Portfolio Breakdown:
BAC - 6.7%
PRGN - 17.6%
APP - 0.8%
JPM - (13.7%)
BWR - 2.7%
TBT - 9.2%
CAD Cash - 29.6%
USD Cash - 47.6%
JPM Oct, $50, sell call - (0.1%)
BAC Oct, $17, sell put - (0.3%)
RIMM Oct, $60, sell put - (0.1%)
Portfolio Performance:
Return Since Last Update - (1.25%)
Return Since Inception - 178.72%
S&P 500 - 1044.38
S&P 500 Return (June 30) - 13.66%
USD/CAD - 1.0918
Monday, September 28, 2009
Friday, September 18, 2009
Looking for Opportunities
Portfolio Breakdown:
BAC - 2.9%
PRGN - 18.9%
APP - 2.1%
JPM - (3.7%)
BWR - 2.9%
TBT - 5.1%
CAD Cash - 32.0%
USD Cash - 39.8%
Portfolio Performance:
Return Since Last Update - 0.84%
Return Since Inception - 182.54%
S&P 500 - 1068.30
S&P 500 Return (June 30) - 16.26%
USD/CAD - 1.0696
The Prior Week of Trading:
Not much action this week for the portfolio; I have decided to take a wait and see approach. The market seems to be caught between a continuation of positive economic data and an environment that seems to be screaming "technically overbought". I am by no means a technician or chartist (believing more in efficient markets than obscure patterns on paper) but I do occasionally fall into the mean reversion trap. Valuations seem to be stretched given the fact that next quarters earnings season will most likely resemble the last; decent EPS performance stemming more from cost cutting rather than revenue growth. The market definitely chose to focus on the EPS surprises last quarter even though estimates were remarkably low; I think the stagnant revenue numbers and lack of forward looking guidance next season will be a wet blanket on a great many of the low quality stocks that have performed so well as of late. I would look to add quality names with a solid dividend and overseas revenue exposure (to take advantage of the low US dollar) to my portfolio to capitalize on this coming trend.
The one name I added to my portfolio this week is the TBT; an inverse ETF tracking the performance of 20+ year treasury securities. I will look to expand on this post at a later date further explaining my reasoning; the short version is that I expect the yield curve to steepen as inflationary expectations start to creep into the economy, while the Central Bank will choose to keep benchmark rates low for a considerable amount of time. Downside risks still remain to economic stability, but cost-push inflationary pressures coupled with an extreme easy money environment will undoubtedly produce higher rates in the future.
BAC - 2.9%
PRGN - 18.9%
APP - 2.1%
JPM - (3.7%)
BWR - 2.9%
TBT - 5.1%
CAD Cash - 32.0%
USD Cash - 39.8%
Portfolio Performance:
Return Since Last Update - 0.84%
Return Since Inception - 182.54%
S&P 500 - 1068.30
S&P 500 Return (June 30) - 16.26%
USD/CAD - 1.0696
The Prior Week of Trading:
Not much action this week for the portfolio; I have decided to take a wait and see approach. The market seems to be caught between a continuation of positive economic data and an environment that seems to be screaming "technically overbought". I am by no means a technician or chartist (believing more in efficient markets than obscure patterns on paper) but I do occasionally fall into the mean reversion trap. Valuations seem to be stretched given the fact that next quarters earnings season will most likely resemble the last; decent EPS performance stemming more from cost cutting rather than revenue growth. The market definitely chose to focus on the EPS surprises last quarter even though estimates were remarkably low; I think the stagnant revenue numbers and lack of forward looking guidance next season will be a wet blanket on a great many of the low quality stocks that have performed so well as of late. I would look to add quality names with a solid dividend and overseas revenue exposure (to take advantage of the low US dollar) to my portfolio to capitalize on this coming trend.
The one name I added to my portfolio this week is the TBT; an inverse ETF tracking the performance of 20+ year treasury securities. I will look to expand on this post at a later date further explaining my reasoning; the short version is that I expect the yield curve to steepen as inflationary expectations start to creep into the economy, while the Central Bank will choose to keep benchmark rates low for a considerable amount of time. Downside risks still remain to economic stability, but cost-push inflationary pressures coupled with an extreme easy money environment will undoubtedly produce higher rates in the future.
