Wednesday, 16 January 2008

Booking profits on Oil, XOM, EUR, Shorting GS, BBY, adding to Eurodollar short

Wow. I go to the gym for an hour, and when I come back the Euro has plummeted 2 points, Oil is down and back up a bit, I hear inflation is at the highest rate in 17 years, and while I am reading that, I've got Bloomberg TV in the background telling me that inflation is the lowest in ages!! Who the hell knows what to make of it.

Well...I know what I'm doing. I just bought back my EUR 1.47 Feb 1st Calls that I'd sold a couple of days ago at 2.435 points, for 1.012 points...that's a profit of $1,423. Sweet. I missed the lows unfortunately, but still can't complain with that result after 2 days. Spot was around 1.4660, it's traded in a 2.6 point range today alone!

EUR/USD 5 Day Chart

I also just covered some Exxon (XOM) that I'd shorted on Jan 7th at $91.57, I just bought it back at $86.56, that's 5.4% lower, and a $1,002 profit (yes I was tick-watching to make sure it got into 4 figures!!). As oil prices fell, so did Exxon, plus I think the market is starting to realise that refining margins aren't actually that great. Plus inventory numbers today were higher than expected, causing both oil and oil companies to fall. This inventory stuff seems a little random to me, so I'll take advantage of it.

5 Day Exxon Chart

In line with the Exxon rationale, I just couldn't resist taking my profits on my oil short either...I bought back my Crude short (Feb '08 NYMEX contract) at $90.10, for a profit of $988. I had been even more in the money than that, but I missed the lows of today unfortunately.

Now, that was my profit-taking, I've also added to my horrible Sep '08 Eurodollar position, selling $25/bp at 97.10, figure I might as well average in a bit, especially since I could see an equity bounce, and also rate cuts getting priced out a little bit if/when we see some stability. One of my annoyances with this trade is that I'm purely doing this on a value basis...I fundamentally believe that deflation is coming, so selling Eurodollars just doesn't tie in with that thesis...but hey, we're here to trade, so I better just do that.

I've also put on two more shorts:

Goldman Sachs (GS)...just sold about $20,000 worth at 198.83, I just don't think they will be able to extend the earnings of previous years when M&A is going to decline massively, and ABS (Asset-Backed Securities) issuance is as good as over. Also their financing costs are going to be MUCH bigger than in the past. I think they've had a good run in the markets, but the glory days are gone for a few years now I reckon. Just check out the 2 year at $150 or so in the middle of 2006...conditions today are much worse than then, so maybe it should really be trading more like $125 are or so. We'll see.

And finally...I shorted some Best Buy (BBY). Yes, it may be the best electronics retailer in the US, but it's going to get hit as hard as anyone when consumer spending all but dries up. Over the last 2 years, it's basically traded around $50, with a few forays up to the high-$50s and down to the low-$40s. Well, I just shorted it at $45.10, and love the entry level. I shorted just over $20,000 worth.

2y Chart of Best Buy

Well, that's it for now! Relatively pleased with how everything is going, P+L up to $32,000 or so, with about $22,000 of that this month. Here's hoping the market keeps handing out cash!


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