Wednesday, 12 March 2008

Buy low Sell high...Citi

Sold out of the Citigroup long I put on 2 days ago, selling at $22.37 for a profit of $1,422 and a 2-day gain of I said on a previous trade...annualize that!

Nice timing as well, as the stock promptly dropped to close at $21.21.

Away from that, I've been distracted a little from actively trading lately. I've got 5 stocks in my personal portfolio that have been a DISASTER (all longs)...4 of them I have as I think long (LONG) term the technology they offer will be world-changing, and the stocks could have multiple gains. And one of them I just think is stupid cheap. But literally 3 of them are down 50%, one is down 40% and one is down 70% from my average price. Maybe I should stick to day trading. I may elaborate on some of these in a future post.

And aside from that, this Oil short I have is f*cking frustrating. I can't believe this stuff is trading at $110 today (my short is at around $87). The data that's coming out seems to show that oil use is DOWN in the US, which accounts for around 25% of all oil use I understand, and also the trade deficit would be coming down if it wasn't for the price of oil. Since I think that the markets will eventually do what it takes to save the US from complete meltdown, I think oil will fall and cause the deficit to drop somewhat. But it's certainly a tough ride at the moment.

Tuesday, 11 March 2008

Who Dares Wins

Well, that was an interesting day...the biggest up day in the stock market in 5 years...a sure sign of a bear market. I knew yesterday was a day of fear, hence me buying C, FRE and LEH. However I was also slightly fearful, so didn't put as much in as I usually do on a trade. So now I'm taking it on the chin on my shorts (which are thankfully much less than they were a week ago at least), whilst making some back on the the longs I put on.

I took my profits on Freddie Mac (FRE) not long into the open, selling at $19.30 for a profit of $1,218, a one-day percentage gain of 11.75%. Annualize that! If only I wasn't such a chicken, that could have been huge.

Also sold my Lehman long, selling at $46.25 for a profit of $450, a one-day percentage gain of 5.1%.

Citi also looking good ending up 9% today. I think this is the type of stock you buy when the world feels like it's falling apart. If it can get through this credit crunch, it has significant earnings power, a large dividend yield and could be a great long-term investment.

I'd also like to reiterate here how much I like 2 of my shorts...Hormel Foods (HRL) and General Mills (GIS)...these guys sell packaged foods. Think about it. They have to PAY for commodities (wheat, corn, sugar, meat etc) and turn them into cans/packets of stuff to SELL to consumers...I am thinking that there is no way they can pass on the size of price rises they are having to pay for their input costs, so margins must fall. Looks like the stock market doesn't buy my theory though, as these two have crept up marginally since I put them on a month or two ago. We'll see how this plays out, I'm pretty confident.

Monday, 10 March 2008

Fighting the Fear...buying C, FRE, LEH

Financial stocks are taking a BEATING today, following Bear Stearns liquidity rumours, taking the stock down the most since the 1987 crash, and battering other financial stocks. Lehman also out saying they are laying off 5% of their staff globally.

Well, I like to step in to buy when fear seems high, so today could be the day. I just paid $20.00 (-4%) for Citigroup (C), $17.27 (-12%) for Freddie Mac (FRE) and $44.00 (-5%) for Lehman Brothers (LEH). I was also going to buy some Bear Stearns, but it was 5-6% off the lows of the day so I'll just wait that one out. I bought around $10k worth of each stock.

Whilst the fundamentals are still clearly disgusting for the financial sector, when fear is high you can sometimes get great entry levels, so looking for a good near-term bounce in all of these, purely on technicals. Lehman seems a decent one though, I still think them and Goldman are pretty well run banks, so will probably whether all but a complete financial meltdown (something I am definitely not ruling out).

Portfolio updates

OK so as I just mentioned in the previous post, I got a little lazy with the blog over the last couple of weeks. Here's what I've been doing (and if you've any doubt I'm making this up, I'll just point out now that if I'd actually waited til today for most of these trades I'd have made a lot more money, so hopefully you'll believe me on this! Anyway this blog is here for me to keep track of my EXACT P+L, so all numbers completely reflect what I make, including all expenses)...most of it was covering existing positions:

March 4th, bought Downey Financial (DSL) at $24.04, having originally sold it on Feb 1st at $33.95, for a profit of $1,982. Was literally just a few hours early to cover this one, as the stock proceeded to plummet even further, and is currently at $19.78. Oh well, can't argue with a 29% return in one month. Still think this company goes bust, but thought I could trade it around a little.

Same day, I covered Vornado Realty Trust (VNO) at $82.34, having sold on Feb 1st at $90.70, giving a profit of $836 and a return of 9.2%. Like some other trades I closed out that I'm about to mention, I felt the size I had on was too small, so taking my profits and if it gets close to my original entry I'll get in in bigger size.

March 5th, I covered my Vodafone (VOD.L) short at 157.7p, for a total profit of $2,921. I'd sold a couple of times, some at 187.5 and some at 171.5.

March 6th, covered Mohawk Industries (MHK) at $69.64, making 11.2% in one month for a profit of $1,758. Again, still hate the company, but am a sucker for a profit and will sell any strong rally.

Same day, covered Hovnanian (HOV) at $8.51, making 15% in just over a week for a profit of exactly $3,000.

Also covered Centex (CTX) at $20.76, making 11% in just over a week for a profit of $2,540.

And covered Lennar (LEN) at $16.20, making 18% in one month for a profit of $1,065.

And FINALLY, covered General Growth Properties (GGP), making 11.9% for a profit of $902. Again, was just too small in this one unfortunately.

Phew! Back up to date with everything...current P+L ~$40,200, damn that Crude Oil short...


Feb P+L recap:

Have been away travelling plus also a little lazy with the blog. Was also having some problems with the spreadsheet, but I've fixed it now. This Google Docs thing is rubbish, they are kidding if they think they'll ever get people to move from Excel to an online application...

First up...February P+L was $15,463, pushing the total P+L since inception at the start of December to $39,433.

Most of the money was made being short equities and indices, and most of the equities I was successfully short was in sectors pretty close to this credit crisis (financials, reits, homebuilders etc). Also took some money out from selling options on GBP, and a little from being long 10y Treasury futures briefly, a trade that I'd intended to get back in on but I hated the price action as yields went from 3.55% to 3.90% pretty quickly. On the losing front, I got a good kick in the nuts from being short Oil, dropping around $15,000. Very frustrating, like I said I'd been on the road, and literally didn't even see it between ~88 to ~98. I'm mildly nervous on this one, although I think eventually fundamentals will kick in and take it all the way back down. We're already seeing fuel use fall in the US (can't remember where I read it so no link). Demand drop CAN take even oil prices down, and I don't think many people appreciate that.

My next post will follow shortly, detailing trades done over the last couple of weeks.

