Weinstein Trading and Fading

Trading results 5/18/10

Busy day as I was trying to do several things at once.

I was trading BP for much of the day to be able to get a better cost average and that worked out well. While I took a realized loss my average price dropped to about the current price and that allowed me to actually increase my NAV from the trading activity. I did some spreads with V options and while I made a small gain it was a failure in that it didn’t trade as expected and that was the motivation to close it out.
WFMI + 4
V may70 + 21
V may 70 + 157
V May 65 – 141
SPRD + 116
LVS + 57
BP – 258

- 44
 
Quote from Robert Weinstein:

One would think that the price should have doubled after that release : o )

I don't really think its a level playing field (well even less with equity options than other markets) but at some point I think the leak will get fixed and price should see a nice bounce. That is why I like the idea of getting in with options.

The October40 puts last traded at about 2.50. It is something I will be looking at tomorrow if we have another down day. I would like to be able to get over 3 for them which if exercised would give me a cost of 37 a share which puts us very near the bottom in early 09 when the world was falling apart. Surely not risk free and if it was BP price would not be doing what it is. Although the bounce today off of 45 was interesting and I wonder if that price will hold or not.
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i am watching bp for an investment too but i am looking at it this way. bp traded under 40 in 2009 when it had no liability risk. is there any reason it shouldnt go back to 40 with all that has happened?
 
Quote from Free Thinker:

i am watching bp for an investment too but i am looking at it this way. bp traded under 40 in 2009 when it had no liability risk. is there any reason it shouldnt go back to 40 with all that has happened?
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Shouldn't?? not sure. If you mean what do I think the odds are then I would say it is more likely than not that if it goes under 40 it does not stay there long absent some other thing changing the field of view. BP is getting hammered due to the bad PR and removing that will IMHO give a big lift to the price of the stock. Its the fear of buying it right now that may give an opportunity. Of course it is not enough to be right you also have to have the timing and that is why I think writing options (either covered calls and collect the fat dividend assuming it doesn't blow up like the rig did or writing naked puts) that are far dated allows someone to buy into the panic with a lower chance of getting their head handed to them. It is clearly not the trade for everyone or the majority as there is a reason its called "catching a falling knife"....LOL

One other point to think about is the price of oil. Oil is priced a lot higher today than early 09 and while we don't know were it is going to go we can believe that part of the reason for the sub 40 price is a result of oil hitting a low.
 
Trading results 5/20/10


Some days its easier than others to be a contrarian and today was not one of them with BP or GS.

I did get a chance after the close to watch the live video of the oil and nat gas coming out of the pipe on the bottom of the “ocean” of the gulf of Mexico. It has all the excitement of watching a big diesel truck exhaust coming out the pipes. Some have been saying that the video proves that over 5K barrels a day are coming out but I didn’t get the impression that it was anything near 25K or some of the other numbers floating around. From what I read its hard to get 25K barrels a day out of a oil rig in ideal conditions but my source is weak at best. Regardless of the amount it just didn’t appear as bad as it sounded before watching. Perhaps using the big “straw” to suck some of the oil it what is making it better.

When it looked like the wheels might come off the wagon I started shorting the 30yr and the July 30 yr 126 call. I kept the naked call and while it was a great trade at the best point it ended slightly in the red by the end of the day when the bonds moved to the high of the day during the close and went higher from there. As of this post late the Spoos have retraced some and has once gain gone to the good but this trade is about time decay as much as a position play so unless it gives a very quick and strong move my way I will be holding for a while. With the recent run up it would appear that time will work harder for me than the rates of the bonds will work against me. CHS still could not get much of a foot hold today and I covered some as early as 530a manually after some had already been covered as early as a little after 3am

All around a good day for what it was. With a market down around 400 points including after hours I think I came out ok even after factoring in unrealized pain that I am taking on with BP, GS, and C. Each day lately I think that anyone who sold yesterday was a genius and anyone who sold today was mistaken. GS I still like but I did not expect that they would be sold off this far and remain here for long. In the next few weeks we will see how that pans out as I wrote June put that is now ITM. C is looking less and less attractive as they lose traders and with the Senate dummies passing the Finance reg reform. If they really wanted to do some good they would stop all the loan programs that allow people that are not credit worthy from driving up the housing prices for those that are and cost the tax payers untold amounts of money.

ZB sep + 428
NTES + 72
MEE MayP + 117
GS Jul 120P + 42
DUG + 73
CHS + 435
BP May 45P + 27 and I loaded up a little bit on these and I would be comfortable getting the shares put to me (of course I would prefer to have the stock put to me by one cent though)

+ 1198
 
Trading results 5/19/10

Busy day today all day long buying and selling CHS back and forth. IB is the one that made the most on it.

