Steve Osborne's Journal

THE WEEK IN REVIEW

Ceiling above tolerated oil prices by the stock market was raised this week.
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Transactions made:

June 13th, in the morning (see 06-13-05 11:42 AM thread)
- liquidated short positions on bonds at 25/64 per put. Proceeds=$781.25.

June 16th, at market close
- rolled over expiring long positions on DJIA by selling two JUN05 102 calls at $3,770 each and buying three JUL05 104 calls at $2,540 each
($80 was used from the proceeds of previous bond position liquidation to be able to purchase the three JUL05 calls)
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Portfolio Value:

May 16th (at market open)
2 x JUN05 DJIA 10200 calls @ $1,650 = $3,300
2 x JUL05 30YR 11600 puts @ $1,625 = $3,250
Total = $6,550

May 20th (at market close)
2 x JUN05 DJIA 10200 calls @ $3,325 = $6,650
2 x JUL05 30YR 11600 puts @ $1,625 = $2,281.25
Total = $8,931.25

May 27th (at market close)
2 x JUN05 DJIA 10200 calls @ $3,700 = $7,400
2 x JUL05 30YR 11600 puts @ $781.25 = $1,562.50
Total = $8,962.50

June 3rd (at market close)
2 x JUN05 DJIA 10200 calls @ $3,000 = $6,000
2 x JUL05 30YR 11600 puts @ $265.63 = $531.25
Total = $6,531.25

June 10th (at market close)
2 x JUN05 DJIA 10200 calls @ $3,175 = $6,350
2 x JUL05 30YR 11600 puts @ $234.38 = $468.75
Total = $6,818.75

June 17th (at market close)
3 x JUL05 DJIA 10400 calls @ $2,850 = $8,550
cash = $701.25
Total = $9,251.25
 
THE WEEK IN REVIEW

After the plug was pulled Monday afternoon at 3:35, it became clear that things had to get worst before they could get better. At the moment, the only thing that can get oil prices under control is a falling stock market.
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Transactions made:

Abandoned ship early in the week (see last two posts): sold 1 July DJIA call @ 2750 (Monday) and 2 July DJIA calls @ 2735 (Tuesday)
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Portfolio Value:

May 16th (at market open)
2 x JUN05 DJIA 10200 calls @ $1,650 = $3,300
2 x JUL05 30YR 11600 puts @ $1,625 = $3,250
Total = $6,550

May 20th (at market close)
2 x JUN05 DJIA 10200 calls @ $3,325 = $6,650
2 x JUL05 30YR 11600 puts @ $1,625 = $2,281.25
Total = $8,931.25

May 27th (at market close)
2 x JUN05 DJIA 10200 calls @ $3,700 = $7,400
2 x JUL05 30YR 11600 puts @ $781.25 = $1,562.50
Total = $8,962.50

June 3rd (at market close)
2 x JUN05 DJIA 10200 calls @ $3,000 = $6,000
2 x JUL05 30YR 11600 puts @ $265.63 = $531.25
Total = $6,531.25

June 10th (at market close)
2 x JUN05 DJIA 10200 calls @ $3,175 = $6,350
2 x JUL05 30YR 11600 puts @ $234.38 = $468.75
Total = $6,818.75

June 17th (at market close)
3 x JUL05 DJIA 10400 calls @ $2,850 = $8,550
cash = $701.25
Total = $9,251.25

June 24th (at market close)
cash = $8,921.25
Total = $8,921.25
 
With oil prices retreating and the stock market rallying again, the US will continue to attract an increasing amount of foreign capital because of it's higher growth rate.

Recommendation: Buy calls on US Dollar Index on market open with half of the capital.
 
Bullish positions that were building up for the US dollar are already reversing because of renewed uncertainties caused by increasing oil prices.

The Sept05 82 call bought at $5010 today will have to be liquidated on market open.
 
Call liquidated at 4.90 ($4,900).
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Portfolio value:
Sept. 9th (at market close)
cash = $8,811.25
Total = $8,811.25
 
I can't seem to get the CL chart up, but I think oil should be back above 70 in the near future.

Good luck

ozzy

P.S I don't like making predictions.
 
THE WEEK IN REVIEW

In August, oil was overbought and a correction started on August 31st while my sentiment indicators showed that the uptrend was still intact until two days ago. The underlying trend showed signs of changing direction Thursday and Friday but a closer look at the context and at open interest data made me believe that it was too early to think that the trend had changed. The price drop that took place during those two days seems to be the result of long positions being liquidated ahead of OPEC and Federal Reserve announcements.

Even if there is a consensus that the US economy has weakened in the past few weeks, traders minds are still dominated by the circular logic behind the tug-of-war between stock indices and oil prices. This phenomenon is still going on in a very mechanical way and that tells me that if oil prices go down again, the stock market will add to its recent gains and depict a healthy picture of the economy which, in turn will bring oil prices up again. This process can only stop when the stock market becomes unable to respond positively and immediately to a drop in oil prices, i.e. when concerns about weaker growth dominate good news from lower oil prices.
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Transactions made:

Sept 15th, on market open
- bought 1 DEC05 CL 68 call at $2,870 to open a position.

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Portfolio Value:

May 16th (at market open)
Total = $6,550
.
.
.
Sept 16th (at market close)
- Cash = $5,941.25
- 1 x DEC05 CL 68 call @ $2,070 = $2,070.00
Total = $8,011.25
 
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