Tuesday, 26 February 2008

Closing CHF/JPY long

Back on December 19th, I bought Swiss Francs versus selling Yen, with the rationale being that Swissie could outperform as it has slightly higher interest rates and some chance of growth, whereas Japan looks set for another recession (I keep my eye on Japan Economy Watch). Both countries should trade similarly on a carry trade basis, so in times of stress, neither should really outperform the other.

Well, I'd left a limit order a point and a half from where I owned it, and it hit today. I'd paid 97.17 for the June contract, and sold it today at 98.77, for a profit of $960.

I don't think much has changed to change my rationale on this trade, so any selloff and I may look to get back in.

Away from that cross, I've now got nothing going on in FX. I'm frustrated that I took off my longs in AUD against JPY and GBP. I'd even written on the GBP one on Jan 9th,
"As always, I'll try and remember and keep an eye on this one, to look for the re-entry. I still think we could have a solid break out of the long-term range as the UK economy comes to a screeching halt."

Well, what a dick I am. I even watched it spike up to 2.28, and just bottled it when I should have pulled the trigger. It's now trading at 2.12! $16k or so that I should have had in my pocket.

I'm still thinking the UK is screwed, but I now don't know what to short it against. I am beginning to think the next down leg in the dollar is coming, as the fundamentals are just terrible in the US, with no solution and no end in sight for the housing problem. I hate the Euro and just refuse to buy it here. I missed the Aussie dollar as I said. I don't like the Yen, as they hit another recession and so near-zero rates look here to stay. Maybe the Swiss Franc is the way forward, but it's had a big move at the end of last year. Might keep an eye on this one though.

Finally, I think Hungary could be the next shit-show in the markets, or at least Eastern Europe in general. Global Economy Matters has some very detailed posts on this, stating

It is unlikely that the Baltics will be the first in line in connection with a potential currency run in the context of Eastern Europe. That dubious honor seems to have landed at the front step of Hungary and Romania.

See this post for plenty details. I'll probably buy USDHUF very soon, the entry point here, around 175, looks fantastic:

In fact I've talked myself into it. Just paid 174.86 in equivalent of $500 per big figure (shorted about $87k worth of HUF).

Cool. Back in the FX game.


Monday, 25 February 2008

I am bearish...really bearish...selling stocks here:

I am an avid reader of Mish, and lately Reggie Middleton's BoomBustBlog. They are probably the two most informative producers of economic and market related information anywhere, and everything I read here, and elsewhere, points me to a continuing deterioration in economic fundamentals, pretty much led by the US (although exported to Europe/Asia through risk transfer mechanisms such as CDO's).

Homebuilders look screwed, monolines seem finished, as I can't see the plan to split them into two parts, a "good" part and a "bad" part, being anything other than fraudulent conveyance, REITs look like the next crash victim as the CRE crunch hits hard and fast (lots on this posted over at Calculated Risk also), and with the housing crash in full force, bank lending taps turned off and unemployment increasing, retail looks set to get hosed also.

On that note, I've put on some more shorts, selling:

Aeropostale (ARO), a US clothing retailer, at $27.44 in ~$27k
Hovnanian Enterprises (HOV), the builder, at $10.01 in ~$20k
Centex (CTX), the builder, at $23.30 in ~$23k
Boston Properties (BXP), a REIT, at $88.04 in ~$26k
Simon Property Group (SPG), a REIT, at $85.77 in ~$25k

These all look like near-guaranteed to go down over the medium term, with fundamentally flawed businesses in this environment. I'm also looking at shorting Assured Guaranty (AGO), the monoline, and getting long Jones Soda (JSDA)...really struggling to find longs I like, but this one looks like it has potential. More later.

I'll get the spreadsheet updated in a bit, have been on the road for a couple of weeks so not been as active. Time to get back to it, I was hoping February would be a more profitable month, but the Oil short caught me out, and I didn't keep on the long AUD versus both Yen and the Pound which would have really paid out. Oh well, plenty more opportunities out there.


Wednesday, 20 February 2008

Shorting US Steel again

Selling ~$18k worth of US Steel (X) at $111.72. This one is the gift that keeps on giving, I've shorted it a couple of times in the last few months, and am getting in again for the same rationale really, in that steel stocks basically get killed in a recession.

Stock up a lot over the last 2 days after a UBS upgrade, but I'm gonna just use that to get this great entry point. UBS may be right in that higher iron ore settlements should cause price rises, but I still contend that lower demand will hit margins.

Portfolio all looking good except my oil short...down something like $13k on it...pretty frustrating, I still don't mind being short, but I even thought that the timing of my entry was poor. Will see how it unfolds over the next few days.

Friday, 15 February 2008

Covering FTSE and S&P 500

Just bought back the short I put on the FTSE and S&P 500 yesterday. Paid 5785 on the FTSE (having shorted at 5922) for a profit of £1,370 (~$2,700), and paid 1345 on the S&P, having shorted it at 1371.5, for a profit of $1,325.

It's all too easy, just fade the rallies.

Thursday, 14 February 2008

This market is gifting you money

This market is practically giving money away. Trading from the short side, I can barely see how you can go wrong. Adding to shorts here:

Selling ~$69k of S&P 500 June futures at 1371.5

Selling ~£13k (~$25k) of HMV.L at 128.9p. HMV is a large specialist music/DVD retailer in the UK...any slowdown that hits discretionary spending will hit these guys early...combine that with increased music and video piracy (everything is available illegally for free with the simplest of internet searches), and this company should fundamentally struggle.

And finally, selling ~£59k (~$116k) of FTSE June futures at 5922. UK slowdown is coming, but is not being fully recognised in equity prices yet. It's a gift.

[Admin note: new trades will go into the spreadsheet over the next few days, I'm travelling at the moment so unable to keep it fully up to date.]

Wednesday, 13 February 2008

Profit taking on Goldman

On the road travelling, but just posting I am buying back my Goldman Sachs (GS) short here. Profit ~$2,300.

Have an eye on shorting some more retailers, maybe ANF next.

Monday, 11 February 2008

Taking my profits on COF, KMX, FED

Buying back Capital One (COF), FirstFed Financial (FED) and Carmax (KMX) today. Making ~15% on COF and ~10% on the other two. Easy easy money to be made in this market.

I was just thinking about a quote from Reminiscences of a Stock Operator (probably the best book on trading you'll ever read), where (and this is from memory) Livermore says "in a bull market, be long or flat, and in a bear market, be short or flat"...certainly rings true with me, every time the market rallies, I'm just picking out the stocks I fundamentally want to be short and selling them, buying them back when they have dropped a decent amount. Certainly feels easy at the moment.

Bought back COF at $47.88 that I'd sold at $55.44 on Feb 1st, profit $2,268
Bought back FED at $35.35 that I'd sold at $38.94 on Jan 30th, profit $718

[Something doesn't look right with Carmax, I think I forgot to report my opening of the trade and forgot to put it on the spreadsheet...will investigate...profit was $2,043]

Whilst I still think these stocks can fall from here, by taking profits it leaves me able to reset shorts if/when the market rallies.

