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Top Trades for Wed, 25 Mar 2015 09:56

Good morning!  

I forgot that I like cashing out, it's a real weight off your shoulders not having to worry about positions.  Not that I "worry" about LTP positions but, even for me, there's a little something that I don't think about until it's gone – like it is today.  It helps you step back and gain some perspective because cash opens up a World of POSSIBILITIES that positions don't give you.  

Anyway, enough philosophy – let's find some trades!  

I just got stopped out of /NKD (off 19,600) and /TF (off 1,255) so no Futures either so we're really starting from scratch here.  The STP is WAY too bearish, of course, since it has nothing to protect.  As noted by Albo, LL is popping and we liked them enough to keep them in the LTP, so we'll see how things go on them:

I posted the STP and LTP in yesterday's comments but I was away for the weekend and didn't get a chance to clean up March trades that finished, nor have I logged the sales in the LTP but we are left with:

  • USO

  • ABX 

  • HOV

  • RIG

  • BHI

  • CIM stock and short calls stay – puts go. 

  • CLF 
  • LL
  • LULU (it's a bearish trade)

  • MAT

  • UCO

Obviously, one thing they all have in common is they are low in their channels.  That's how we built the LTP in the first place – we bought stocks from our Buy List whenever they were low in their channels.  We also have a bit of diversity with ABX and CLF representing materials, UCO, USO, RIG and BHI representing the energy sector HOV and CIM are housing, MAT, LULU and LL are consumer (but we're short LULU) and GTAT represents penny stocks.  blush

I think pretty much all of these are on Jabob's FU list, so we're in excellent shape going forward.  

We won't be looking for any more material stocks but we will be looking to round out our portfolio as we add positions over time.  Scaling in and diversifying our exposure are how we built the LTP and that's been a winning formula so far – no need to change it.  

ECA/Savi – Earnings estimates for 2015 are for a loss of 0.05/share vs a gain of $1.35 last year and next year they are projecting a gain of 0.56, though there's no basis to be so optimistic.  That means, that if you give ECA $11.34 of your money today, they will only lose 0.30 of it each year.  You may as well buy a bond if you want negative rates of return!  I would have to study ECA VERY CLOSELY to determine whether or not they are worth the risk but /NG hasn't even fallen like oil has – what if it begins to catch up?

 

As I said to the HNW investors in Canada on Monday night, it's silly to try to guess which oil company will survive over time when we can simply pick up the UCO July $5/9 bull call spread at $1.70 and sell the $5 puts for 0.50 for net $1.20 on the $4 spread that's $2 in the money.  If oil is up in July, you make up to $2.80, which is 233% return on cash and, if you lose on the UCO play (break-even is $6.20, more than 10% below the current price and sub-$40 oil), then I'm very sure whatever oil or gas stocks you are thinking of buying now will be much, much cheaper!  

See, a trade like that we could say we don't mind owning $20,000 worth of UCO long at $6.20 so we buy 40 of the spreads and, if all goes well, we make $14,000 in 114 days.  TOS says the margin on 40 short $5s is $1,800 so this is one VERY margin-efficient play.  

 


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