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Wednesday Virtual Portfolio Moves

Posted August 22, 2007 at 9:24 am | Permalink (Edit)
AAPL – I’m going to get reamed on the calls I sold yesterday to cover my leaps but at least I have the $135s and $140s above them…
Posted August 22, 2007 at 9:37 am | Permalink (Edit)

Miners are on fire – RTP, BHP – good time to build up gold plays. Adding NAK at $10.30 and rolling down some calls and adding to others. AUY, GG, ABX, MRB…

Posted August 22, 2007 at 9:49 am | Permalink (Edit)

CFC – not at all confident but it’s a light entry and I have a month so I think I’ll roll up once and see how it goes. If the market makes and holds my 13,250 level then I’ll give up but I’m also devoid of puts so I’m not sweating the loss.. Good timing on metals.

13,200 concern – holy cow, give it 10 minutes! I’m not making any major commitments but as long as we hold 13,100 I’ll be happy today (providing the Nas and S&P hold their levels). This is amazingly green so far. Let’s see if MRVL moves, they are the dog of my main screen.

Posted August 22, 2007 at 9:57 am | Permalink (Edit)

XOM $85s must be sold, currently $2.40 but if those things go up the premium is ridiculous and I don’t see XOM breaking $90 again. I’m considering selling them AND the $85 puts, now $3.30 as I won’t mind having XOM put to me for net $80 either (especially if people are willing to pay me $2.40 for calls that are $1.25 out of the money!)

Posted August 22, 2007 at 10:02 am | Permalink (Edit)

PTR should do well as their earnings are actually coming from increased production (bet you didn’t know oil companies could do that!). I like the Oct $145s at $4.70 against the Sept $140s for $4.25 but it’s a little dangerous.

Posted August 22, 2007 at 10:24 am | Permalink (Edit)

ANF should do very well based on other retail reports.

AAPL – had to take $7 for more $130 puts on my uncovered set of leaps. I mean, come on, a $6 premium?!?

Posted August 22, 2007 at 10:43 am | Permalink (Edit)

Out of VLO but not rushing into oil puts as the inventories were very strange with a huge draw in gasoline (5.9Mb) and a huge build in crude (1.8Mb) and distilates (1.3Mb) which nets out at about -3Mb so these guys are running all over the map but I think oil will break lower on the whole.

Posted August 22, 2007 at 11:08 am | Permalink (Edit)

Oil flirting with $68, looks like the oil sector may start to put a drag on the market but I would be thrilled to hold our levels today if the energy sector turns red.

CROX stopped out – don’t know why, don’t care.. XXX

Posted August 22, 2007 at 2:45 pm | Permalink (Edit)

BMY – yes, it’s so cheap on the leap that it’s almost bullet-proof. I think I’d hold out for .60 though but if it starts touching .35 again (it did briefly yesterday) then perhaps give up and take .40 but don’t worry about missing it as you can still sell the $27.50s for a good premium.

GOOG – probably retest of $515, I’m opening Dec $530s at $26.50 to capture earnings and will look to sell $520s or possibly $510s as downside mo plays if we get a rejection at $515 or $520 (I will sell some $520s at $520 even if it does look strong, hopefully for $15). XXX

Market is following pattern I predicted earlier in the week with bulls and bears herding it into a channel between 130 and 132. There’s a LOT of money to be made here but we have to morph into swing traders, which will require an attitude adjustment once we confirm the range.

NSM – could be ready to pop over $26.50. Not in a good option position though. TSM has a much better chance of rockin’ and rollin’ and they are conveniently at $9.96. I like owning the stock and selling the Jan $10s for $1.20 for a 13.6% return or buying the ‘10 $12.50s for $1.73 and selling Oct $10s when it weakens, currently .65, pretty nice coverage! XXX

COH – getting very tempting down here. They are executing a very good but very expensive strategy and I’ve been waiting for a bottom since the Spring. My target was $40 but if they hold up here I’m going to start building a long position. I’m hoping to pick up the ‘10 $40s for $10 but they are not so bad at $12 for an initial entry. $45s can be sold for $1.12 and there are 28 sales ahead of us!

Note the picks I am making are ones I will be happy to buy more of and DD if the market drops another 1,000 points. I’m taking no more than 50% positions (mostly 25%) on anything right now but there’s no reason not to play a little if we can pick up sensible hedged positions.

Index puts – I have not as yet rolled my remaining DIA puts but I took a hit on both ends as the VIX drop trumped a 100-point rise in the Dow. I rarely play the Qs as they simply don’t move enough to give me a jackpot in a day and that’s all you can count on with these things. I will spend .30 to roll to the $131 puts in the DIA but this is just a robotic tightening as the only way to win at an insurance strategy is to always be insured. By ratcheting up on the downside I force a squeeze that either pays me for a pullback or puts my October calls into the money, where the crashing VIX will be less of a factor. I’m also considering selling some Sept $134s as they are outrageously priced at $2 and I am well covered to the upside with my other calls.

