DHH Options Time
by Sabrient - March 18th, 2011 4:01 pm
Dark Horse Hedge is Rocking (2) & Options Time Again
By Scott at Sabrient and Ilene at Phil’s Stock World
My heater’s broke and I’m so tired
I need some fuel to build a fire (actually need something that cools heat down)
The girl next door (Tokyo), her lights are out, yeah
The landlord’s gone, I’m down and out
It’s cold gin (option) time again
You know it’ll always win – KISS
The tragic developments in Japan took center stage this past week and our hearts go out to everyone in Japan, and everyone who is touched by this catastrophic event.
Prior to the earthquake and tsunami, the VIRTUAL Dark Horse Hedge virtual portfolio was positioned with a 70% Long / 30% Short tilt. We are now considering moving to a 50% / 50% balance. We will most likely do that, assuming no material change in the world events, by adding to our short positions next week. In the meantime, we have two option positions which are expiring today and we wanted to add to the review we began last week. (Click here for our first four long positions reviewed a week ago.)
Options Expiration:
Radware Ltd (RDWR): On November 11, 2010 we added Radware (RDWR) to the virtual portfolio using Phil’s Buy/Write strategy. At that time RDWR was trading at $33.39 and we added half the shares we wanted (100) and sold the March $35 2011 call and March $35 2011 put to complete the buy/write. On December 7, 2010 when the stock traded up to $40, we rolled the call out to the Jan $35 2012 call, which we sold for $9. We kept the March $35 2011 put we had already sold for $5.10. The put (as 65-70% of options do) will expire worthless today yielding a $5.10 profit. At this time, we believe it is prudent to hold the shares, currently trading at $35.56, and the Jan $35 2012 call.
Xyratex (XRTX): On December 20, 2010 we added Xyratex (XRTX) using the buy/write strategy and acquiring half the shares we wanted exposure to and selling March $15 calls and puts for a net $3.60. XRTX is trading at $11.14 today on expiration day, so the call side will expire worthless ($1.80 profit) and the puts will be exercised – the
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DARK HORSE HEDGE – Funeral For a Friend, TEO
by Sabrient - October 27th, 2010 2:48 pm
DARK HORSE HEDGE – Funeral For a Friend, TEO
By Scott Brown at Sabrient, Ilene at Phil’s Stock World
The roses in the window box
Have tilted to one side
Everything about the house
was born to grow and die
You’re a bluebird on a telegraph line
I hope your happy now
Well if the winds of change come down your way girl
You’ll make it back somehow
Funeral for a friend – Elton John
This song doesn’t say a lot in words but touches all of us in many ways. I [Scott] lost my grandmother this past weekend at 91. She was not cheated in years for sure but lived the last 22 years without her best friend, my grandfather, who was a Marine in WWII. He waited 22 long years but she has “made it back somehow”……”I hope your happy now”.
But this is an investment article, so what does all of this have to do with Dark Horse Hedge and TEO? We recommended a purchase of Telecom Argentina (TEO) on July 1, 2010 at $16.38 and have maintained that position as the stock has climbed steadily to close yesterday at $22.78.
This morning TEO has traded as high as $27.15 on the news of the death of political heavyweight and former President, Nestor Kirchner, who is now out of the 2011 presidential race. Kirchner was seen as unfriendly towards the markets.
Sincerely, for Argentina and from a market perspective there is nothing better than knowing that Kirchner will be out of the presidential race of next year. For years his confrontational, resentful style towards investors, companies and bond holdouts deprived Argentina of much-needed capital," said Roberto Sanchez-Dahl, who oversees $1.1 billion in emerging market debt for Pittsburgh-based Federated Investment Management. See Argentine assets rise on death of ex-President Kirchner, Reuters.
TEO was one of the first stocks recommended in the Dark Horse Hedge virtual portfolio and has been like a friend yielding us nearly 50% profit in almost 4 months. The momentum players have pushed the stock around today and while we continue to like TEO for the long term, we feel that it is time to play “Funeral for a Friend,” take advantage of the momentum to take our profits. Perhaps the winds of change will blow our way again and TEO will make it back to the DHH virtual portfolio somehow.