Sunday, September 13, 2009
Considerably Smaller
Portfolio Breakdown:
BAC - 2.9%**
PRGN - 17.7% *
APP - 2.1%
JPM - (3.6%)***
BWR - 2.8%
CAD Cash - 32.2%
USD Cash - 45.9%
* Sold 37 sept call options at 5 strike (0.05 premium)
** Sold 5 Sept put options at 16 strike (0.15 premium)
*** Sold 2 Sept call options at 44 strike (0.36 premium)
Portfolio Performance:
Return Since Last Update - 5.57%
Return Since Inception - 180.18%
S&P 500 - 1042.73
S&P 500 Return (June 30) - 13.48%
USD/CAD - 1.0773
The Prior Week of Trading:
I took this week to lighten up the portfolio by selling both some profitable positions as well as options on ones I chose to keep. I sold out of 2/3 of my position in APP as I see limited near term upside due to the prospect of the continuation in its current tight trading range; I like the exposure to high beta consumer discretionary in the medium term, but I think there are better ways to play this thesis. I wish I had switched from APP to TRLG, a name I have been watching for a long time, because it has continued to outperform it's peers; I would look to add TRLG to my portfolio on a pullback into the low 20's. I continue to stay bearish on JPM and to that end sold the September 44 calls and as a quasi hedge to this position I sold the September 16 puts on BAC; the overall pair trade of long BAC and short JPM becomes more attractive by the day and I will look to add to this position in the weeks to come. It was the right time for me to exit KFN as it traded up sharply the morning of Sept. 11 on very light volume; technically KFN seems to be entering some resistance in the mid 4 range and I would look for a significant pullback if the market decides to reverse course; I will look to pick this back up in the 3.75 range.
HNU was definitely my most successful move this week. I took the opportunity of extreme bearish sentiment last Thursday to go double leveraged long natural gas on that day and have since exited the trade one week after it's inception as it has gone beyond my expectations in a very short period of time. Last Thursday it seemed as though no one was long Natural Gas and when the commodity price traded off yet again following a smaller than expected build in the EIA inventory report I thought we had reached a state of maximum (or near maximum) pessimism; turns out, I was right. As I explained in my post from last week, my plan was to ride a bounce to the $3 level in the commodity and that is exactly what I did. I would expect natural gas to consolidate in this level in the weeks to come with a bias more to the downside than up.
BAC - 2.9%**
PRGN - 17.7% *
APP - 2.1%
JPM - (3.6%)***
BWR - 2.8%
CAD Cash - 32.2%
USD Cash - 45.9%
* Sold 37 sept call options at 5 strike (0.05 premium)
** Sold 5 Sept put options at 16 strike (0.15 premium)
*** Sold 2 Sept call options at 44 strike (0.36 premium)
Portfolio Performance:
Return Since Last Update - 5.57%
Return Since Inception - 180.18%
S&P 500 - 1042.73
S&P 500 Return (June 30) - 13.48%
USD/CAD - 1.0773
The Prior Week of Trading:
I took this week to lighten up the portfolio by selling both some profitable positions as well as options on ones I chose to keep. I sold out of 2/3 of my position in APP as I see limited near term upside due to the prospect of the continuation in its current tight trading range; I like the exposure to high beta consumer discretionary in the medium term, but I think there are better ways to play this thesis. I wish I had switched from APP to TRLG, a name I have been watching for a long time, because it has continued to outperform it's peers; I would look to add TRLG to my portfolio on a pullback into the low 20's. I continue to stay bearish on JPM and to that end sold the September 44 calls and as a quasi hedge to this position I sold the September 16 puts on BAC; the overall pair trade of long BAC and short JPM becomes more attractive by the day and I will look to add to this position in the weeks to come. It was the right time for me to exit KFN as it traded up sharply the morning of Sept. 11 on very light volume; technically KFN seems to be entering some resistance in the mid 4 range and I would look for a significant pullback if the market decides to reverse course; I will look to pick this back up in the 3.75 range.
HNU was definitely my most successful move this week. I took the opportunity of extreme bearish sentiment last Thursday to go double leveraged long natural gas on that day and have since exited the trade one week after it's inception as it has gone beyond my expectations in a very short period of time. Last Thursday it seemed as though no one was long Natural Gas and when the commodity price traded off yet again following a smaller than expected build in the EIA inventory report I thought we had reached a state of maximum (or near maximum) pessimism; turns out, I was right. As I explained in my post from last week, my plan was to ride a bounce to the $3 level in the commodity and that is exactly what I did. I would expect natural gas to consolidate in this level in the weeks to come with a bias more to the downside than up.
