Much to write about

After getting no action on my trades last week, this week has been a rush of activity. On Tuesday, I opened 3 new positions:
CIT July 09 (Strike 2.5) @ 0.45
SNV June 09 (Strike 2.5) @ 0.25
ZLC June 09 (Strike 2.5) @ 0.20
I probably won't close these positions if given sufficient margin of safety as expiry approaches.

CIT is an interesting trade because essentially I am playing the opposite side of buying calls. Someone is buying up June and July 09 (Strike 5) calls on CIT, which is making the 2.5 puts more expensive.

SNV is a value play. Cheap stock, 2.25 is below the 52wk low. I feel safe.

ZNC was an earnings insurance play. I bet that the stock wouldn't fall more than 50% - it didn't. Great. I'm not too worried about this one falling through my strike either.

I've also been making a market in KEY. My positions have reached a critical point where I can make a small profit by buying the bid and selling the ask. However, it's useless to describe these trades because I'm usually out of them within 30 minutes (at least, I try to do that). I've traded KEY 5 times this week for a total profit of $0.10.

Flawed leaderboard

My broker has an online trading network where investors can connect with one another, share experiences, ideas, and strategies, see what others are trading, and how they are performing. The performance leaderboard, which displays the performance of the top members on the network, is a flawed concept. The portfolio performance of people who take on risk through leverage and are rewarded for it will always be greater in the extremes than the performance of lower risk strategies. The amount of people who lose their entire investment through leverage is also high - after all, options expire with time. The leaderboard should show risk-adjusted returns. It scares me to think that people will try to replicate the strategy of some of the top performers without such outstanding returns.

If you're looking for a broker, send me an email and I will refer you to mine. Think of it as a way of showing blog appreciation. :)

It's time to get rich

My last post was on September 13th, 2008. A lot has happened since then. We've seen the collapse and rebound of financial markets, although, let's face it, the market is nowhere near where it was during 2008. Let's talk about the elephant(s) in the room.

Why did I stop posting?
September 22nd, 2008 witnessed the crash of Ambac, by far the largest holding in my portfolio. Since I was losing money for the people who read and followed my advice, I stopped posting it. Yes, I was still outperforming the market, but what was the point of giving my advice if it lost you money?

Why am I posting this?
I'm outperforming the market so much that I am actually net positive since 2007. As of 5/18, the one year performance of the S&P is (34.7%). My portfolio is up 29.5%. I am going to be posting my trades again - and we will all get rich together.

Latest trades:
Sold YCRW July 2009 2.5 strike put @ 0.60
Sold CCRT July 2009 2.5 strike put @ 0.75

MET and AIG

I bought up my odd lot of MET shares at 55.81; the final VWAP ended a few percentage points higher, as funds bought in to take advantage of the exchange. I'm looking to get out of RGA above 50, but I won't get my shares until next Wednesday. I'm hoping that it doesn't go down before then. I'm guessing that we're going to see some pretty big moves next week; the VIX is above 25, which means that blood is on the streets and it's time to buy.

I've been watching the AIG debacle with increasing interest. Lehman's problems caused a huge sell off in financials last week. I'm not entirely sure why, since it seems like they are firm-specific. Like Lehman, AIG is also facing losses on mortgages; it also has to pay out hurricane damages. Yes, these losses will happen, and they will be huge, but from a valuation standpoint, the equity looks great, and IV is through the roof, making it even more attractive.

Success with FMCN

Although I did not get in at the bottom, FMCN had a strong rebound today. I sold my shares at 29.98. My return of 3.4% was excellent, and wiped out the losses that I realized when I entered into my CEDU trade.

I also exited my CEDU trade at 4.75 on Thursday in preparation for taking part of the MET tender offer next week. Overall, this week was a good one for my portfolio; unfortunately, I cannot say the same for the market.

Days like this happen

The market is doing terribly. That's why selling options is great; it reflects the fact that stocks do not always go up. In fact, if a stock rises too quickly, that is usually time to be fearful.

As the market sold off, so did FMCN. I think that today would be a stupid day to sell it.

Ambac strikes again

My largest holding has outdone itself once again. That's right - ABK is up 25% on news that regulators approved Connie Lee.

As my stocks have bounced, I have continued to sell calls on my holdings. I sold Oct 08 calls (strike - 5) on WM for $0.45. I was also lucky to sell Sept 08 calls (strike - 12.5) on ABK for $0.25. Whenever a stock rises very quickly in a very short amount of time, volatility goes a little crazy. This is a good time to sell options. I remain bullish on all of my holdings (obviously) which is why these calls are out of the money. Some I am more bullish on than others.

I also had a good day trade on LUV today; shorted it at 15.93 and bought back at 15.65. It seems like there is strong selling interest (or weak buying interest) at and above 16. This is the second time that I have done this trade.

I believe that China is particularly oversold. I'm not sure why; I am going to overnight FMCN today if I can get it at a good price. (Update - I got in at 28.9).