Rolled the $50 ANR put sold yesterday from March out to April first thing this morning on continued strength in ANR.
Combined that means we have collected $1.75 in cash per share. Of course the portfolio still has a commitment to buy the shares at $50.
Scenario 1: The stock stays above $50 over the next month (8% downside from here)and the portfolio gains 3.5%
Scenario 2: The stock falls below $50 and we are forced to buy a second lot at an effective price of $48.25.
Scenario 3: An opportunity will present itself in the next 5 weeks on a pull back where we can take some of these profits and possible re-invest them in an upside call to try to generate some leveraged, asymmetrical returns on the possibility of an ongoing strong coal market.
Wednesday, March 16, 2011
Tuesday, March 15, 2011
Today's "Efficient" Market
Today's market once again illustrated it "efficiency" and "lack of emotion". (yes, I'm being sarcastic.) This seemed to provide what seemed like a few opportunities.
* * *
The portfolio has been long one lot of ANR. The stock was purchased a short time ago at $55 based on two factors: I assumed the republican victories in Washington last November would continue to make coal a key fuel for the US for a long time despite rhetoric from the administration and it seemed that the perhaps the stock was overly punished by it purchase of Massey. The current nuclear noise seems like it will only re-enforce the importance of coal and the emotion around it.
With today's low opening and ANR option volatility over 50%, I sold a $50 March puts for $.51. That provides a 5% cushion to make 1% in 4 days. Worse case, the stock goes below $50 and the portfolio will has a second lot at a cost of $49.50.
By the afternoon, the option was down to $.28, so a good start to the 1% return, but volatility in this name seems high so will be looking for ways to try to continue to capitalize on this volatility. Perhaps rolling this put forward and/or sell calls against position in the near future.
* * *
Also in today's "efficient" market, GE opened way down...allegedly on concerns about their liability over the reactors they sold to Japan utilities 40 years ago. Common sense seemed to indicate that liability will not easily (if ever) flow back to the manufacturer vs the operator, etc. If I were cynical, I might even think that some big player might want to accumulate GE stock for their wind/infrastructure business and was broadcasting a concern about the smaller nuclear business to be able to buy a little cheaper.....What a surprise...GE bounced back about 4% from its open. I was only able to capture a little over 1% of the bounce....but 1% return in a few hours...never sucks.
* * *
The portfolio has been long one lot of ANR. The stock was purchased a short time ago at $55 based on two factors: I assumed the republican victories in Washington last November would continue to make coal a key fuel for the US for a long time despite rhetoric from the administration and it seemed that the perhaps the stock was overly punished by it purchase of Massey. The current nuclear noise seems like it will only re-enforce the importance of coal and the emotion around it.
With today's low opening and ANR option volatility over 50%, I sold a $50 March puts for $.51. That provides a 5% cushion to make 1% in 4 days. Worse case, the stock goes below $50 and the portfolio will has a second lot at a cost of $49.50.
By the afternoon, the option was down to $.28, so a good start to the 1% return, but volatility in this name seems high so will be looking for ways to try to continue to capitalize on this volatility. Perhaps rolling this put forward and/or sell calls against position in the near future.
* * *
Also in today's "efficient" market, GE opened way down...allegedly on concerns about their liability over the reactors they sold to Japan utilities 40 years ago. Common sense seemed to indicate that liability will not easily (if ever) flow back to the manufacturer vs the operator, etc. If I were cynical, I might even think that some big player might want to accumulate GE stock for their wind/infrastructure business and was broadcasting a concern about the smaller nuclear business to be able to buy a little cheaper.....What a surprise...GE bounced back about 4% from its open. I was only able to capture a little over 1% of the bounce....but 1% return in a few hours...never sucks.
Monday, March 14, 2011
If China sneezes, don't let your emerging market portfolio catch a cold.
There is an old saying in the world of global investing: "When the U.S. sneezes, the world catches a cold." Today, the U.S. is still recovering from a cold and U.S. consumer does not appear to be the engine of growth they once were. On the other hand, the huge population in China that is moving towards the middle class is a key driver of global demand. Hence, it seems that "When China sneezes, the world catches a cold” may be the more relevant saying today.
With today's news cycle focuses on issues in the middle east, news about China seems to be pushed to the background. However, it is possible that China may be facing some headwinds that would adversely impact an investor's portfolio and emerging market positions.