Friday, 8 February 2008

Shorting GAP

Just sold ~$20k of Gap (GPS) at $19.93.

Shorting retail in the US is a GIFT. Every single store is going to see falling revenues this year, falling margins as competitors aggressively price to shift stock, etc etc. With Gap only ~10% off it's 52-week high, today is a great entry point.

Another $3,800 to the good guys

Well, my GBP/USD 1.95 straddle just rolled off, and I covered the outright short I had on as well.

I'd sold the 1.95 straddle back on January 22nd for 417.1 cents, in £5/cent or £2,085.50 in premium. It just expired for 52 cents, giving me a profit of £1,825 = $3,550.

I'd also took 24 cents out of my outright short, for a profit of £120 = $233.

Sweet. After my 1.98 straddle expired at a great level last week, the market then sells off down to my level for this week's expiry! Doesn't get better than that.

Lots of opportunities in FX. I missed shorting some HUF (Hungarian Forint) since I kept waiting for a better entry, and I didn't put the GBP/AUD short back on, and I didn't put an outright Euro short on or sell some more calls. But once I stop being such a f*cking bottler, I'm going to nail a few more of these. I think the USD is the one to think about. I could see a big rally against the major currencies, but the US really does have some major problems. The biggest issue in the relative housing markets between the US and Europe is that it is SO easy for people to walk away from homes in the US. Ever since that mortgage relief act was signed last year, you can now walk away with no tax liability. So all the banks are going to get royally f*cked. There is just no avoiding it. So if we really think currencies will move based on relative growth differentials and interest rate differentials, it would suggest that the dollar is set to deteriorate further.

Against that, I think the optimism in the UK and Europe over the last year has been unjustified, so these currencies could do with getting a bit of a kick-in.

I'll probably still be a seller of EUR and GBP on rallies, but I'm having a good thing about changing that plan.

Stopped out of the S&P short

Well, having increased the S&P 500 short yesterday at 1317.5, and moving my stop-loss to the breakeven level of 1334, I got stopped out. Shame. Maybe I should have been less greedy and just chucked some of the profits into the pot whilst it was up.

Oh and just an admin note, I closed out my Johnson & Johnson short back on January 24th, I'd forgotten I even did it at the time, it's in the closed trades section now (profit $689).

And fingers crossed for GBP/USD to expire at 1.95 at 10am NY time today, that's where my straddle is struck.

Thursday, 7 February 2008

Closing the Dow straddle and the delta hedges

Back on January 24th, I bought a Dow 12100 March straddle, and tried some volatility trading. I wasn't exactly delta-hedging, but instead for every 100 points I was selling 10% of the exposure, so if the market had moved 1000 points either way from the straddle, I would have the same notional on for my hedge as I did for my straddle.

So as the market went up from my strike of 12100, I was selling at every 100 points, then each of those trades was bought back when it dropped back 100 points. I realise this is not very clear! But here's what I ended up doing:

Opening Closing P+L
12200 12159 $82
12300 12200 $200
12400 12317 $166
12500 12400 $200
12600 12500 $200
12700 12600 $200
12400 12300 $200
12400 12300 $200
12500 12400 $200
12600 12500 $200
12270 12100 $340
12300 12200 $200
12416 12300 $232
12400 12300 $200


So I made $2,820 on my hedges. Well, I bought back my straddle for 822 points. I'd sold it for 911 points, in essentially $20/point or $18,220 premium, this lost me $1,780. So net-net, I made a profit of $1,040.

Not bad, and certainly better than a kick in the teeth, but it was a pain in the ass keeping all the orders up to date, and also was tricky to keep track of in real-time in my spreadsheet. So out it goes.

Increasing S&P 500 Short Further

Increasing my S&P 500 Short, selling another ~$26k worth at 1317.5 on the March future. That gives me a short of nearly $80k now at an average of 1334, so I'm putting my stop loss in at that level.

The US is a mess, the rest of the world is following, I want a big short, and I'm willing to take a risk on timing and getting stopped out to get that short on.

Away from that, my GBP/USD trade is working out well, I have a 1.95 straddle expiring tomorrow, and am also outright short from around the same level. Following the Bank of England cutting 25bps as expected, Sterling has dropped about 1.5 points today to 1.9450. I'm up around $3,000 on this trade, and ideally it will expire bang on 1.95 tomorrow at 10am NY time.

Wednesday, 6 February 2008

Actually pulled the trigger on Mohawk

As I mentioned in my previous post, I had my eye on Mohawk (MHK)...well, I just shorted about $16k worth at $78.43.

I'll be honest here...I know jack sh*t about this company...but looking at its profile from Yahoo, I don't see how any company in the carpet/tiling sector can do well in a severe downturn:

Mohawk Industries, Inc., together with its subsidiaries, engages in the production and sale of floor covering products for residential and commercial applications in the United States and Europe. It operates in three segments: Mohawk, Dal-Tile, and Unilin. The Mohawk segment designs, manufactures, and distributes floor covering products, including carpets, rugs, ceramic tiles, hardwood, resilient, and laminates. It markets its products through independent floor covering retailers, home centers, mass merchandisers, department stores, commercial dealers, and commercial end users, as well as through private labeling programs. This segment's products are offered under the Mohawk, Aladdin, Mohawk Home, Bigelow, Durkan, Helios, Horizon, Karastan, Lees, Merit, and Ralph Lauren brand names. The Dal-Tile segment engages in the design, manufacture, and marketing of a line of ceramic and porcelain tiles, and natural stone products. Its ceramic tile products are sold through independent distributors, home center retailers, tile and flooring retailers, and contractors. The Unilin segment produces and sells laminate floorings, as well as insulated roofing and other wood based panels. Mohawk Industries also provides wood flooring products, which include hardwood and laminate flooring. The company was founded in 1988 and is headquartered in Calhoun, Georgia.

Results are February 14, I can't wait. If you need more convincing on this sector, read this recent post by Mish, including the comments section. Lots of negatives on homewares/furniture etc.

Commodities and portfolio update

Well, my Copper short that I'd entered yesterday hit its stop loss of 324.95, so I'm out of that for flat. Oh well, it was worth a try to try and get the position larger as the market fell. I'll sit out of this one for a few days and re-assess.

My Crude Oil short is finally back to flat following a large increase in inventory's. Perphaps my timing on this trade wasn't ideal, but I think it's inevitable that oil falls substantially from here, so I just plan to leave this trade alone for now.

Away from that, I'm still tempted to enter some new equity shorts. Currently I have my eye on Mohawk Industries (MHK), a carpet and tile supplier. This is exactly the sort of industry that will get hit from the fallout from housing and a slowing economy. They report results on February 14, so I plan to be short by then. As for my current shorts, I love them all. I feel extremely confident sitting short the market just now.

One thing though...if anyone has any ideas of some stocks to get long, please mention them! I've only got 3 on (HLYS, BID, IACI) and I don't particularly like them. IACI is off 3% today after posting a large quarterly loss. If I didn't have so many shorts on, I'd let some of the longs fly.

