Reasonably Thinking

Last week, my broker abruptly ran out of SSO shortable shares, forcing me to buy them and consequently eliminated my portfolio hedge. Today, I replenished a portion of my market hedge by selling a call spread on SSO using the $50 and $60 strike prices. Recall, I initiated a similar position in March 2011, which concluded in January 2012, netting me $621. Over the next few weeks, I will look to build on this short position. Top Five is updated accordingly.

Trade details:

I’m upset to report that my broker ran out of shortable shares of SSO, and my position was subjected to a mandatory buy-in.  Hence, my largest position and entire portfolio short hedge was bought to cover at $52.76.

I will spend the weekend contemplating how I want to proceed.  One choice would be to sell out-of-the-money call spreads, as I have done historically.  Another choice would be to initiate a short position in E-mini S&P 500 futures.  I will update the Top Five page next week when I somehow refund this position.

At the end of 2011, my largest asset class was cash.  Today, that fact still holds true.  However, much of my cash is in tax-deferred accounts, which cannot hold short positions.  Thus, all of my short positions are in a margin account, and today, with the market advance, a margin call forced me to cover.  I decided to finish unwinding my tactical housing positions, which include covering RYL and selling NVR.  I also bought to cover my stake in the homebuilders ETF, ITB at $14.07.

Keeping score, I earned $600.88 from the five individual positions and a loss of $113.14 from ITB, netting me a gain of $487.74.