OptionPundit

Tag: AGU

  • Fear of Fear Itself

    Two 90% volume down days in a row!! Last time that happened on Oct 6th and 7th, we saw sell-off on Oct 10th. We saw a brief rally that couldn’t last any longer and bears pounded with full force. Market closed below 50% retracement from Oct bottom to short-term peak, and it doesn’t speak well. It seems likely that we are about to retest Oct bottoms. The stock futures are up as of this writing, which I think will change depending upon the outcome of the most awaiting employment data to be released at 8:30 EST. 

    The speed with which liquidity is being injected into the system, rates are being cut, it tells how severe the situation has become. According to Bloomberg, Yesterday’s cuts by the Bank of England and European Central Bank, which came with the Federal Reserve and Bank of Japan on the cusp of zero rates, are a bid to shock life back into their recessionary economies and strained money markets. It may be an uphill battle as consumers and businesses show greater interest in saving than spending, and banks hoard capital rather than lend it. Who would have thought, LVS will be looking for funds in such a dire state. The company might be next bankrupt if the funding is not made available quickly. I think they will get it as these projects are too important for these countries to allow it to fail. Such is the fear in the market, that cash is also not being considered cash. Here is what I shared with OPNewsletter members-

    oh btw, any rationale why this thing will sell below even cash offer, assuming 0.093 shares of ASH has no value – HPC Hercules announces shareholders vote in favor of merger with Ashland Inc. (18.10 +1.30) . Co announces at its special shareholders meeting held earlier today Hercules’ shareholders adopted the Agreement and Plan of Merger, dated July 10, 2008, pursuant to which Ashland (ASH) has agreed to acquire Hercules. The Merger Agreement was adopted by holders of more than two-thirds of Hercules’ outstanding common stock, as required by Hercules’ Certificate of Incorporation and the Merger Agreement. The terms of the Merger Agreement call for Hercules shareholders to receive, for each share of Hercules common stock, $18.60 in cash and 0.0930 of a share of Ashland common stock. Hercules and Ashland expect the transaction to close on November 13, 2008.

    The funding is committed, deal closure is next, approved by sharedholders what more is needed, the > $20 bucks was being thrown for $17.5 by the time I posted it for OPNewsletter member. Talk about Fear. Markets finally woke-up to the price discrepancies on HPC, on a huge sell-off day and in spite of ASH being down 7%, the HPC was up +9% . I had picked up a few hundred shares earlier, so that was a sweet bonus for one day holding. I sold half and still have half.  A speculative pick also faired pretty well-

    AGU will be announcing earning tonight, my feel is that they will beat estimates and also may raise the outlook, those looking for speculative play may look at this for further analysis..but again, no more than 2-3% of capital…this is not part of OPN..

    AGU rallied after announcing results and I booked gains.

    The value has emerged and I have started my thought process to start value stock investment portfolio. I had shared an initial list with OPNewsletter members results of which are so far so good. I shall be publishing a separate report on this.

    More after the employment data.

    Profitable trading, OP

  • A Terrible, and A Fantastic Week

    It was a terrible week for U.S. stocks and equally for almost every major stock markets worldwide. The Dow fell 157.47 points, or 1.5%, on Friday to close at 10,325.38, racking up a 7.3% drop for the week. The Nasdaq Composite Index fell 29.33 points, or 1.5%, on Friday to close at 1,947.39 and lost 10.8% for the week. The broader Standard & Poor’s 500 Index dropped 15.05 points, or 1.4%, on Friday, ending the day at 1,099.23. For the week, the index was down 9.4% for the week. But all this shouldn’t come as a major suprise to OPNewsletter subscribers especially those who were following this general market comments thread of OPN member’s only section. I also mentioned clearly that I wouldn’t trade for stock pinning for Sept expiration cycle. This is not a “praise myself” post, but to state clearly how we handled first hurrcane of the season, that has just passed.

    If I say this was the most volatile weeks since 1987 market crash, I think I wouldn’t be too far-off from reality. Too much of uncertainty, hopes and dreams surrounded the stock markets world-wide. Starting with the hope that bail-out package will be passed without issues; it was dashed to zero when markets were taken by surprise upon defeat of the bail-out plan, markets tanked on Monday, and the worst 1-day performance since 1987. Soon after there was revised hope that package will be passed and markets started to go back up, one of the best one day performances in past 5 years. Dow was up nearly 300points when bill was to be voted on Friday, I wrote to OPN subscribers at OP discussion forum to stay away from rally and also on my twitter account, that it might be “Buy in anticipation and Sell on news” event.

    For income trades, OPNewsletter stayed on the sidelines. We opened only one trade, a RUT iron condor that we officially closed for +9%, some might have had minor losses due to the fills that received during a very fast moving market that it was. For OPN, I invested only 8% of capital in that. Since I invest majority of my capital in income trades, I preferred and shared with OPN subscribers to stay in cash since mid September. Preservation of capital is of utmost importance to a trader or investor. Market environments were not such that I could leave the income trades on and not watch it. It required one to be nimble, closely monitor markets and always be “on”. Staying in cash proved to be a good strategy, we could sleep well while markets were gyrating.

    Though I had my own share of losses, it was a great week. Attached snapshot is just for few profitable trades. A fantastic week for those who played bearish on my fantastic fours (POT, MON, MOS and CF) as MOS missed the earnings and was punished by markets really ruthlessly. I also mentioned in the speculative sections of the forum when Apple (AAPL) was drowning below $100 watermarks due to rumors. I had been a net buyer of puts and sold some as market closed, but still in bearish position. WFC went down within minutes of S&P putting it on Credit Watch negative. It was a quick trade, generating +25% in less than 1hr time in a very volatile market environment. A bear call spread was also opened (37.5/35) Oct, which is also yielding +45% as of Friday close. Due to its highly speculative and directional nature I didn’t write on forum. Then was GE, VIX (+25%) and many more directional trades. Overall a great week for “directional/speculative” trader!

    Where are we now, as per my indicators, we are in for trouble ahead. But this is market which has defied several rules and indicators and therefore I would like to prepare for worst but hope for the best since most of the past major bull markets kicked-in during worst market sentiments.

    Preserve capital, stay cautious and be profitable,
    Profitable trading, OP