An VIX call is a good hedge against long positions as it has only run up when the market turned down. It has the added bonus of paying out if we have an insane run-up as well but I’m waiting for 20. I already sold some sucker the Sept $30s for $4.50, now $1.50 and I still won’t buy him out (I feel so evil when I’m doing it to someone else!).

TXN – I like all semis right now as I see corporate spending moving up.

LEH killing 1,200 employees around mortgage units, if the market shakes this off I’m very happy.

Posted August 22, 2007 at 3:05 pm | Permalink (Edit)

CHL – I’d let it run (nice play, by the way). They are the most likely target for Chinese investors allowed to invest in HK-listed companies so they could go hog wild if they break out over $60 but maybe sell 1/2 if they fall back below $60 as the last rejection was a bitch

MRVL – if it were my buck to protect I’d sell 3/4 the $17.50s for .82 and then resign myself that rolling even for 4 months sure beats losing but I would never have bought the $25s in the first place as the chance of the company gaining 50% in 16 months is pretty slim.

You go long Apple because it is one of the best companies on the planet, not because some wiggly lines seem to be making a pattern…

Posted August 22, 2007 at 3:10 pm | Permalink (Edit)

Now it is time for the FAF $45s at $1.75 if you want a mo play. XXX

Posted August 22, 2007 at 3:33 pm | Permalink (Edit)

CFC – I have the $20 puts. There is no Buffett bail-out, see yesterday’s extensive comments.

Q puts cheap – Holy cow that is so not the way to look at things! The QQQQ Sept $46 put at .58 with the Qs at $47.59 needs a 4.5% move in the Qs to put you in the money while a DIA $130 put at $2.15 with the DIA at $131.97 needs a 3.1% move to put you in the money so you are actually paying a 50% premium to the DIA puts to “save” money on the Qs. Since the chance of a 4.5% unidirectional move in the markets is probably 1/10 that of a 3.1% move, you are literally flushing money down the toilet with the Qs. Forgive me for making an example of you but this is one of the most serious mistakes option traders make – price does NOT equal value!

Posted August 22, 2007 at 3:39 pm | Permalink (Edit)

VIX crashing!

Posted August 22, 2007 at 3:45 pm | Permalink (Edit)

700 points – I’m telling you it’s this chair!

CCJ – I have the leaps and I endorse the leaps and I love this company. I have the Jan ‘’09 $40s, which are up just $1 today at $8.60 so I still like them.

AMZN – too rich for me but I wouldn’t bet against them.

Cover CCJ and UTX – not unless the market pulls back. Still looking for my 13,250 breakout.

FIZZ flying today but I lost interest in it as it goes up and down for no reason.

Posted August 22, 2007 at 5:02 pm | Permalink (Edit)

OXPS – damn, that’s one I would have liked to have bough in the AH market, fell all the way to $22 on that news. This move could actually precede a merger or buyout but may just be a founder cashing out as the forward projections start to stagnate…

Posted August 23, 2007 at 3:25 am | Permalink (Edit)

CFC – Ouch! I am reminded of BSC and GS bailing out earlier sub-prime blow ups but it turned out they were trying to hide the mess they were in… Still, this is why we balance, the environment is turning damn bullish again and my virtual portfolio just so happens to be extremely bullish with that being one of my only puts so I won’t cry too hard. Don’t think I’ll chase it either but I would take it as a mo play since I think they have a great downside. You’ve got to love the AH reaction, up 20% on a 7.5% loan that converts to owning 16% of the company at $18 a share – nice dillutive event down the road! Also, a 20% jump in price on top of the 10% recovery they already had pretty much guarantees Buffett wouldn’t touch them with a 10-foot pole.

Index puts – I like to have no less than 15 days so I usually roll to 45 days at that point. It’s a different play when you are longer than shorter as the shorter ones let you do nice, tight rolls for .30 (on the DIA) per 100 points but a lot of it is playing by ear. This morning I had 400 DIA $130 puts and I could obviously see the market up 100 pre-open so I dumped 1/2 right away at $2.25, a .63 loss which left my basis on the remaining 200 at $3.51. As I said at 2:45, I was waiting to roll and it cost me another .60 to roll to the $132 puts so now my basis is $4.21 with the $132s at $2.62 but that’s OK because I still need to DD to get back t my original level of protection. That would put me back to 400 at $3.40, down 23% on the play – not too bad for covering a 150-point Dow advance.

 


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