Tuesday, 5 February 2008

Increasing the Staples short

Last Monday, I'd shorted some Staples, about $23k worth. I'm doubling that up today at roughly the same price, selling it at $22.95.

The way I look at it, this stock's 52-week high was $27.66, back before the crunch had started and whilst the economy was chugging along OK. Also, private equity were lurking in every sector, so I suspect a lot of stocks had an LBO premium attached. All those positives are now gone, so the chance of seeing those prices in the near future look slim. So, selling today at $23, with the economy going down the tank and deflation about to rear it's head, looks like a fantastic trade to me. One of my biggest concerns is that I won't be short enough when the meltdown arrives, which was a problem last month.

Trading on a P/E of 15, when Office Depot is trading at 10. Wait for the "E" and the P/E to fall. Let's say earnings drop 20%, and the P/E moves from 15 to 12. That implies a 36% drop in the stock. Looks pretty feasible to me. Book it.

Doubling up the Copper short

I'd sold some Copper earlier today at 329.35. It's off around 3% or so from there, and I've just sold some more at 320.55 and stuck a stop-loss in the middle. So now I can't lose anything, but I've got a ~$65k short here. I just need it to start heading down without bouncing.

After a horrible ISM number earlier, I think even the MSM will realise that the US is heading into an UGLY recession. Stocks and commodities are going to get crushed, putting on shorts is like shooting fish in a barrel.

Selling Copper again

Selling around $33k worth of Copper at 329.35.

Same old story really. A US slowdown, soon be hitting Europe and the UK, will reduce demand for industrial commodities. The entry point here looks pretty good, about 15% off the lows of December.

Sunday, 3 February 2008

Cable option expiry on Friday

Back on January 17th, I sold a 1.98 straddle on GBP/USD and at the same time sold some FX outright...I'd sold the straddle for 291.9 cents (ie. 2.919 big figures) in £5/cent, and it expired at 84 cents on Friday at 10am NY time (market was at 1.9714).

That's a profit of £1039.50 = $2,050

At the same time, I'd sold some GBO outright, and I closed it out at the same time for a profit of 90 cents, so making £450 = $887.

Option premiums remain high on this cross, and I think it may do nothing for a while. Whilst the US has taken the brunt of the bad publicity in this credit unwind, the GBP is actually pretty sh*tty as well, actually performing WORSE in 2007 than the dollar on a trade-weighted basis (no link as I can't remember where I read it). So we have two crappy currencies battling it out, and whilst I think on a valuation basis the pound will eventually fall substantially against the dollar, in the near-term I think the newsflow and economic picture coming from the US will remain grim.

So my plan is to stay net short Sterling, but also take some risk selling options. I have another identical trade expiring this Friday coming. My straddle strike here is 1.95, so a small fall would help me here.

Friday, 1 February 2008

Shorting Real Estate

Just shorted:

~$6k worth of Lennar (LEN) @ $19.75

~$8k worth of Downey Financial (DSL) @ $33.95

~$8k worth of General Growth Properties (GGP) @ $37.92

~$6k worth of Vornado Realty Trust (VNO) @ $90.70

What a rally some of these have had from the lows. Well, homebuilding is still a f*cked sector, and Commercial Real Estate is set to join it. Just read Calculated Risk and Mish to see the CRE disaster coming.

DSL has been posted a few times over at CR, and has an unbelievable growth rate on delinquent loans...GGP and VNO I read about over at Reggie Middleton's BoomBustBlog. Some fantastic analysis on a number of companies, I am pretty bearish already and naturally predisposed to that way of thinking, being generally skeptical, but wow this makes me think some of these companies are on the way to zero.

I've done smaller size than I usually would, as I've just got a LOT of shorts on, but if they start moving my way, I may increase the size and just put some stops in around my average price.

I'm pretty confident on these...literally, if I just leave them 'til Xmas, I don't see any way they can be higher.

Selling some Capital One

Selling just over $15,000 of Capital One (COF) at $55.44. The stock is up from lows of $37, and the 52 week high is ~$83...last time the stock was at $80 was in the first half of 2007. Now, it's clear that the world has changed, so I don't think we'll be even getting close to those levels again. So selling at ~30% off the highs doesn't seem to bad. Let's target low 40's on this one as a level to consider profit taking, although as always it depends on the newsflow. I think credit card companies will get hit eventually, and that could REALLY mark a change in their stock values.

Taking profits on my Treasuries

Just sold my 10y Treasury futures position at 117.33, for exactly a 1 point gain and $2,500 profit. I'd bought it 2 days ago with the 10y around 3.69%, today it is in to 3.56% following the weak payrolls number. Whilst I still think we could have a lot lower to go on treasury yields, it won't be in a straight line, so I'll try and capture some volatility in it. Plus I'm just a sucker who can't resist booking profits (I'd call it one of my weaknesses...hey there's worse things to be bad at!).

January P+L recap

Well...I think all in all, that was a pretty disappointing month. I've taken the P+L from just this morning, before the US open, but a rise overnight in some of the futures I am short means the actual Jan P+L was maybe a little higher, but lets go off this number.

Up $14,000, compared to up $10,000 in December.

I'm really gutted by this. I've been so bearish, and I managed to mostly miss all the equity falls last month. I didn't cover as much as I should of on the morning before the Fed cut rates the first time, although I had planned to as soon as the market open, but the f*cking Fed bailed out the longs by cutting before the open, scuppering my gameplan. I also stupidly shorted som Eurodollar futures, although managed to get out for ~$3,000 instead of the over $10,000 I was down at one point. And I've handed some money back being short oil as well.

I think some of my trades have been too short-term, so I'm going to try and hang on to stuff for longer going forward, so the stuff I am short, I am pretty comfortable being short for several months if necessary. No plans to particularly change the shape of my portfolio, although if we saw the carry currencies sell off (mainly Aussie), I'd maybe look to put some of that on. I also may get involved in some commodities from the long side, looking at livestock and cotton at the moment, and may short copper. Away from that, I'd like to have a larger equity portfolio, although I could do with finding some stuff to get long. I want to short some homebuilders and some REIT's I think.

Away from all that, I think the next shoe to drop in the markets will be the real pain in the European economies. There is no way they avoid the US-style housing-led economic pain, it's just a matter of time. So...I'm watching the UK market in particular with a view to getting short. Maybe I'll sell some June FTSE calls this month if the market rally continues.

That's about it. Like I say, an annoying month, I was up $35,000 at one point, so gave a fair bit back. I'd like to take some swings and try to push the P+L up to $70,000 by the end of February, so that's my mental target. Need some share falls, a rally in Treasuries, and a fall in the oil market to make that happen. Not unrealistic, me'thinks.


Wednesday, 30 January 2008

Selling FirstFed (FED)

Just sold around $8,000 worth of FirstFed Financial (FED) at $38.94.