Started out great with CHS as I traded the stock back and forth and then it went from oversold to way oversold and really did go further than expected. Even so I was able to trade through much of it and during the afternoon rally when it went above 12.30 I was a little ahead again but decided to hold on for 12.50 which it did not see today. For a stock that had as good of earnings as it did AND is opening up new stores along with increases in SSS I felt it should bounce. As such I am still long and expect to get a better price tomorrow when the dust clears a bit. I don’t understand why it was not sold off more into earnings by those that started to sell when the earnings became public. How big of a gain did they seek that they thought they needed to dump? After the original kick in the teeth for the rest of the bag holders I understand why they dumped at what they could get but once you were in today hanging on until the panic lowers is maybe a good move. At least it is the move I am making and I will buy more if it gaps down at the open tomorrow. (I do have offers in for after hours trading but they are to make a gain that I would be happy with if the price moves that much higher tonight). I also shorted a BP put and tried to short more but my offer was at the HOD and it didn’t get lifted. CSTR was my play of the day with shorting the trendline break. I also covered the GS put I wrote yesterday and will rewrite it on weakness (staying small in GS due to the price of the stock) and still am holding the other GS put I wrote. I covered the extra shares I piled up yesterday to average out my cost in premarket trading which was interesting to watch as the prices moved based on London trading. It was pretty easy to spot the bids/asks that were put in manually.

BP + 130
BP M45P + 19
CHS – 208 Still long holding overnight at about break even for the shares I have.
CSTR + 391
GS Jul125P + 57

+ 390
 
I think its easier to go long a similar stock that does not have exposure of unknown lawsuits like BP. For example, DO which is an off shore driller fell over 35% from its 52 week high even though it has nothing to do with the current mess. Now instead of just going long the stock, I sold naked puts which even after this fall, have yet to go to the price where I will need to actually own the stock, which I do not mind owning if I do get assigned at that price. Until we know what BP will have to pay, how can we actually value the stock enough to go long.

This leads me to my other thought. Due to the market falling, most of my stocks that I am long, have fallen, the ones I consider to be good speculations of massive profits in the future, and some which I consider to be just swing trades. So what I did strategically, was kill the ones that were just swing trades even though I think in time I will be proven right, to add more to the ones which have extreme possible reward in the near future.

So, what I am saying, is that it may be wise to look at your current longer term positions, and see which still make sense, and do you wish to change your allocations for each position, and/or move some to a new position. Since all stocks being down, I don't really feel that taking a loss on weaker positions is a bad idea, if the money can be allocated to stronger positions.

Also, I have noticed I made a few mistakes with a stocks in a bad sector being utility non dividend paying stocks including some alternative energy. I have decided although I do think these stocks are oversold, the problem is that the sector itself is weak, and I feel that the sector is being sold so all stocks are being killed. Therefore I have decided to get out of this sector for now due to this problem. I think for trading stocks even technically, it may be wise to look at a sector. I don't know if you scan for sectors or just stocks.
 
The day started out early again today

I didn’t have any trades that I needed handling although I have been gaining greater exposure to BP this week. First thing I did was check to see if the hole had been plugged. No luck with BP stuffing a rag or something in the pipe so it was on to see how the rest of the market was shaping up. After yesterdays fall I was expecting to see some sign of life beyond the world coming apart at the hinges. It didn’t look so good with the spoos down about 8-11 points but what really caught my eye was the 30yr bonds again. After yesterdays gap up in price (based on the TLT EFT) it was by any measure over extended. I started to short it as based on the gap plus one and I was working into a scale of the sept 30yr short and started to focus on BP once again being down and today was option expiration day. So I scaled into the short which is near being long the market which put me very long the market so I decided to take off most of the contracts near break even to lower my exposure in case the wheels did fall off today. I did keep one contract that I rode for almost the whole move back down and covered near the bottom.

I also bought some more shares of BP during its big move down and was able to grab a few three cents from the bottom. BP started trading near 44 back and forth so I started selling to cover above 44 and buying below 44 and ended up going net negative shares which I was comfortable with as I am getting about 800 shares put to me from options that I wrote. This puts me about 500 shares net long on Monday plus I have puts wrote for Jun that are ITM and quite a few Oct 40P wrote today as well. Of all the trades its the Oct 40 puts I like best and after seeing the close I wish I would have written more but not a lot more as this is a big long position for me in relation to it being more than just a day trade. Its a lot like GS (they are both actually named together in a suit) with a lot of fear and uncertainty which often spells opportunity if you can buy it and still sleep at night. GS I like at this level but don’t love it yet. If it starts breaking down under 120 and nothing has changed with the company in terms of profit (I don’t care who hates them or what BS they are blamed by the public for) I would then become much more aggressive in going long.

