Favorite leaps – I wll be going over these carefully today and the past few days are a real gift in examining the strengths and weakness of our positions but PLEASE EVERYONE REMEMBER THE VIX IS OBSCENELY HIGH AND YOUR OPTIONS ARE OBSCENELY OVERVALUED!!! So when I say get to cash I also mean before everyone realizes our virtual portfolios simply aren’t worth what they seem to be.
This makes it a very tough time to buy leaps as they are generally overpriced but it’s OK if we enter sensible spreads as our caller is paying too much as well. That has to be balanced against the danger of a short-term rally that puts our callers into the money so do not expect any quick answers today. I tell you people to be patient and study, study, study all the time – it would be really sad if I can’t manage to lead by example here!
RIMM – my Jan ‘09 $300s are up 161% ($10 was credited to them from the exp of the Aug $220s) which is hysterical to me as I bought them solely to cap my margin on the short side on 7/6 with RIMM at $214. Now RIMM is at $223 and my $300s are “worth” $27.50 (up $8)? That’s exactly the sort of crazy valuations I’m talking about. Even if I sell the very dangerous $230s for $11.10 the volatility decrease of the stock finishing under $230 would negate most of the gain I make so my risk/reward profile on the spread is all screwed up… If I wasn’t so far ahead I would sell for sure but I still think RIMM is too much fun to short into excitement and I need plays like this to keep me from getting bored in the chop but nothing more.
WFR – with 9,000+ stocks out there owning one you don’t enjoy is silly. I love the fundamentals on these guys and I believe my faith will ultimately be rewared (actually it has several times already). The trick to owning this stock is to sell the calls when it’s going well. In other words, at the exact point you got all psyched about it “breaking” $56 you could have set a sell-stop on the $55s at $3.50, which would only trigger on a rejection. That would have scored a quick buck this morning and, now that it held yesterday’s average on the dip, we could have taken that off the table and waited to see if we get a chance to sell another run. Like SNDK – if you own this call to win it can break your heart, these are crazy, unstable stocks that whip up and down on a daily basis. Both have strong enough fundamentals to put me in Jan ‘10 calls though but I’m always looking for a tennant to offset my long-term rental…
Index puts – I only have 200 DIA Sept $230s left and they are offset by 250 Oct $131 and $133 calls so I would have to say I’m neutral there. I’d really like to see us break up here but if 13,100 is going to offer resistance on a day when the Hang Seng gainst 6% and Europe gave us a good start then I’ll probably be dumping those calls and upping the put side.
Setting tight (15% of profits) stops on all gainers over 50% as I just don’t like the internals so far. My perspective is I’d like to have more cash and less positions, especially as the big money index plays are proving so profitable it is almost a waste of energy to watch the small fry.
CCJ – great Biz 2.0 article:
http://money.cnn.com/2007/08/15/news/international/cameco_nuclear.biz2 /index.htm?source=yahoo_quote
Fundies are great on them but uranium got clobbered down to $95 (blended forward contracts) vs. $120 earlier in the year. My mistake in valuing CCJ is that I overestimated the ability of investors to stick with a loooong-term trend that will keep uranium demand up for many, many years no matter what the economy. Unlike oil, uranium is only used by plants that, once they open, operate continuously for decades so the demand trends are very predictable (you can see permits etc 10 years ahead of openings) and NOT subject downturns as, apart from an accident, no one spends billions to build a nuclear plant and then lets it sit idle.
No matter what uranium costs it is a fairly small consideration in the cost of running the plant so the only danger to a long-term investing thesis is that someone will discover a lot more uranium and depress prices. Since Uranium, unlike gold, pretty much shouts out it’s location to modern equipment, we can be pretty sure grandpa won’t strke the motherload when he’s weeding the yard…
The forward p/e of this company has been driven down to 13, getting down to the level of far more volatile miners and very close to 2006 lows when the company was selling and making far less. My Jan $42.50s are down to $2.65 from $3.40 and I’m going to roll out to the ‘10 $40s, now $10.70 which seems pretty obvious since I can sell the Sept $40s for $1.12 with 28 sales to go so XXX on that one but no reason to sell the closer calls just yet!
CROX – I strongly recommend having bought it Thursday at $45 XXX for those of you with a time machine! Missing is missing and it’s kind of like saying that the train left the station an hour ago so I should tell you the best way to run after it – some things are just not meant to be. $55 will be an interesting test but I can’t see chasing them up to $60 where they just took a 25% rejection. That last sell-off was a gift but I’d rather see them hit $60 and make a short play than pay to see them test $55. That being said, we could make the $55 caller pay $3.90 for the test while we pick up the ‘09 $60s for $13.85 as they only fell to $9.50 on the dip so you are protected for $10 to the downside and the stock has to gain almost 10% in the next 30 days before you even have to give your caller his money back. XXX
Posted August 20, 2007 at 12:04 pm Permalink (Edit)
WFR – I’d buy that company down here…