SELL TEO, at the market, Wednesday October 27, 2010.
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Don’t Stop Believin’ – DHH shorting HUSA again
by ilene - September 23rd, 2010 9:36 pm
DARK HORSE HEDGE – Don’t Stop Believin’
Working hard to get my fill
Everybody wants a thrill
Payin’ anything to roll the dice just one more time
Some will win, some will lose
Some were born to sing the blues
Oh, the movie never ends
It goes on and on and on and on
Don’t stop believin’
Last weekend we wondered “Where do we go from here?” and so far the answer is nowhere. The S&P 500 closed last Friday at 1125 and today at 1124. We went through what thus far would be classified as a false breakout on Monday as the indexes continued the strong September showing but have traded lower every day since on continuing worries about jobs, or the lack thereof.
HUSA however has inched its way back up to $9.87 during that same period and triggered a 4th DHH recommendation to SHORT HUSA. The reasons have been well chronicled in past editions and so we won’t recite them again other than to repeat the song “It goes on and on and on and on”. Nothing has changed about HUSA since the first SHORT on July 1, 2010.
SHORT HUSA at the open Friday, September 24, 2010
Chart by FreeStockCharts.com
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DARK HORSE HEDGE – Take It On The Run
by ilene - September 16th, 2010 2:35 pm
DARK HORSE HEDGE – Take It On The Run
By Scott at Sabrient and Dark Horse Hedge, and Ilene at PSW and Dark Horse Hedge
Heard it from a friend who, heard it from a friend who
Heard it from another you been messin’ around
…
They’re talkin’ about you and it’s bringin’ me down
But I know the neighborhood
And talk is cheap when the story is good
And the tales grow taller on down the line
But I’m telling you, babe, that I don’t think it’s true, babe
And even if it is keep this in mind
That was fast. We’re going to smile and take it on the run, for another 9% in 3 days on our HUSA short.
BUY TO COVER HUSA short at the market, Thursday, September 16, 2010.
And to quote the Terminator “I’ll be back.”
Take it on the Run – REO SPEEDWAGON
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DARK HORSE HEDGE – Can’t Get No Satisfaction
by ilene - September 9th, 2010 4:31 pm
DARK HORSE HEDGE – Can’t Get No Satisfaction
Courtesy of Scott Brown at Sabrient and Ilene at PSW
When I’m drivin’ in my car
And that man comes on the radio
He’s tellin’ me more and more
About some useless information
Supposed to fire my imagination
I can’t get no, oh no no no
Hey hey hey, that’s what I say
I can’t get no satisfaction, The Rolling Stones
Phil Davis put the “He’s tellin’ me more and more, About some useless information” into perspective Tuesday when he wrote:
Nice market take-down by the Journal this morning, who led off with an article questioning the EU stress tests saying: "From this point of view, it is not surprising that the doubts raised about the validity of the stress tests are weighing on the Euro and also on other risk-correlated currencies." Then, to make sure no one misses the article, they run another headline for the US markets that says "Concerns Over EU Banks Hit Euro" in which they quote themselves:
"New concerns about the ability of European banks to weather the financial crisis came after the WSJ story highlighted once again the weaknesses of the stress tests. The report helped to widen the bond spreads on peripheral debtors and knocked European stock markets lower as another wave of euro zone jitters hit the market."
Phil continued: “think about the “nature” of this story. There is nothing NEW in this NEWs, is there? It’s the kind of article that could be written any time someone wants to push the markets. Even the data they are using is from back on 3/31 – they didn’t even bother to update their facts for Q2!”
Sure enough by Wednesday, 24 hours later, the headlines countered: “Stocks resume rally as European debt worries ease.”