I actually don't know much about this "bank", but any mortgage lender with a focus on California can't be doing well. It was in the high-60's early last year, so doesn't actually seem to have fallen all that much given the huge change in the market. I think we need to see a number of small lenders go bust, and I want to be in on some of them. I plan to short more if it starts to go down, and maybe use a stop-loss around my average short price to limit risk.

I also have my eye on Downey Financial (DSL), with a view to shorting it. It seems to be a regular over at Calculated Risk, as it's delinquent loans are going through the roof! This is from a post on Jan 16th...delinquent loans up from 1.5% in June to 7.8% in December! And I'm not sure, but maybe I see a trend...?

Gonna watch the stock for a little bit before pulling the trigger. I better be careful on getting too bearish...maybe I should find some longs...

Buying 10y Treasuries

Just paid 116.33 for the 10y Treasury future (March), in $25/cent, which is about
$250 per basis point.

The on-the-run 10 year is trading at 3.68% today. Whilst it has come in from 4.50% just 3 months ago, I think the picture has fundamentally changed from back then. The Fed has shown its willingness to bring rates down a long way, GDP growth is slowing FAST, just 0.6% in the 4th-quarter, and there is plenty scope for deflation talk to begin as profits start to fall, companies start reducing prices, and unemployment begins to drop. All we need to nail it is for commodities to start to come down. I guess that one is a playoff on global demand falling against faith in fiat currencies deteriorating. I've got to think that the demand side wins in the near term.

And when do you see the Fed next hiking rates? The economy is in the process of falling apart, and I can't see the end of the tunnel. Long the 10 year 20bps above Fed Funds with significant cuts still to come, looks good to me.

Increasing the S&P500 short

Sold another ~$26,000 or so of S&P March futures at 1357, doubling my short (I'd shorted at 1327 last week).

I'm so bearish.

Maybe I read Mish and Roubini too much.

Looking at shorting some homebuilders and REIT's also, I don't know much about the REIT sector, although stumbled across an unbelievably good blog,, which was discussing the sector (and GGP in particular) in a lot of detail. Very negative.

Tuesday, 29 January 2008

Cutting out of Intercontinental Hotels for flat

Back on January 7th, I'd bought some London listed Intercontinental Hotels (IHG.L)

As you can see from the chart, at the time, my 772p entry level looked pretty good. However, within a few days the stock had dropped all the way to 612p!!! Now, to maximise P+L, I think it's important to get good entry levels on trades, so I've cut out for flat, and I'll wait for another huge equity puke to pick some up again. I still think global hotel chains can make good profits, they seem to be growing sensibly and still have plenty spots across the world to get into. For example, IHG are looking at franchising Holiday Inn in China. So...waiting for a better entry.

Monday, 28 January 2008

Back into the Staples short

I'd successfully shorted Staples (SPLS) earlier this the 13 days since I covered that short, the stock is back up about 14%, so I'm getting involved again. I sold around $23,000 worth at 22.93. If I'd waited closer to the close, I coulda squeezed another 1.5%-2% out of it, as it closed at $23.33.

Anyway, not to worry. There is no way a business supplies retailer is going to do well this year. I'll just try and take 10% out of it as many times as possible.

Selling some S&P500

Selling ~$27,000 worth of March S&P 500 futures at 1327.

I just feel that the market has some significant downside yet. With the credit markets on their knees, lending siezing up, the housing market looking like it has years of falling still to do, the commercial real estate crash now getting more talk on the MSM, and the fact that equity indices are higher than they were a couple of years ago despite a MUCH worse environment, I think we need to see significantly lower prices.

I also think that in the bigger scheme of things, long-term we will see smaller corporation sizes and smaller profits. The internet revolution is still only a decade old, and barriers to entry in a number of industries, already down massively over the last decade, are continuing to fall as the web techniques develop. From retail, media, real estate, even banking, and many many more industries, it doesn't take much for competition to get started. So long-term this should bring down profit margins, and result in less long-term dominant companies, as innovators improve on existing products and services.

Of course, this could take years to play out. But I'm patient, and I'll add to my short on the way down.


Friday, 25 January 2008

Selling the Dow 12900 call option

Just sold the balance of my Dow 12900 Feb call at 94, for a profit of $1,500.

Taking advantage of the euphoria of the last few days, whilst their is certainly potential for stocks to continue to creep higher, I don't think it would take much to get fear back into this market. [Note: the chart finishes at last night's close, the market looks set to open around 12465]


Covered my Sep '08 rate trade

Just paid 97.185 for $125/bp of Sep '08 Eurodollar, to close out my position.

I was in a world of pain just a few days ago when this was up around 97.90, and since the Fed has clearly shown it's hand on its willingness to slash rates as deep, far and fast as necessary, I don't think fundamentally I'm supposed to be short rates. So, I'll take the cut, for a total loss of $3,413 across all my trades on this contract. Better than the $12,000 or so I was down on Tuesday at least...

Oh, and SURELY the Fed doesn't cut next week? They'd be crazy to, but then they seem a little irrational...


Scratched out of AUD/JPY for flat

Sold my Jun '08 long on AUD/JPY at 92.49, for basically flat P+L. I figure I was down about 3.5 points just the other day, the best part of $10,000, so f*ck it I'll unwind the trade following the monster rally of the last 2 days and look to pick it up lower. Might never happen, but I'm willing to be patient. I don't think we've seen a bottom in equities by a long-shot, so the great unwind and the Yen rally could easily reappear, not that I really agree with the rationale for Yen strength, why would you want to invest in an economy that has had stagnant growth and equity prices for nearly two decades???


Thursday, 24 January 2008

Taking off part of my Eurodollar short

Just paid 97.34 for $25/bp of my Sep '08 Eurodollar. Thought process is that 1) it's booking $500 from my 97.54 sale of the other day, and 2) I'm thinking of taking the whole trade off and just writing off the $5,200 or so loss. The Fed cut rates 75bps and showed its hand, it will CLEARLY be willing to slash rates further when (not if) the economy slows further, bad debts increase, the housing market gets worse, share prices fall and banks lose even more money than they already have.

You can see from the market move over the last couple of weeks that I jumped in too early...ce la vie. Big change in market sentiment in just over a month, moving 165bps or so, was just too tempting to try bottom fishing (longer-term chart here).


Going to try some vol trading...

Earlier today, I paid 911 for a Dow March 12100 straddle, in $20/point (just over $18,000 premium). My plan here is to do some crude delta hedging, selling $2/point of Dow March futures every 100 points up. At the time I bought the straddle, I sold $2/point of the Dow (about $25,000 worth) at 12270, and set limits to open positions every 100 points away from the strike. So at 12300, I sold another $2/point, at 12400 I'll sell ANOTHER $2/point, etc etc, until if it hits 13100 I'll sell my final delta and I'll be flat on the way up. If the market blew out of the 1000 point range either side of 12100 I'm trying to trade, I'll lose about $9,000. However, I'm hoping I can catch some swings, so in this example, every 100 points it drops, I'll cover that sale. So my first and second sales will be bought back at 12200 and 12100 respectively, then on the way down, I have buy limits set every 100 points down for 1000 points. We'll see how it goes.

