The US stock market has fallen 30% from its peak. That’s a lot of magic money. The put options contracts that I bought as hedges for my portfolio have now grown larger than the value of the stocks in my portfolio. The net value has risen, so that means I over-hedged. Oops. Actually, that makes up for some of the losses my retirement accounts have taken (they aren’t well hedged … I wouldn’t even describe them all as particularly well diversified).

I’ve been trying to think of a counterpoint to my post from this morning. The only thing I can think of is that the popular media seems to share my opinion, which is a pretty good signal that I’m totally wrong. Unfortunately, none of the people who actually predicted this mess seem to think we’ve hit bottom. I’d still like to see one multi-day rally followed by a big ratcheting down, preferably with heavy volume. That would make me feel like capitulation occurred. I recently read a well-respected analyst say that market crashes occur in oversold markets, so that doesn’t make me feel any better about the present.

I waited a little too long to buy my puts today, so I didn’t make as much money as I could have. However, my limit orders hit the exact prices I wanted, and I got out right near the end. That made up for my stupid mistake the other day. I still took most of my money off the table. The problem with day trading is the amount of money I spend on commissions and the amount of opportunity that I lose. The benefit is that if Bernanke and Co try something silly tomorrow morning, I have more cash to buy puts into the rally. I really miss rallies. Bear market rallies are the best.

Speaking of Bear market rallies, did you see Volkswagen today? Some hedge fund was forced to unwind, causing a massive short covering spike. Volkswagen became the largest auto manufacturer by value, surpassing Toyota. That’s impressive. I’m sure fair value is significantly below today’s price. Expect to see other companies have similar spikes / collapses as the market unwinds.