Wachovia (WB) surprises, but not in the way you think

Wachovia (WB) reported Q1 2008 today with a loss instead of the profit expected by analyst consensus. Dividend was cut to $1.50 per year. Neither of those things were surprising. In fact, I would argue that it was mostly priced into the options premiums.

The surprise was that they pushed up earnings from Friday to Monday. This hasn't happened to in recent memory and as a result, I was caught with some positions that I wanted to close / roll down. But overall, it was a cheap lesson. A few hundred dollars for a lesson that there are temporal surprises.

Still long Wachovia (WB) through a variety of naked puts. I am trying to figure out how exactly to position myself going forward. The pricing of new common stock at $24 is reassuring since that sets a near term bottom (the new issuance was oversubscribed).

I have been building reserves (not unlike banks) so that even with a 10% drop in a core holding no longer threaten margin calls. I have been deleveraging by reducing the number of share I hold. For example, suppose I have 200 shares of BBBY get called away at 30. I would normally write 2 naked puts at 30 for the next month. Recently, I would instead write 1 contract. This is a natural deleveraging that does not force me to realize losses unnecessarily. Also, I have been closing winning positions that no longer have sufficient reward for the margin required.