Hope that's clear. I'm not going to add it to the spreadsheet at the moment, as I'll be forever updating it as limits get hit. I'll have to think of the best way to do this.

Here's hoping it just keeps flying around for a couple of months between 11000 and 13000...


Sold my Starwood Hotels long

Sold my Starwood (HOT) stock earlier today at $43.51.

Whilst I still think that some of the global hotel groups can still perform over time, the last few weeks has certainly been a warning shot towards stocks exposed to debt and to the consumer. My Intercontinental Hotels long (UK stock) has performed like a pig since I bought it, down almost 20% or so since I bought it on the 7th of January, but is now almost all of the way back. So my plan is to let Starwood and Intercontinental fly, and maybe pick them up on the days when the market is looking ugly. Another couple of percent on Intercontinental and its gone.

My P+L on the Starwood was $979, as I had some financing costs on it. Although I haven't mentioned it yet, I do have to finance all my longs and shorts, so the P+L isn't just reflective of the spot rates they are trading at when I buy/sell. Just looking at where the stock was trading when I bought sold, it looks like I made $1,220, but because most stocks have dividend yields below the risk-free rate, it's actually negative carry to own stock. For short-term trades, it's not overly noticeable, but longer term it matters. I'll adjust the spot rate of the closed trade to reflect the EXACT P+L that I made.


Wednesday, 23 January 2008

Portfolio thoughts:

Some of my thinking on the portfolio so far:
  • The interest rate trade has been disgusting. I'm not sure if I can take anything away from it, other than maybe I should only trade in the direction I fundamentally believe in. Since I believe that the unwinding of leveraged credit will be deflationary, I need to position for lower rates. Trading the other way just because the price makes it look like a good trade will do me no good, as I can't just sit it out easily, confident in my position.
  • Taking profits at the right time, and having patience to wait for good entry points, is key. Just look at some of my shorts that I covered, Carmax is up 14% since I covered it just over a week ago, and 21% from the lows, Staples is up 15% since I covered my short last Tuesday, etc etc.
  • Having said that, I definitely took off my FTSE and DAX Options short, the DAX one alone I booked about $8,000 in profit, but that trade would be up $60,000 if I'm kept it on! So being patient until a trade is at least close to the levels I think it can reach is important.
  • Sizing my trades; I don't want any particular trade to overly dominate the portfolio, especially if it goes badly, so making sure I am not too big in some trades as well as being large enough in other trades where I believe in the position. I think I've been OK with this so far, although spending the $6,400 on the Dow Call premium was too much given the short term nature of the trade and the P+L so far.
So, although I feel I could have done better so far this week, the P+L is doing OK. I like pretty much all the trades I have on, and am not in a hurry to close out any of these at the moment. I think the next trades I'll be looking at will be once again shorting Staples, Carmax, US Steel, etc. I could really do with finding some longs to put against it, as the single-name equity bit of my book is short about $100,000 notional.

Also I think there is more to do in FX. The Fed has shown its hand, being willing to slash rates as much and as low as necessary. The ECB and BoE look unwilling to bail out the markets to the same extent. Initially this should help the Euro and the Pound, but at some point the markets will focus on relative growth rates, and if the Fed is doing enough to cushion sme of the blow of this credit deleveraging debacle, then maybe the dollar comes into favour. So I still plan to sell strength on the Euro and Pound. I also still have an eye on selling Hungary (HUF) and maybe Czech Krona (CZK), any economy running a large deficit is bound to see its currency get crushed this year.

Finally, commodities seems to be in a playoff between a slowing global economy reducing demand and hence the price, and a lack of faith in fiat currencies driving money into hard assets, taking commodities higher. I think ultimately the demand side wins, taking prices lower, so I plan to be mostly short. Reading any blogs about Peak Oil definitely makes me nervous on my oil short, but I think that long-term trend will still be beaten by demand. Hell, we might even see a supply increase from the oil producers if the price drops enough, so that they can maintain their income...that could really bring an accelation lower.


Cutting my Dow Call Option in Half

I guess it really is all about timing. I paid 64 for a 12900 Dow Feb Call the other day, only to see the markets puke. I'd paid $6,400 in premium, and was a little concerned I'd gone too large. Following a pretty big rally today, my options is back up to where I bought it, so I'm cutting the position in half for flat, selling $50/point at 64.

I'll consider this a get-out, even if I do lose my premium here. Just this morning, the bid side of my option was 4....maybe more patience is needed for entering and exiting positions...


Tuesday, 22 January 2008

Couple of trades from earlier

Sold the S&P futures that I'd bought overnight for a bounce, selling at 1310 (equivalent to 1305.5 on the S&P500). Profit $820.

And covering my Coca-Cola (KO) short...paying $59.12, for a profit of $800.

I'd have liked to cover more of my shorts, but they just didn't seem to go down enough, especially after the 75bps rate cut. I'm almost tempted to increase my shorts on a few things (BBY, GS) and add shorts in SPLS and X. But if the markets go on a little rally, I expect it to lift all stocks, so I'm going to mostly leave my single name equity portfolio unchanged.


Selling more Vodafone, also doing some FX

Trading looks like it'll be active today, so I'll be keeping everything brief.

Added to my Vodafone short, selling another ~$7,000 worth or so.

Also, with the pound trading around 1.95, I just shorted some (£500/big figure) and sold a Feb 8th Straddle for just over 4 points. Don't mind being short the pound around 2.00, and don't mind taking 4 points profit out the trade if it goes down.


Barclays sold...6.3% in less than an hour

Big rally on the FTSE, close to unchanged having been down 4-5% at one point.

Selling my Barclays out for a near $1,000 profit. 425.4p, 6.3% in under an hour. Annualize THAT!


Closing my eyes and buying some Barclays

Just paid 400p for £8,000 worth of Barclays. They say you get paid to take risk on the days no-one else wants it. Well, UK banks are on sale for basically the lowest price in 7 years. Fuck it, lets give it a go. While the UK may be fucked, it's still going to be a long drawn out process before it finally hits recession.


Selling more it

Doubling up my crude short, selling the March NYMEX contract at $86.49 in a bit over $40,000. A few reasons:

1) Oil was the biggest bubble commodity last year, rising even more than gold. It's payback time.
2) Despite everyone saying that it costs $40/$50/$60[insert number here] a barrel to produce, I reckon the Saudi's are still pulling it out the ground for less than 10 bucks a barrel. No evidence at all to back this up, just a hunch.
3) Loved this FT article the other day talking about Israel converting the whole country to electric cars, and requiring ZERO oil within 10 years!!
4) Just saw this BBC article pop up on my computer...'Huge' oil field found off Brazil.

So there's my reasons. I'm short about $95,000 worth now just below $87, I think we should be looking for $70 a barrel to start with.