Read more about an approach to maintain exposure to the trend of an emerging middle class across the world while minimizing exposure to China at
http://seekingalpha.com/article/258012-don-t-let-your-emerging-market-position-catch-a-cold
This approach may be just what the doctor ordered to keep your investments in emerging markets from catching a cold if China sneezes.
With today's news cycle focuses on issues in the middle east, news about China seems to be pushed to the background. However, it is possible that China may be facing some headwinds that would adversely impact an investor's portfolio and emerging market positions.
Read more about an approach to maintain exposure to the trend of an emerging middle class across the world while minimizing exposure to China at
http://seekingalpha.com/article/258012-don-t-let-your-emerging-market-position-catch-a-cold
This approach may be just what the doctor ordered to keep your investments in emerging markets from catching a cold if China sneezes.
Friday, March 11, 2011
Unitrin - Day Trade
Absolutely terrifying and horrible news from Japan today. Obviously, we all hope and pray for the least possible human impacts as is possible.
However, these type of unfortunate situations always seem to create market dislocations and trading opportunities. In looking for that type of opportunity this morning, I fell back to a day trade on Unitrin. The stock was down this morning. I could not find any stock specific news, and assumed it was down in sympathy with P&C insurers who might be adversely impacted by the disaster. From past research, I did not recall that Unitrin had any Japanese exposure and not even very much west coast US exposure.
So I was able to re-invest the lot sold earlier in the week at $29.23 and sell later in the day at $29.66 (prices net of commissions). That's a 1.47% gain in 4 hours...just another example of inefficient markets.
However, these type of unfortunate situations always seem to create market dislocations and trading opportunities. In looking for that type of opportunity this morning, I fell back to a day trade on Unitrin. The stock was down this morning. I could not find any stock specific news, and assumed it was down in sympathy with P&C insurers who might be adversely impacted by the disaster. From past research, I did not recall that Unitrin had any Japanese exposure and not even very much west coast US exposure.
So I was able to re-invest the lot sold earlier in the week at $29.23 and sell later in the day at $29.66 (prices net of commissions). That's a 1.47% gain in 4 hours...just another example of inefficient markets.
Wednesday, March 9, 2011
Acquired second lot of Bunge
As discussed in previous posts, I was looking for a pull back in Bunge to acquire a second lot. Got that chance today and acquired the second lot at $70.31.
That makes the average price for the whole position to be around $69. That also happens to be near the 50 dma. So if the price falls to this level, I will have to consider calling off this trade at no gain.
However, technically the stock bounced off of $70 nicely today. It is still has forward pe around 10, but the confusing balance sheet shows it trading under book value but with lots of debt. Not surprisingly the analyst estimates remain all over the map, and the implied volatility on BG options remain high. So if the stock advances short term, I will likely try to capitalize on this uncertainty an sell a upside call to hedge the trade.
That makes the average price for the whole position to be around $69. That also happens to be near the 50 dma. So if the price falls to this level, I will have to consider calling off this trade at no gain.
However, technically the stock bounced off of $70 nicely today. It is still has forward pe around 10, but the confusing balance sheet shows it trading under book value but with lots of debt. Not surprisingly the analyst estimates remain all over the map, and the implied volatility on BG options remain high. So if the stock advances short term, I will likely try to capitalize on this uncertainty an sell a upside call to hedge the trade.
Tuesday, March 8, 2011
Sold Half of the Unitrin Position
A long standing order to sell one lot (half position) of Unitrin executed today as Unitrin went over $30 . This lot returned a very nice 24% since being acquired on 10/19/10. (22.3% cap gain plus another 1.8% dividend). In comparison the S&P was up about 13% during that same period.
Unitrin still has attractive fundamentals trading at a nice discount to book value ($34), a p/e around 11 and a 3.2% dividend yield. I was tempted to let this run ...but as they say...."pigs get slaughtered". So I took these profits, and will leave the other lot in place for awhile to see if momentum can run it up to at least to the 52 week high of $31 and maybe up near book value of $34.
Unitrin still has attractive fundamentals trading at a nice discount to book value ($34), a p/e around 11 and a 3.2% dividend yield. I was tempted to let this run ...but as they say...."pigs get slaughtered". So I took these profits, and will leave the other lot in place for awhile to see if momentum can run it up to at least to the 52 week high of $31 and maybe up near book value of $34.
