Stock sales, short sales

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July 16, 2010

Bank earnings allow profit taking on FAS 20100716

Posted by ReasonablyThinking under All Commentary, FAS, Stock sales, short sales, Trade History, Trade highlights | Tags: , , , , , |
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The three big banks, JPMorgan Chase JPM, Bank of America BAC, and Citigroup C, reported quarterly earnings late this week.  On the surface, earnings seemed acceptable, yet revenue disappointed.  This implied gains from cutting costs–not expanding the core business–something the market did not take favorably.  This influence, combined with unhappy earnings from Google GOOG and poor consumer sentiment, sent the market falling today.

(Image from MarketWatch)

As a result, the FAS bull market exchange traded fund sunk 12.2%.  With the decline, I was happy to take profits.  I sold my 1 put option, purchased Tuesday, for $11.30, netting me a proft of $210.06.

I still maintain a short position in UYG since I believe the long term trajectory for banks is treacherous.

 

July 16, 2010

Took profits on Freddie Mac puts 20100716

Posted by ReasonablyThinking under All Commentary, FRE, FMCC, Stock sales, short sales, Trade History, Trade highlights | Tags: |
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With options expiration taking place today, I decided to trade out of my Freddie Mac FMCC position and take profits.  Ideally, I would have liked to convert the options into a short position, however the number of shares available to short was unlikely to suffice conversion.  The risk was had I converted, I could have faced an automatic cover at Monday morning’s market price.  Given that FMCC had a twenty-five cent bid-ask spread, this was not a risk I was willing to take.  Twenty-five cents becomes a sizable spread when trading 12 contracts that represent 100 shares each ($0.25 x 12 x 100 = $300).

The trade:  I sold 10 contracts at $0.62 and 2 contracts at $0.61.  These 12 contracts were originally purchased back in February for $0.16 each, netting me a pre-tax profit of $501.77.

 

July 15, 2010

ITB roll completed 20100715

Posted by ReasonablyThinking under All Commentary, FRE, FMCC, ITB, Stock sales, short sales, Trade History, Trade highlights | Tags: , |
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To complete my options roll (from Tuesday), I sold my 6 ITB put options today at $6.10 each.  Keeping track of all housing trades (starting February 2009), I have a gain of $928.  Currently, I still own 9 put contracts (green highlights), worth $5,720.  In simpler terms, I have a position currently worth $5.7k betting that the stock prices of homebuilder companies will fall.

For the thesis behind this trade, please read Housing, Economy, Banks–A Three Legged Stool With Three Broken Legs.

 

Also, an update on the Freddie Mac (FMCC) put options…  After speaking with my broker today, I realized that my best play may be to convert the options into a short position.  The stock has recently been trading between thirty to forty cents per share.  Frankly, I can’t see how anyone on the other side of the trade would be investing; it would be more like gambling.  In my opinion, the equity is worthless.

 

July 13, 2010

Initiated financial short exposure; roll options 20100713

Posted by ReasonablyThinking under All Commentary, FAS, FRE, FMCC, ITB, Stock purchases, bought to cover, Stock sales, short sales, Trade History, Trade highlights | Tags: , , , , , , |
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With option expiration scheduled to take place on Friday, I must be prepared.  Two of my positions that are set to expire are my Freddie Mac (FMCC) puts and housing (ITB) puts, both of which are in the money.  My intent is to exit the Freddie Mac position, since the stock is trading over the counter, and to roll the housing position.  To roll the housing position, I simply need to purchase put options for some time in the future and sell/convert my current puts (that expire Friday).  To initiate this strategy, I purchased 7 ITB put options today, with an expiration of January 2011, for $5.90 each.  I will obviously exit my 6 July ITB puts before the week’s end.

Independent from the above, I decided to increase my short exposure to financial companies.  In the long term, I foresee a subdued economy where bank loan losses increase.  As such, I shorted 25 shares of the financial exchange traded fund UYG at $57.60.  In addition, I believe provisions for loan losses (funds set aside for loan losses) are currently too small; an increase in quarterly provisions could stymie bank profits.  Furthermore, it is possible that European credit concerns throughout the second quarter reduced lending, which could hinder quarterly revenue.  Therefore, I purchased an August put option, with a strike of $32, on the financial bull exchange traded fund FAS for $8.90.

So, the UYG is the bearish long term play; FAS is the bearish short term play.  JPM reports its quarterly earnings on Thursday; BAC and C report their quarterly earnings on Friday.

You can read more about my perspective on housing, banks, and the economy by reading my latest opinion piece:  Housing, Economy, Banks–A Three Legged Stool With Three Broken Legs.

