Michael Shulman

How to Bet on Tech Without Losing Your Shirt

by Michael Shulman   11/26/08

Where to Place Your Tech Bets

There are several opportunities based on Wall Street optimism and ignorance:

1. UltraShort QQQ ProShares (QID)

This double-short ETF goes up 2% for every 1% the tech-heavy Nasdaq falls.

2. Apple (AAPL)

The iPhone is still a must-have gift, and our surveys show Apple laptops continue to pick up market share among consumers and businesses, led by the new $1,000 MacBook.

You can play AAPL a couple of ways.

• Buy AAPL shares and immediately sell calls to average down your cost and generate some cash.

• Sell AAPL puts, i.e., the right for someone to sell you the stock at a fixed price and on a certain date in the future. If the stock is at $80, and you think it represents good value but see a volatile market ahead, sell $65 or $70 puts and pocket the cash. If you are "put" the stock, you have it an even better price than the $80 you thought was a good price.

3. Buy puts

Buy puts on the big names that will definitely be taking a hit due to a falloff in demand in the corporate market.

Consider puts on Dell (DELL) or printer manufacturer Lexmark (LXK).

I am not a bear or a pessimist by nature. I am a market agnostic and rely on numbers and the fundamentals facing companies. And it's hard to see any positive data hitting the economy or the tech sector any time in the near to mid-term future.

So, avoid the sector or short it, focusing on ETFs or big names. That is the real tech play right now.

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Michael Shulman is the editor of ChangeWave Shorts. To learn more about him, read his bio here.