Monday, March 7, 2011
Closed Intel Covered Call Position
Intel dropped this morning in a down market. I guess mostly because of some analyst blabber about the semi industry, but no real Intel specific news.
On the drop, I brought back the May $23 calls sold on 2/18. This covered call trade yielded about a 1 % gain in 2 weeks for this lot. This was Scenario 3 from the post describing the trade.
Hopefully there will be a chance to reestablish this covered call position on an Intel rebound.
On the drop, I brought back the May $23 calls sold on 2/18. This covered call trade yielded about a 1 % gain in 2 weeks for this lot. This was Scenario 3 from the post describing the trade.
Hopefully there will be a chance to reestablish this covered call position on an Intel rebound.
Monday, February 28, 2011
Using Options to acquiring a second lot of Xerox
Sold one lots worth of Mar $11 puts today for 44 cents net of commission.
Scenario 1 - The stock will stay below $11 over the next three weeks and the second lot will be acquired at a net price of $10.56. A price that seems attractive based on prior post, 1% below the current price and around what looks like a potential support level on the charts.
Scenario 2 - The stock moves back near or over $11 in the next three weeks. Best case the option will expire for about a 4% gain over 3 weeks, or we will keep an look-out for opportunities to cover in the even shorter term.
Scenario 1 - The stock will stay below $11 over the next three weeks and the second lot will be acquired at a net price of $10.56. A price that seems attractive based on prior post, 1% below the current price and around what looks like a potential support level on the charts.
Scenario 2 - The stock moves back near or over $11 in the next three weeks. Best case the option will expire for about a 4% gain over 3 weeks, or we will keep an look-out for opportunities to cover in the even shorter term.
Friday, February 25, 2011
Postions Boeing - Bought second lot on tanker news
Good news for Boeing today as it was announced that they won the tanker bid. I suspect most of this news was priced into the stock as it seemed hard to believe the US govt could really shift the jobs and key elements of control of the program out of the country. However, this does eliminate one bit of uncertainty for the stock, provides significant long term support for the company, and reinforces my long-term bullish view of the stock.
In the short-term - The stock jumped over $74 (nearly 5%) on the news which seemed to be a break out on the chart. Also, hopefully this news will help trigger some positive analyst moves over the coming weeks. Hence, seem like it is time to add the second lot of the stock. When the stock it filled some of the gap back to near its support level I added the second lot to the position at a price (including commissions) of $72.71.
That makes the portfolio long two lots at an average price just under $71.
In the short-term - The stock jumped over $74 (nearly 5%) on the news which seemed to be a break out on the chart. Also, hopefully this news will help trigger some positive analyst moves over the coming weeks. Hence, seem like it is time to add the second lot of the stock. When the stock it filled some of the gap back to near its support level I added the second lot to the position at a price (including commissions) of $72.71.
That makes the portfolio long two lots at an average price just under $71.
Friday, February 18, 2011
Intel - Covered Call Intiatied
Intel had a nice week and broke through $22.
Took the opportunity on this pop to sell one lots worth of May $23 calls for $.49 net of commissions.
Scenario 1 - stock runs over $23 in the next quarter and one lot of stock will be called away and result in a lighten up of the portfolios position in Intel. Over the next three months this lot will return $.49 in options, $.18 in q2 dividend, and about $.80 in capital appreciation.
A total return of $1.47 or 6.6% in a quarter.
Scenario 2 - the stock will stay flat and the 2% option premium will be pocketed.
Scenario 3 - Intel stock (and perhaps the overall market) will hit a correction period this spring and this option will be able to be covered for a small hedge on the position.
Took the opportunity on this pop to sell one lots worth of May $23 calls for $.49 net of commissions.
Scenario 1 - stock runs over $23 in the next quarter and one lot of stock will be called away and result in a lighten up of the portfolios position in Intel. Over the next three months this lot will return $.49 in options, $.18 in q2 dividend, and about $.80 in capital appreciation.
A total return of $1.47 or 6.6% in a quarter.
Scenario 2 - the stock will stay flat and the 2% option premium will be pocketed.
Scenario 3 - Intel stock (and perhaps the overall market) will hit a correction period this spring and this option will be able to be covered for a small hedge on the position.
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