In the midst of the Japan quake, Tsunami, Nuclear problems . . . .

I'm counting on

- an over-reaction to terrible natural disaster news
- an over-reaction to terrible man-made safety failure news
- an over-reaction to sector analysis

As it relates to the auto sector and the chip sector, the general news across radio, TV, the web and print is talking about globalization of manufacturing and just-in-time inventory practices. These are not new - twenty plus years ago, I worked for Digital Equipment in the Detroit area and was heavily involved in the semiconductor and automotive spaces. And yes, even then, disasters were contemplated and disaster planning was part of the manufacturing process.

Let me be clear, all three issues are serious and are not to be swept aside. It's just that fear in my eyes, is a stronger emotion than greed. Action on that opinion is part of my competitive edge.

I took advantage of this yesterday by buying a calendar put spread @75 with the intent of layering a 75/80 diagonal or simply letting the MAR 75 expire and then selling the APR 80 after March expiration. The trade cost me $0.97 and is now worth $1.575 .... a 62% gain.

I may close half this afternoon and capture the gain. At present Delta -10.07, Gamma -1.51 and Theta 15.15. I could buy the MAR 75 put for .74 and sell the APR 80 for $4.25. Or I could wait 'til next week and see where things stand. I'm leaning towards the latter.

IN ENGLISH, Toyota was trading at a 1-year high of 93.9 on 3/1/2011. On the 4th, it dropped below its 20-day moving average at 90.75 and by the 11th had dropped below its 50-day around 86.50. Yesterday it dropped below its 100-day at 81. Under normal, non-crisis scenarios I would expect it to continue down, but upward volume is a bit too strong. I believe it will stabilize above 80 within the next month.

SO, I sold someone insurance that I would buy their Toyota stock at 75 until Saturday. If TM closes above 75, I keep the premium. If it's below 75 (and I do nothing else) I own TM at 75 - if it continues its decline, I am losing money.

If, as I expect it will, TM approaches 80 again the next few days, I will sell an 80 put that expires APR 15th.