 

June 22, 2010

Took some ITB profits, sold puts 20100622

Posted by ReasonablyThinking under All Commentary, ITB, Stock sales, short sales, Trade History, Trade highlights | Tags: |
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With a small market decline today, along with weak housing data, I decided to take some profits on my July ITB 17.50 puts.  I sold 2 of them for $5.60 each.

I still believe housing pain is yet to come as I continue to hold eight more put options on ITB.  Below is my trade history of ITB since I first established a negative position in February 2009.  The two red boxes highlight the culmination of today’s trade while the green shaded cells are the put options that I still hold.

While I haven’t played this as tactfully as I would have liked, I am managing to eek out nice gains.  The thesis remains sound, and I continue to believe that my positions against homebuilders will payoff.

 

May 27, 2010

Sold USL 20100527

Posted by ReasonablyThinking under All Commentary, Stock sales, short sales, Trade History, Trade highlights, USL | Tags: |
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On Thursday, when I bought USL, the intention of the purchase was an investment to be held for months.  However, since the price moved quickly in my favor, I decided to take profits here.

(image from Google Finance)

The headlines attributed to today’s broader market rally–and by association a rally in oil–was China’s proclamation to continue holding (and not to sell) European debt holdings.  With one major player keeping steady, the markets rallied.  Although I view this as noise, the past few days have offered opportunities to enter/exit long term positions.  With regard to oil, I would still consider recycling this trade down the road, and I would like to have more commodities exposure.

Keeping score:

20-May USL bought 50 35.1  $  (1,762.00)  
27-May USL sold 50 37.2  $   1,852.96  
           $        90.96 5.2%
 

May 25, 2010

Sold SSO puts 20100525

Posted by ReasonablyThinking under All Commentary, SDS, SSO, Stock sales, short sales, Trade History, Trade highlights | Tags: |
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With the recent drop in the market over the past month, I decided to take profits on my SSO puts (a trade that bet on the market falling).  This trade also makes sense since the options expire next month–I would have been forced to act in June had I held onto the position.

As you can see below, I was behind on this trade through all of March and April.  Yet, I still managed a nice gain here.  The opposite side of the trade was ahead for two months and ended up with a loss.  Given the choice of the two, I’ll happily trail behind for a bit if I believe the trade will work in my favor.  (The graph is of SSO, the security that the put option is derived from; the arrow is my entry point on 2/2/10, when SSO traded at about $37).

(image from Google Finance)

Even after exiting this downward position, I still maintain a substantial market short position.  Further, if the market was to rally from here, I would consider recylcing this trade.

Keeping score:

2-Feb SSO Jun$44 buy put 2 8  $  (1,609.50)  
25-May SSO Jun$44 sold put 2 10.2  $   2,030.46  
           $      420.96 26.2%
 

April 14, 2010

Replaced ITB short position with put options, again

Posted by ReasonablyThinking under ITB, Stock purchases, bought to cover, Stock sales, short sales, Trade History, Trade highlights | Tags: |
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Similar to the trade I made last month, due to low broker inventory, I was forced to cover the remainder of my ITB short position.  To replace this exposure I purchased two October put options at the $20 strike.

Transactions details:

100 ITB bought to cover @ $14.21

2 ITB $20 Oct10 P purchased @ $6.00

 

April 8, 2010

Sold GENT 20100408

Posted by ReasonablyThinking under All Commentary, Stock sales, short sales, Trade History | Tags: |
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Years ago I bought shares of the small pharmaceutical company, Gentium.  Gentium is pretty much a one drug wonder, Defibrotide, which is used to treat veno-occlusive disease (complications with graft versus hosts during organ transplants).

Last week, Gentium had positive quarterly results that sent the stock substantially higher.  In conjunction with the news, the company announced that the CFO was leaving the company to become a consultant to the company, which I view as neutral to negative.  This afternoon, the stock again moved substantially higher, for reasons unknown to me.  Given the news and recent price movement, I sold nearly half my position.  The remaining position I am keeping for tax loss purposes; I’ve given up on the trade, but am using the loss to dodge the tax man.

(image from Google Finance)

 

March 29, 2010

Sold JJC 20100329

Posted by ReasonablyThinking under All Commentary, Stock sales, short sales, Trade History | Tags: |
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A month ago, Chile, the world’s largest copper producer, was rocked by an earthquake.  At the time, I was willing to bet that continued chaos, impairments to infrastructure, and aftershocks would hinder copper production more than initially expected.  The trade has not played out to its full potential, so I exited my position today.

1-Mar JJC bought 30       45.70  $  (1,378.00)  
29-Mar JJC sold 30       47.60  $   1,420.97  
           $        42.97 3.1%

Today was an ideal exit point since copper inventories on the London exchange fell, boosting the price.  Strategically, I like having some hard asset exposure, but a position should be sold with a broken thesis.

 

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