put options for UPS and MER bought

Last week, after watching interview with Nouriel Roubini at Tech Ticker, I was convinced that the big brokers are doomed.

Since I was out of my MER(12.43 +0.87 +7.53%, ) short, because I foolishly entered a stop order in panic when the big rally happened last week, I tried to enter the short position again. I wasn’t able to do that because there was no share available to borrow from my broker.

I suspect that it was so due to the short restriction that the SEC applied to protect 19 major financial institutions including MER.

That protection creates an artificial supporting force that caused a big rally in the financial sector. Once the protection is gone, the stocks will drop like a brick.

2 alternative actions that I could take in place of doing a short:

1. Buying the ultrashort financials SKF(135.00 -15.35 -10.21%, )
2. Buying the put for MER

I decided to go with option no 2. I bought the MER Sep 08  $22.50 put at $2.47/contract

In order to do that I had to cover both my MAR and UPS short positions. Then I also bought the UPS Jan 09 $55 put at $2.40/contract.