Selling more Sep '08 Eurodollar

Well, one of my nightmare positions, being short Sep '08 Eurodollars, is really going crazy this morning...I'm selling another $25/bp at 97.54.

Whilst I definitely see the risk of full blown crisis, and a slashing of Fed rates, I don't think it will be in a straight line, so the market pricing the Fed at 2.25%-2.50% by September seems punchy to me. Since mid-December alone, it's priced in an extra 130bps of easing. Hell, even if it went to ZERO, I'd only be down about $50,000. Bad, but not a total killer by itself.


Monday, 21 January 2008

Buying a little S&P 500 for the bounce

Well, tomorrow should be interesting. Falls in Europe today of 5-7.5%, and futures way down in the US. From reading through the comments on a few other blogs, it seems like I wasn't the only bear who had taken his shorts off last week.

So I'm expecting the bears to reset shorts tomorrow, the BIG bears who had kept their shorts on to cover, and the longs to panic and dump stuff all over the place. That should set the technicals up for a squeeze higher, although the fundamentals certainly argue for further falls.

Well....that's my thesis, so I'm buying a little bit of S&P500, paying 1269 for the March future (equivalent to 1264.5 in the S&P500 itself), in about $25,000 worth. Keeping it small, I'll see how the day plays out. I think I'll probably look to cover some shorts if it gets hit really badly, and maybe I'll re-short Staples if it's down under 5%.

Stay calm folks, panic never pays.

If you can keep your head when all about you
Are losing theirs and blaming it on you;
If you can trust yourself when all men doubt you,
But make allowance for their doubting too;
If you can wait and not be tired by waiting,
Or, being lied about, don't deal in lies,
Or, being hated, don't give way to hating,
And yet don't look too good, nor talk too wise;

If you can dream - and not make dreams your master;
If you can think - and not make thoughts your aim;
If you can meet with triumph and disaster
And treat those two imposters just the same;
If you can bear to hear the truth you've spoken
Twisted by knaves to make a trap for fools,
Or watch the things you gave your life to broken,
And stoop and build 'em up with wornout tools;

If you can make one heap of all your winnings
And risk it on one turn of pitch-and-toss,
And lose, and start again at your beginnings
And never breath a word about your loss;
If you can force your heart and nerve and sinew
To serve your turn long after they are gone,
And so hold on when there is nothing in you
Except the Will which says to them: "Hold on";

If you can talk with crowds and keep your virtue,
Or walk with kings - nor lose the common touch;
If neither foes nor loving friends can hurt you;
If all men count with you, but none too much;
If you can fill the unforgiving minute
With sixty seconds' worth of distance run -
Yours is the Earth and everything that's in it,
And - which is more - you'll be a Man my son!
- IF by Rudyard Kipling


Covering Copper short, and setting an Oil short

Covering my Copper short for a $1,135 profit...I'd shorted the March contract at $321.75 on Friday, and am buying it back today at $310.40. Part of the reason is that I'm surprised how well it has held up despite the weakness in today's markets. Maybe something is up.

Setting up a new short in Crude Oil, selling the March NYMEX contract at $88.21. I'm pretty bearish on Oil and don't want to miss it, with a slowing global economy, demand WILL go down, as will speculation in commodities, and so down goes Oil. Sold just under $45,000 worth.

What a day in the markets...not exactly sure how to play this one, am going to do not a lot until I see how the US reacts tomorrow.


Friday, 18 January 2008

Buying some OTM Feb DOW Calls

Just paid 64 for a Feb DOW 12900 Call. Expiry Feb 15th. In $100/point, so $6400 premium.

Markets are obviously volatile, and I figure I can double my money on a 300 point rally, whilst limiting my exposure to just 64 points. Looks OK to me.


Looking deeper into commodities...Selling Copper

Just sold some Mar '08 Copper at $321.75, in just over $30,000.

I'm quite surprised how well copper has done lately, given all the recession talk. I guess it's partly to do with the fall of fiat money and the move into hard assets that has been going on ever since the Fed starting cutting rates. Fundamentally, any slowdown is going to affect demand for this industrial metal, so I expect some decent price falls from here. I'll try and add to the position as and when the price falls.

Also, if you've got any nickels in your pocket, you might wanna think about joining me in this trade. Nickel is 75% Copper and 25% nickel, and if you price up the fundamental value in a coin, it's about 6.8 cents at the moment!

The next thing in commodities that I'm having a close look at is meat prices...I see contracts for Feeder Cattle and Live Cattle, and Lean Hogs and Pork Bellies. Now, in all honesty I know jack-sh*t about any of this, but it was put to me somewhere that meat prices could be in a lull as farmers cull their cattle instead of rearing them, due to high grain/feed costs, and once that increased supply is out of the way, there will actually be much LESS supply in the future, so prices could really soar.

Looks like a good entry. The other contracts I mentioned look similar. I'll keep an eye on it for now, although am very close to pulling the trigger.

If anyone has any knowledge about this stuff, please let me know!


Thursday, 17 January 2008

Covering US Steel short, 6.1% in 1 week.

Taking my profit again on US Steel (X), it's down 6.1% since I shorted it a week ago. Just paid $101.25, profit $662, having shorted it at $107.87.

Still think it's going down, but I'll keep chipping in some profits when I can. My big mistake was not selling more when it rallied after my original short, as per what I said my plan was. Shame to have left money on the table, but maybe I'll get another chance since Goldman are still bullish on the sector...for some reason.


Cutting out of CFC for flat


Just sold my CFC at $5.65. P+L $20. Yes $20.

I can't believe I bought into this in the 2 days before a takeover was announced and I've still managed to make no money. If only I'd been around last Thursday afternoon...I didn't see the news until after the close. Up 51% and $4,000, yeah I'd have taken that! F*ck f*ck f*ck.

Sucks. But I'm not going to lose money on this one.

Whilst there are definitely risks in the merger going through, I still think it's more likely than not that it does, no matter how bad housing, and Countrywide, looks like by the 3rd quarter. Anyway, I'm sick of seeing this stock now, so out it goes.


Selling another consumer "staple"

Reading this Mish article gave me another stock which looks to be doing far too well, given that it is a food producer getting double-f*cked by higher input prices and lower consumer spending and lower pricing power (I think).

General Mills (GIS) "products include ready-to-eat cereals, refrigerated yogurt, microwave popcorn, frozen pizza and pizza snacks, ice cream and frozen desserts, frozen baked goods, ready-to-serve soup, dessert and baking mix, and refrigerated cookies. The company also offers grain, fruit, and savory snacks; dry dinners, and shelf stable and frozen vegetable products; refrigerated and frozen dough products; and organic products, including soups, granola bars, and cereals."

Yum. Well, how do you reckon that business is doing just now? Paying more for the basic foodstuffs that they use to make it? Yep. Maybe falling sales if we are in a slowdown? Yep. Going to get worse? Undoubtably.

