Tuesday, May 3, 2011

ANR - Trade Closed

ANR reported earnings and missed analyst estimates. This miss also surprised CCI as I had thought that prior to the upcoming stockholder merger vote it was unlikely to have a messy earnings announcement.

The "good news" is the portfolio had covered the lot of stock with June $60 calls. One of the key reasons to have that type of option position in place is to provide some insurance for a drop in the price. My general philosophy is
  • "when you have insurance in place and the stock falls....cash in the insurance policy first, ask questions later" .
So as the stock fell below $55 this morning, I covered that option at $1.15 including commissions. A 1.4% return to offset the price drop in the stock.

Later in the day, I spent a little time trying to sort through the earnings announcement. I did not spend too much time because on the surface it was clear it did not meet my expectation of " no noise before the merger vote". So I sold the lot at $55.18 after commissions. Rational for the sale included:
  • the earnings were not good and more importantly more messy than I expected.
  • earnings misses often create more that a one day adverse impact on the stock.
  • some of CCI's enthusiasm/momentum for this stock was because in the short term it was a way to play the "nuclear backlash" from the Japanese issues. That catalyst seems to have fallen off the front page.
In general, I think there is still probably bullish rational for having a coal position or trade in play in this space. I may look closer at the earnings announcement, and re-enter a trade on this stock if the market offers a lower price. Alternatively, perhaps other stocks/etfs in this space offer a better opportunity.


A list of ANR transactions can be found by clicking on the google doc on the page below


In summary this lot (and related options trades) returned 4.7%. The S&P during the same period was up 2.35%...so coincidentally this lot doubled the performance of the S&P. As previously reported, lot 2 of ANR was also exited profitably.

Certainly the actions/timing taken on this trade were not perfect. More profits could have been made. However, it is never too upsetting to achieve the two key goals for a trade of
  • making money
  • beating the market

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