OptionPundit

Tag: LEH

  • OPNewsletter Returns +6.2% in Sept’08

    In what could be summarized as tumultuous month for the US markets, full of volatility and extreme intradays moves and strong reversals, OPNewsletter Sept portfolios returned +6.2% including commissions. This beats my revised target of 5% including comissions (vs earlier 5-7% x-comissions). This surely wasn’t an easy month for an income trader but a portfolio approach and diversification helped me achieve positive results. I used up a max of 53% of overall capital during month and opened 5 portfolios-

    • GLD -16.67%
    • SPY barely break-even at +0.6%
    • EWZ +5.3%
    • DIA +23.57%
    • RUT +28.64%

    These doesn’t include directional alerts that I sent to OPNewsletter members (DBC +30% and GS +12%, and bearish alerts on POT, CF, MOS and MON). These were not part of OPN and hence these are not counted in the OPNewsletter tracking. And yeah, we have one for LEH as well, results of which we’ll come to know on Monday.

    We are in the process of Opening October portfolio as well as new openings for sign-ups. If you would like to join OPNewsletter, pls sign-up for the waitlist by clicking at “Buy Now” button on the rightmost siderbar at the top corner. If you would like to read subscriber’s testimonials, pls feel free to read here.

    Have fun and profitable trading, OP

  • Lehman Slumps, Market Follows

    According to marketwatch, LEH seems unable to raise capital and that’s what is taking it down. At OPNewsletter I was selling this rally. Here is what I wrote to OPN members yesterday-

    Markets are going to the sky, moon or whichever planet you can think of. I shall share with you my version…before that…I may be completely wrong and hence take it with not just pinch of salt but loads of salt….

    My version- Dow will rally it finds some resistance somewhere in between 11,560-11,600 (allow few points here and there) with a bigger resistance around 11,770….SPX will rally to 1280 area followed by resistance around 1305…I am not a buyer of this rally…till I see major buying spree coupled with a 90% up day i.e. the volume of up stocks is >90% of up+down volume..I don’t think anything significantly changed except “new hats” and workload at “printing press”…I am sensing..”It’s time to get cash, pump-up the rally, pump-up the financials and get out from here as there is no one out there who is willing to give cash”…..

    but in the end, it’s just me…and I may very well be wrong…

    And rest is history now. It was hardly a strong rally with less than 60% up volume (of up+down). Oh well, we still have few hours left and anything can happen. LEH’s trading volume was huge yesterday (app 2X average trading volume), so it seems it’s shares were being off-loaded amidst strong rally. My guess is that smart folks knew that the deal is probably not coming through especially after the SWFs experiences since last year.

    For OPNewsletter, we reduced our Delta exposure with this rally, we closed RUT Iron condor for >+28%. In spite of all the market gyrations, as of this writing it is trading above waters.

     LEH, soon a penny stock, oh well, I may be wrong as usual,

    Profitable trading, OP

  • Ospraie to shut flagship commodity hedge fund

    Ospraie, It took 8 years to reach where it was, one of the largest commodities fund. It took nearly (or less than) 8weeks for it to close! According to a news published on Reuters, Ospraie Management LP is shutting its flagship commodity hedge fund after losing 27% in August and almost 40% this year, according to a letter that the firm sent to investors on Tuesday.

    Ospriae Fund Ltd., which had roughly $2.8 billion in assets at the start of August, is (was) one of the largest commodity hedge funds in the world. It’s down 38.59% so far this year; it plunged 27% in August on losses in energy, mining and natural resources equity holdings, making it one of the biggest ever closures of a commodities-focused hedge fund.

    Dwight Anderson, founder of the firm, launched Ospraie Fund in February 2000 and generated annual returns of 15% until the end of 2007. The firm, one of the most influential in commodities markets, still manages more than $4 billion in assets, including $1.2 billion in a special opportunities fund. Lehman Brothers Holdings Inc. (LEH ) bought 20 % in the firm few years back (April 2005). Fast forward 3 years, Ospraie is closing down, and Lehman is on Sale (almost). The landscape is entirely different. This also serves a reminder that the past performance doesn’t mean future performance will be similar. And in today’s world, complacency has no place.

    Since losses suffered by Ospraie Fund have exceeded 30%, investors don’t have to abide by its “lockup.” Lockups tie investors’ money into a fund for a specific period — usually between three months and a year. But the lockup provision for the Ospraie Fund disappears if losses top 30%, so this allows investors to pull their money more quickly.

    The Fantastic fours (POT, MOS, CF and MON) are all weak, giving technical signals of bearish trends. I am not sure but it might be quite possible that other commodities funds are also strugling and want to get out of the these underlyings. These stocks had wonderful runs, and don’t be surprised if we continue to see downtrend for a while with dead cat bounces along the way.  

    Profitable trading, OP

  • Fantastic Four Does it Again

    Mosaic (MOS), CF Industries (CF), Monsanto (MON) and Potash (POT) are my fantastic four of the agriculture and farming sectors. I mentioned those here and then again asked a question about a month ago, when the four were travelling earth from the sky. Whoever has the medicine to manage trading constipation did pretty damn good. And guess what, on Tuesday when crude slipped, it seemed as if these were dumped again. See today’s action and all four are flying CF up +10%, MON +5%, MOS +7% and POT +4%. Those may not sound big % gains, so look at absolute dollars, and if you are an option trader, I think you will be pleasantly surprised. POT has been my 4th biggest profit contributor of the 2008 (so far). They have a particular behaviour and in case, you are on the wrong side, these four could easily be money losing machines. That’s why I called in my last post “Hot is tough to handle, so handle carefully”. These continue to be on my watch list as long as agri and commodities business is booming. They will also be the first ones to get out any signs of “commodity bubble” bursting.

    It’s beautiful if a computer modeling can help you multiply your investments, but I shall be careful. Quant Asset Management, a Singapore- based hedge fund which uses computer models to pick trades, said it plans to double the assets it manages this year after beating its peers Oh btw, The top three countries to invest in now would be the U.S., South Korea and the U.K., according to Quant’s computers, and the industries, marine transportation, general mining and exploration. Read more.

    But I will not leave Vietnam behind. It has excellent potential. Read recent free economic paper from Goldman Sachs (GS) to understand more about the Potential country that could be the next Asian Tiger in the making. Be mindful this is the same Goldman sachs that coined BRIC and also told the world about N-11 so Ignore it at your peril.

    Food For thought– JPMorgan Chase & Co. analyst Kenneth Worthington became the latest to cut his fiscal second-quarter earnings estimates on Investment Banks. This includes Lehman Brothers (LEH), Goldman Sachs(GS) and Morgan Stanley (MS). As per Bloomberg, Lehman Brothers Holdings Inc., the fourth-largest U.S. securities firm, needs more capital even after raising $6 billion to recover from credit-market losses, said David Einhorn, a hedge fund manager who’s betting that Lehman shares will fall.

    Love it or hate it, it’s called WallStreet,

    Profitable trading, OP