Looks like a good time to get in. Sure, it's not the top, but it's not a whole lot off it. I don't see any reason why it should get back up there either.

Selling almost $55k at $54.64. This is now my biggest single equity position.


No shares to short of CMG...shame.

Following an excellent post and active comments section from Mish about the restaurant sector, I just tried to short some Chipotle Mexican Grill, but my broker doesn't have any shares to short, damn. This looks like a great one to short TODAY, especially since the shares haven't reacted despite the CFO saying business trends since mid-September have been weak (I'm paraphrasing), and commodity prices are "challenging".

What a no-brainer short. Oh yeah, and the P/E is 62 and the forward P/E is 43. Betcha earnings estimates are brought down this year as well.

Anyone have any other restaurant shorts to look at?


Selling GBP/USD, and selling a Straddle

Cable (GBP/USD) today is up around 1.5 points, trading at 1.9770 just now. I just sold some Jun '08 at 1.9643, in just under $1,000 per big figure.

At the same time, I just sold a 1.98 Put and Call, expiring Feb 1st, for 1.674 points and 1.245 points respectively, so a total of 2.919 points.

If the pound falls, as I expect it to do over the medium-term, I book a nearly 3 points profit. If the pound rises, I'm comfortable selling more of it...note that on the straddle I lose money above about 2.0050.

Newsflow out of the US is horrible just now, maybe if it quietens down for a while we can get back to focusing on the impending UK crash.


Stopped out of my S&P500 Punt

Well, I got stopped out on my S&P 500 punt. Down $1,000. My stop was at 1372.5 and you can see it got taken out overnight (I was in the March future).

Oh well. Was maybe a stupid idea.


Wednesday, 16 January 2008

Taking a punt...going long some S&P 500

Just paid 1382.5 for equivalent of $100/point of S&P, and put a stop-loss on it at 1372.5...that's a notional amount of long $138,250 fyi.

Market seems oversold, Asian markets back up, and JPMorgan CEO is gonna be on the front-page of the journal tomorrow morning as the WSJ speculates the Dimon may be on the hunt for acquisitions - "In terms of buying assets or buying companies, we are very open-minded," Mr. Dimon said in a conference call with analysts.

We'll see. It's just a punt.


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!


Taking a punt by covering my DAX puts

Last Wednesday, I sold a 7500 March call on the DAX and bought a 7000 March put in about 7 times the size, for about zero premium.

Falling a half-decent fall over the last week, I'm covering this position. Whilst I still see significant downside for the German stock market, I want to try and maximise profits by actively trading it around. Plus basically, I'm pretty greedy and find it hard to not book profits!

On the put - I'd paid 76.3 in equivalent of about $135/point, I'm selling it today for 108.7 for a profit of just under $4,400.

On the call - I'd sold at 517.6 in just under $20/point, today I'm buying that back at 305.2, for a profit of about $4,150.

Whilst there is a lot of fear out there, I want to remain level-headed and continue to buy the dips, and set shorts on strength. Nothing goes down in a straight-line, so hopefully this strategy will pay off. Will continue to use these leveraged option trades, where I have a large potential payoff whilst having smaller exposure if it goes against me.


Slightly Increasing AUD/JPY Long

Yikes looks like I was a little early in the AUD/JPY purchase yesterday...Yen continues to be on a tear, and this has dropped another 2 big figures from yesterday, taking it's drop to about 5 points in a week. Looks a little too far too fast for me, especially since Japan looks like it is heading right into a recession, which Japan Economy Watch details nicely.

Just paid 90.90 for the Jun '08 contract, that's with spot trading 93.18.

Looking on the long-term chart, if you think that trend of a rising Aussie is still intact (and with a slowing Japan and still high Aussie rates, I don't see why it shouldn't be), then the entry point today looks good...but then I thought that yesterday also...

[Admin note: just a reminder, I haven't figured out how to get forwards into the spreadsheet, so I'll just put in the spot rate and adjust when I close the trade, to keep P+L exactly right]


Adding again to Oil short, and reducing the stop

I'm adding to my Oil short from yesterday...I'd originally sold at $92.95, then $91.61, now I am selling again at $90.68. Putting the stop-loss at $92.41, which would be a ~$400 loss if it bounced back up there.

Feb '08 NYMEX contract

Looks like we are into a trend there, if we can just break through $90 then maybe a few more folk give up on the bull side of this trade. Keeping my risk small by just incrementally adding to the position as it goes my way, but this will hopefully still give me a large payoff if I can ride this trend down.


Tuesday, 15 January 2008

It's a nice day to take off some shorts

Buying back a couple of shorts I put on last Tuesday.

Carmax (KMX) I'd sold at $19.02, I just bought it back at $17.25, that's a 9.3% drop in 1 week. Profit $885.

Staples (SPLS) I'd sold at $21.86, I just bought it back at $20.16, that's a 7.8% drop in 1 week. Profit $1,700.

Whilst I'm still negative on both of these stocks (a second-hand car dealer and a business supplies seller are NOT going to perform in a downturn), I might as well take profits when I can. If these things rally back 10% or so I'll look to re-enter.


This is a gift...selling more Hormel Foods

A month ago I shorted a little bit of Hormel Foods (HRL). Well, I just shorted another $12,000 or so of it at $39.50, and I could barely stop myself from shorting more. Think about it, a food/meat producer in an environment where input prices (grains/meats/other commodities) are going through the roof, where the consumer is tapped out, and we're heading into a recession. How can that stock be trading at all-time highs??? Just makes no sense...I think what's happening is that moron fund managers are piling into consumer staples because "that's what you do" when the economy is going down. Now, this sector probably will outperform in a recession, but perform outright? Nope. It's going down.

I'm going to have a good think about making this into my biggest short. One thing to worry about though...just be aware they are starting a new Spam campaign!


Buying AUD/JPY again

I bought and sold AUD/JPY last week, between 96.61 and 97.71. Today, the Yen is on FIRE against a number of currencies, and AUD/JPY is down over 2 points to 95.20. I just bought some Jun '08 at 92.81, in an amount that equates to about $2000 per big figure.

As I've said before, Japanese rates are 0.5% and either staying unchanged or going down as the Japanese economy slides back into recession, and Aussie rates are 6.75% and going up apparently. Until the commodity boom cracks, the carry here is worth clipping, and if I can combine that with some active trading, buying dips and taking my profits when they come, I think there is a fortune to be made in this cross.

Away from FX, I'm rueing some big missed opportunities yesterday. Of course, I should have let the FTSE option trade run, but I also had the chance to short some more United States Steel at a great level but didn't (down ~5% today), but didn't despite saying in a previous post how I would sell into any rallies. The strength yesterday just put me off, I guess I'm always a little suspicious that someone out there knows something I don't. Also didn't short Goldman despite it being over 200, which was a level I'd targeted, and also just irritated by Countrywide that just keeps falling!! If it hits the level where my P+L is flat, I'll just dump out of it I guess.

Hindsight makes it look so easy...