It is worth noting…
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DARK HORSE HEDGE – Shorting Suntrust & BooKS
by ilene - September 2nd, 2010 12:26 am
DARK HORSE HEDGE – Shorting Suntrust & BooKS
By Scott Brown at Sabrient & Ilene at Phil’s Stock World
The markets appeared to like the calendar change from August to September today as all three major indexes close with +2.5% gains. The S&P 500 closed the day at 1080, almost exactly on the 50 day MA. This provides a good opportunity for DHH to replace a couple of SHORT positions that were closed to take profits while the market battled the support line at 1040.
We are going to go another round with Suntrust Bank (STI) which already provided us with a +11.2% profit the first time around. STI closed up 5% today at $23.65, earning it a spot on the SHORT list again. Joining STI is bricks and mortar book seller, Barnes & Noble, Inc. (BKS), which closed today at $15.63, up +3.24%, after reporting a wider loss in the second quarter. We are not sure what there is to like about widening losses. Ranking at #9 on the bottom of the Sabrient Outlook rankings provides plenty of reason to recommend adding BKS as a SHORT.
SELL SHORT STI – Again – Thursday, September 2, 2010 at the open.
SELL SHORT BKS – Thursday, September 2, 2010 at the open.
These additions to the DHH virtual portfolio establish the tilt SHORT called for when the S&P 500 trades below both the 50 and 200 day moving averages.
Chart by FreeStockCharts.com
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DARK HORSE HEDGE – Any way the wind blows, doesn’t really matter
by ilene - September 1st, 2010 2:23 pm
Housing-keeping note: Thanks to WordPress’s destruction of Phil’s Favorites site (and replacement with an invite to sign up for its service!), I’ve been relocating my blog to TypePad. Benefits: it looks better, is very user friendly and offers an easy way to search archives for any topic. One unique feature is that while exploring the internet, I can simply click on a button to post an excerpt of an interesting article with a link to the full article. That ability allows me to post links to articles that are worth reading when I do not have reprinting permission, such as articles from major news sources.
The new Favorites site is here. I’ve also created a website for Dark Horse Hedge, here. - Ilene
DARK HORSE HEDGE – Any Way the Wind Blows, Doesn’t Really Matter
By Scott Brown at Sabrient & Ilene at Phil’s Stock World
Is this the real life?
Is this just fantasy?
Caught in a landslide
No escape from reality
Open your eyes
Look up to the skies and see
I’m just a poor boy (Poor boy)
I need no sympathy
Because I’m easy come, easy go
Little high, little low
Any way the wind blows
Doesn’t really matter to me, to me
*****
Ilene and I started the Dark Horse Hedge on July 1, 2010 with the goal of helping self-directed investors weather any storm, no matter which way the wind was blowing. Today completes the second month of publishing the Dark Horse Hedge and we thought it would be a good time to review.
The…
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Dark Horse Hedge – Don’t let the sun (profits) go down
by ilene - August 25th, 2010 1:52 pm
DARK HORSE HEDGE – Don’t let the sun (profits) go down
By Scott at Sabrient and Ilene at Phil’s Stock World
Recovery in danger as firms, homebuyers cut back – AP
Not exactly the kind of headline that anyone wants to wake up to, but if you simply change a few words, it is as if we have slipped into the movie Groundhog Day. Each day’s gloomy headline is much like the day before’s, with a few words changed. Fortunately, DHH began with the premise that how news is going to be headlined and short-term market moves have proven over time to be nearly impossible to predict with any consistency.
So we seek to have long positions that are the best of the best, leveraged against short positions that are the worst of the worst. We combine the ability to reduce beta, or market correlation, with two alpha (return) improving measures. Our first measure is to tilt the balance of the Long/Short portfolio based on market trend, and the second is to use options for yield enhancement.
We are currently in the middle of a 5th consecutive down day for the S&P 500 and we believe in taking profits off the table when the risk/reward premise changes. DHH recommended a short position in SunTrust Banks, Inc. on July 13, 2010 at $25.54 and following the companies $750 Million tender offer of debt on Monday, we believe it is time to cover our STI short position at these prices. We have earned a 11.9% profit in just over a month, and so it is time to let the sun go down alone if its trend continues, but not to let our profits go down.
