You think we’d learn by now that Thursday is thump day but, if we were the type of people who learned we’d buy more calls on oil!
Actually, on the whole, we did a very good job of not panicking during that scary sell-off but we did add a few ill-fated puts as oil was going down all day until the last half hour, where a sudden buying frenzy added $2 to the front-month contract.
Our indices did their best under heavy fire, let’s see where we are vs Monday’s close:
- Dow finished the day at 12,637 – down 24 points from Monday.
- Transports held on to 2,865 – up 15 points.
- S&P dropped 2 to close at 1,448 – up 1 point.
- NYSE closed down 8 at 9,345 – up 32 points.
- Nasdaq lost 2 points to 2,488 – still up 13 from Monday!
- SOX dropped 2 points to 469 – up 2 but up is good.
- Russell went up .19 holding on to 816 – up 11 and still a strong leader!
If you don’t think that budget affected you, think again. Our country’s business plan has been soundly rejected by our creditors who are burning dollars instread of Russian gas and getting out of US equities as home loan defaults look like an early sign of a consumer crisis that can wreck this economy.
Or is it just more tree shaking by the big boys, chasing foreign investors out now that they’ve gotten rid of as many US retail investors as possible? We know the HBC isn’t the big deal people are making it out to be – they gambled on sub-prime and lost but all the people they bought those rotten mortgages from are having a party!
ABN, for example, is in the same business and had a great year! You always need to be aware of the PR machine that comes out and spins these stories to move the markets. That’s why sometimes you hear news and a sector goes up, then two months later you hear the same news and a sector goes down – it doesn’t matter what the news is, it’s what the analysts say it means that moves the markets!
The NYMEX pump crew worked March deliveries down to 277M barrels (-27M) with an amazing 335M traded! April delivery is up to 199M (+28M), this now becomes more humorous every day as you see the farce that they certainly don’t want the March barrels but they really want the April barrels now! May finished at 68M (+2) with June still at 100M.
It’s the same old story, no barrels created or destroyed, just moved around. The problem with this is every month they pick up the last month’s leftovers and there are now 650M speculative barrels on order between April and December – that’s enough to fill a brand new SPR right there! (not including the 277M for March).
You would think at some point logic would bite these guys in the ass but you have to be real patient waiting for logic in this sector! If they have to roll 400Mb a month forward, that means it’s costing someone(s) about $400M a month just to keep these orders open… I don’t care how much money you have, that has to start hurting sometime!
This is why portion control is beyond critical in playing these trades. I urge members to go over today’s discussions as we talked a lot about risk management and strategies. Yesterday we had gains of 21% on BP and 70% on EOG and 50% on PBR and 73% on XOM but today we are behind (so far) 33% on PTR, 5% on TSO and 13% on BHI.
All that would have been fine if I hadn’t been cheap as I called for picking up the VLO $55 calls for .80 at 11:59 but then I only offered .75 and missed a nice almost double ($1.45). Good trading lesson, just because you don’t believe in a rally, doesn’t mean you don’t go with the flow when you see it happening!
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Fortunately, some things did work out today:
CTX March $50 puts didn’t move much but I am happy with them at $1.20 (up a dime).
We got half out of our CVX Mar $70 puts at $1 as they had been picked up as a DD on 2/2 at .55 and we applied a nickel of the profit back to the basis to maintain portion control. We should have taken them all off as they are back to .65!
This is a very key point about the concept of doubling down: You are doubling down to get even, not to win! The second you get even you take half off the table!!! That leaves you with your original bet (assuming it’s worth keeping) at a lower basis than you had before. We save many, many positions this way but only when we are not greedy!
It was time to take our FXI $107s off the table for $2 (up 18%), happy just to get our money back after a rough week of ownership…
We never got a group move to pick up the HYDL Mar $80 puts (let’s keep them on the radar).
Right at the open we jumped on the LEN Aug $45 puts for $1, they finished the day up 40%.
Speaking of DD – I took more MA Mar $100 puts at $1.35 ahead of earnings – wish me luck because that stock is on fire!
We added the NOV Mar $65 puts for $1.55 and sold the Feb $65 puts for .55 for a $1 spread that finished at $1.15 but it doesn’t look likely our putter will be collecting his quarter!
