Trading Strategy Buy put options
Stock Option Trade Buy 10 HBC March $50 puts (HBC 10O50.00) @ $2.30 - Day. Please note the new option symbology. All options are in this format now. filled 2/08/10
Stock Option Target None
Stock Option Stop None
Stock Description HSBC Holdings plc. The Group's principal activity is providing a range of banking and related financial services. It has an international network comprising some 10,000 properties in 86 countries and territories in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa.
Option Trade Rationale This is primarily a play on a potential fianancial disaster in Europe. The ECB President Jean-Claude Trichet is a complete idiot and he will screw this crisis up. A year and a half ago, he kept Euro interest rates high when credit conditions were collapsing and financial markets were tanking. He actually said that he did not see a credit crisis unfolding. Two weeks ago, Greece had credit issues and rather than holding closed door discussions, he publicly said the ECB would not bail out Greece. As a result, Greece held a bond auction. Initially, it went well, but then a few days later, the risk premium jumped and global investors made it known that the well had run dry. Last week, Portugal held a 1-year bill auction. This is a short term issue with little risk of default and they were only able to attract buyers for 65% of it. As a result, they had to cancel the auction. They need this money immediately or it will have a cascading affect. Lithuania is in a similar situation and Latvia is also on the ropes. The entire EU could unravel and HBC has tremendous risk exposure.
Trading Game Plan The ECB could have held an emergency meeting over the weekend to discuss financial aid - they did not. This would have calmed the market. The ECB is satisfied with Greece's massive budget cuts, but the Greek labor unions plan to strike. They want wage increases and no labor cuts. Over the weekend, the IMF met in Canada. Europe's credit crisis was discussed but no solutions were offered. This situation could deteriorate quickly. There is no sense of urgency. HBC is trading lower today eventhough the market has rebounded. Investors are heading for the exits and the selling pressure is mounting.
Stock Option Track Record 2/8/10 - The options traded between $2.10 and $2.20 after the alert and you had all day to get in. The makret and the stock weakned near the close. 3/3/10 - Sold 10 HBC March $50 puts @ $.40. A strong market save the stock after it released dismal earnings. It is ready to drop, we just ran out of time and had to exit. We lost $1770 (10 x $1.75 plus commissions 2 x $10).