BUY TO COVER SunTrust Bank, Inc. (STI) at the market, Wednesday, August 25, 2010
Chart from Finviz.
So what kind of positions do we want to add in this market? One that I like and am recommending is VEECO Instruments Inc. (VECO) using Phil Davis’s buy/write strategy. VECO has a strong buy rating from Sabrient, with excellent scores for growth and value.
Excerpt from Sabrient’s Ratings Report for VECO:
Veeco Instruments Inc., together with its subsidiaries, designs, manufactures, and markets solutions for customers in the high brightness light emitting diode (HB LED), solar, data storage, scientific research, semiconductor, and industrial
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Dark Horse Hedge
by ilene - August 20th, 2010 11:30 am
Dark Horse Hedge
By Scott at Sabrient and Ilene at Phil’s Stock World
Buy to Cover HUSA at the market Friday, August 20, 2010
The road to nowhere has led us to a nearly 15% profit on HUSA in a little over 2 days and so we are electing to take that profit. As we have discussed in past issues, HUSA is lacking a solid fundamental basis for the current stock price and so we will continue to watch it for another Shorting opp. All things being equal, this stock should eventually be properly valued well below these levels but we are content to take 10-15% at a time while it dribbles between $9-11.
On a side note, one of the DHH Long positions, GME, reported $.26 versus $.27 expected Thursday. We have GME covered with a $20 option and still like the mid-term value of the stock. So we are happy to continue selling calls and earning premium in the DHH portfoilo.
The S&P 500 is in a new downtrend as you can see on the chart. The 12-26-9 MACD has broken the signal line in a southward direction confirming for the short-term that we remain on the "road to nowhere". Today being option expiration day could provide plenty of volatility but as Phil Davis has pointed out, a close below 1070 could spell a test of the 52 weeks lows so we will continue to monitor the market for opportunities. DHH is now tilted to the SHORT side by virtue of the calls written on the long positions earlier in the week.
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Dark Horse Hedge – Shorting HUSA, Again
by ilene - August 18th, 2010 11:47 am
Dark Horse Hedge – Shorting HUSA, Again
By Scott at Sabrient and Ilene at Phil’s Stock World
Short Houston American Energy Corp, HUSA, $10.54
We are going to re-enter our SHORT position in Houston American Energy Corp (HUSA) today. After shorting HUSA once, and covering last Friday before the earning’s bounce, we continue to believe the company is overvalued with a 327M market capitalization. Sabrient has a hold rating on the stock.
We wrote on July 1, 2010:
Houston American Energy Corp. engages in the exploration, development, and production of natural gas, crude oil, and condensate. It primarily focuses on properties located in the United States. Last Monday (June 28), Sharesleuth.com published an article about HUSA expressing a number of concerns, including concerns about the management team’s history, questionable valuations on the Columbian estimates, and significant ties to people with prior SEC troubles. From Sharesleuth.com:
A SPECTACULAR DEAL?
The gains are linked largely to Houston American’s deal last October for a 25 percent interest in a Colombian oil prospect controlled by SK Energy Co., one of Asia’s biggest producers, refiners and marketers.
Houston American said in an investor presentation and subsequent Securities and Exchange Commission filing that the prospect was estimated to hold anywhere from 1 billion to 4 billion barrels of “recoverable reserves.”
The latter figure exceeds the official proved and probable reserves for all of Colombia, and stands as one of the most audacious claims by any of the energy companies operating in that country.
Houston American did not cite a consultant’s report or any other independent study as the source of its estimate. Nor did the company offer any qualifiers, such as the percentage of those reserves it has a reasonable certainty of producing…
So, for all the same reasons we shorted HUSA before, we are jumping back in. In addition, the 10-Q released on August 16 stated that the board of directors authorized bonuses of $637,500 and pay increases of 10% for senior management. There were only three full time employees (one new employee just hired), according to Yahoo’s profile, so we take this to mean that either the CEO and the CFO or the CEO, the CFO and the other employee are all getting raises and bonuses. Moreover, the company declared a 0.2% dividend which seems as premature as the bonuses.
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.