Sunday, September 6, 2009
Proceeding with Caution
Portfolio Breakdown:
KFN - 33.1%*
BAC - 3.1%
PRGN - 17.4%
APP - 2.1%
JPM - (3.8%)
BWR - 3.0%
HNU - 6.5%
CAD Cash - 26.5%
USD Cash - 12.2%
*sold equivalent total call contracts at $5 strike, Sept 2009 expiry
Portfolio Performance:
Return Since Last Update - 15.53%
Return Since Inception (June 30) - 165.40%
S&P 500 - 1016.40
S&P 500 Return (June 30) -10.61%
USD/CAD - 1.0852
The Prior Week of Trading:
The makeup of my portfolio has changed significantly in response to KFN reaching my short term price target of $4; in response, I sold off approximately 2/3 of my position and wrote front month calls on the remaining shares at the $5 strike. Although my short term price target was $4 (the main reason for the partial liquidation with the upside/risk relationship now smaller), I see intrinsic value at the $6 mark and plan to hold the remaining shares until that target is reached. I used the rec
ent strength of gold as an opportunity to sell my entire position of YRI; I had bought into this stock with precisely this current scenario in mind and am happy to have made a profit (albeit a meager one). Gold has, over the past few months, moved towards the $1,000 level from its tight range around $900, with great haste only to quickly fall back from whence it came (see chart from http://www.futures.tradingcharts.com/). If gold could not maintain a push through $1,000 at the height of the economic crisis, I fail to see how it can do so under a recover scenario with no risk of inflation. If the US dollar can avoid a collapse (which I am betting on), then gold should quickly fall back to the low 900's once again.
KFN - 33.1%*
BAC - 3.1%
PRGN - 17.4%
APP - 2.1%
JPM - (3.8%)
BWR - 3.0%
HNU - 6.5%
CAD Cash - 26.5%
USD Cash - 12.2%
*sold equivalent total call contracts at $5 strike, Sept 2009 expiry
Portfolio Performance:
Return Since Last Update - 15.53%
Return Since Inception (June 30) - 165.40%
S&P 500 - 1016.40
S&P 500 Return (June 30) -10.61%
USD/CAD - 1.0852
The Prior Week of Trading:
The makeup of my portfolio has changed significantly in response to KFN reaching my short term price target of $4; in response, I sold off approximately 2/3 of my position and wrote front month calls on the remaining shares at the $5 strike. Although my short term price target was $4 (the main reason for the partial liquidation with the upside/risk relationship now smaller), I see intrinsic value at the $6 mark and plan to hold the remaining shares until that target is reached. I used the rec
ent strength of gold as an opportunity to sell my entire position of YRI; I had bought into this stock with precisely this current scenario in mind and am happy to have made a profit (albeit a meager one). Gold has, over the past few months, moved towards the $1,000 level from its tight range around $900, with great haste only to quickly fall back from whence it came (see chart from http://www.futures.tradingcharts.com/). If gold could not maintain a push through $1,000 at the height of the economic crisis, I fail to see how it can do so under a recover scenario with no risk of inflation. If the US dollar can avoid a collapse (which I am betting on), then gold should quickly fall back to the low 900's once again. APP has worried me of late, given the persistently weak consumer and the strong possibility of a back to school bust punishing discretionary retailers. I would like to say that APP has held up remarkably well, but under a market correction this stock could easily fall to the lower end of its short term trading range around $3. I don't think that the scandal and subsequent layoffs surrounding illegal migrant workers will hurt the company in the long run, although it may turn out to be a reason not to own it through a broad market correction; an event that may supply the opportunity to pick this retailer up in the future on the cheap. I decided to edge my way into Natural Gas (scary I know!) through the double long ETF: HNU. I have taken a relatively minor stake here purely looking for a morbidly dead, rigamortis infected, cat bounce. Natural Gas is no one's favorite right now, a reason that makes it at least interesting to me. I dont think Natural Gas can sustain a price well below $3 as producers try to add to reserve supply for the coming winter; a series of smaller than expected builds to inventory as production is idled due to its low cost may prove to be a buoy to prices back towards $3. My short term price target under this scenario puts HNU at around $2.50, the level which will be my exit.
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