Speaking of GS just the rumor that they may be settling with the SEC sent the stock much higher quickly. It was like a sneak preview of what to expect when they do settle. With no knowledge of what would be in the settlement just that they are getting close sent the stock higher. I don’t doubt that it is more likely than not that they will end up settling but numbers like $1bil or more are really getting near the edge of reasonable amounts. If GS really believes that they have exposure I could see several hundred million but nothing approaching $1bil and that’s if they really believe they don’t want to go to trial. I understand its good for business to get this behind them but it appears to be little more than extortion by the government and that’s just bad all around except for the elected officials in DC.

All in all a pretty good day during market hours. I spent most of it getting ready for the last five minutes of trading trying to find options that are puking out today that would be a good buy or sale. I did find some and bought some BP 44 calls for a penny a piece when the stock was 15 cents OTM. I was hoping it would move higher after the close and I was correct as it did move to around 44.25ish but it was past 4:30P CST and that is the cut off time to exercise so the writer of the calls made it by about 57 minutes. I think its just another way that the option market makers screw over everyone else. The OCC option clearing corporation has the 4:30p rule and yet the options don’t actually expire until Saturday and the after markets trading does not end until 7P CST. The only thing I can think of is hopefully more competition away from the old ways will maybe move options into the 21 century along with stocks and futures. Just like having pit traded futures its just a bad deal over having electronic markets. There is no way I would enter an order for a product that is pit traded and I am unsure why anyone else would either. Nothing to gain and everything to lose. The good news is I have a strategy that can be used to make money this way as well so between now and next months expiration I will be calculating the numbers required to make it work with an edge.

BP – 324 went from net long to net short and expect to wake up Monday being net long again. I will write out some long dated OTM calls and let it ride for a while and maybe grab some of that double stuffing 7% yield of a dividend.
GS May 140P + 21
30yr Sept futs + 667

Options that expired today OTM
May 47.50C + 72

+ 437
 
BP continues its seemingly never ending losing days

14 days, 14 days in a row that is. 14 days in a row BP has closed at a price lower than the previous close and it even went lower in after market trading tonight but at least did not close at the low of that. Not really much of a prize that it didn’t. I had a bunch of BP put to me over the weekend as the price went below the exercise price. I also traded BP a lot today and at one time IB reported a gain in trading it (incorrectly given the exercise price of the options). Its going to be a mess to calculate it all out so I will use mark to market tomorrow to get an idea of where I am at.
Its a little past midnight ET and the market is selling off hard (compared to the close which was sold off hard). Dow futs down about 140 points and the spoos down to 1053 which is near the scary number of the crash from a little over a week ago. here we are again and it does not look good.

North Korea gearing up to try another bluff with DC which always seems to work well and the market skittish over what will happen. S Korean Won hitting lows and even oil is selling under 70 for the jul contract. Why would oil be near 69 if worries about war are valid. This leads me to believe that Korea is being discounted but the problems in the socialized utopia of Europe are receiving some weight to what it may mean for the rest of the oblique spheroid that we live on.

The 30yr futs are at the highest levels I have seen them in a long time. If you haven’t refinanced your house in a while you may want to look at the rates because it would appear that 5% is almost usury right now.

BP – 987 Was doing well with it until it sold off into the close
RIG + 18
GS Jul 125P + 18 and still short one contract
DELL – 34
Spoos + 20
30yr sept fut 126 Jul call option + 310 ish (to late and to early to see the results) Glad I took the money and ran with this one as the price moved way higher afterward and even more so in late night trading.

- 680 (number is not even close but that is what IB is reporting. I would put it closer to -1500 when factoring in the big drop in BP.
 
Trading results 5/25/10

Pretty good day and this month is wrapping up nicely

I am running behind in posting so I will just give the facts.
BP + 1429.57
BP Jul 35P + 25
GS Jul 125P + 34

+ 1535
 
Trading results 5/26/10

Frustrating end but a good day

I actually ended the day if you consider after hours trading in the good but I am running a day behind so I am using the statement for yesterday’s results. I had a pretty good day until I went long BP into the close and it started falling apart and dropped 50 cents and I covered half stopping out. I didn’t want to carry that much overnight when I had to leave my office to inspect the new house we are buying. I did put some limit orders in above my cost and some offers were lifted which as it turns out would have been better if they did not because of the run up overnight but at least I kept my risk manageable.

BP – 51
BP Jul 35P + 29
GS Jun140P – 257 I took a stop loss only to watch it fall later but thats how it goes some days

- 297
 
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