OptionPundit

Tag: POT

  • Google (GOOG)- A Bearish Play

    It was an intense sell-off day with down volume accounting for over 90%. All of the major indices have now broken and closed below their September 25th lows and their uptrends dating from the July 8th. Chicago PMI had already provided hints that things aren’t that rosy yet. But hey, who knows. This might be a short term pull back, to quench the bears’ thirst, before new advance resume. Whatever your outlook is, play it cautiously.

    Bearish Call on GOOG Oct 2009

    Usually not many traders want to play bearish trades on Google (GOOG) but sometime one has to take a chance. Based on current market behavior of Google , based on a very simple technical analysis, there was/is high probability that it was/is ready to be cooked for a bearish recipe. Albeit, that was two days ago when I shared “Speculative trade idea” to the OPNewsletter subscribers.

    I am bearish on GOOG (yes i know everyone else is drumming on a different beat)…I am in with a 500/510 BCS and 450/470/430 put butterfly (roughly about $2). If you do decide to play…play only if your risk capital is less than 1-2%..and something you can afford to lose…else just stay away and let’s see how the trade unfolds.

    Goog Risk Reward Oct 09The above trade will make money as long as Google stays below $501 by Oct expiration and a greater deal of money if Google were to retarce just by 5-7% or even midway to rising trend line support.  Attached is the Risk/reward curve of the combination trade. So here we are, as yesterday close, the trade is up +19.6%.

    We also have another bearish play (FXP) on China. Yes, now you may wonder why bearish play on China, here is why-

    Here is another speculative trade idea-
    This is linked to China’s 60th anniversary on Oct 1; this is a bearish trade (FXP). The Chinese markets have been on a roll for the whole of this year driven by stimulus spending, etc. I am not sure if this will continue or not post celebrations. If it doesn’t, the payouts could be big. If not, then we might just lose some of the option value.

    Choose whichever strike/expiration cycle suits your taste.

    I personally chose FXP Nov 9 calls which are up almost +100% since then. Even the underlying FXP is up +15%. Hong Kong is down almost 2.5% today, but we shall see how Shanghai behaves once markets re-open post holidays.

    These are two of 5 total trades (other ones are POT, MON and GLD) that were shared as part of the speculative trades/bonus alerts to the OPNewsletter subscribers.  For Oct’09 OPNewsletter, we are up +5% so far with 88% capital invested across 5 different income portfolios.

    If you would like to sign-up for the OPNewsletter, pls join the waitlist here.

    Profitable Trading, OP

  • Is It a Follow Through Wednesday?

    A few days back I mentioned about “show me the volume“; It was no different yesterday in spite of such a huge market rally. And even after what might look like a resumption of the bullish trend, it was no way closer to a 90% upside day for NYSE. So handle with care. Pete of option-1 suggests not to buy into this rally. We’ll see if markets can follow through yesterday’s gains to push it to higher levels. Be on the lookout for volumes.

    The coppock curve has stopped declining, for the time being, and now flattening to turning positive.  This is has been one of the most accurate indicators to predict market’s turn but do note that this is a lagging indicator and often recovery might have taken place before it gives a signal. But more often there is room for further play once this gives a signal.

    The US economy will begin to expand next quarter, according to 74 percent of economists in a National Association for Business Economics survey. Key Highlights-

    • The NABE forecast panel expects a further decline in economic activity during the second quarter, making for the most severe economic contraction in over half a century.
    • The near-term weakness is largely due to a sharp retrenchment in business investment.
    • Rising government spending will provide vital support to the economy, as the only major expenditure area posting positive growth in 2009.
    • A modest second-half rebound in real GDP is still expected.
    • Growth in 2010 is slated for a return to near its historical trend, with real GDP rising 2.7% on a fourth quarter- to-fourth quarter basis.
    • Labor productivity remains impressive and is expected to improve.

    Government Motors (GM) is about to file for bankruptcy. GM bondholders had until midnight to trade $27 billion in debt for a 10-percent ownership stake in the reorganized company that U.S. officials have said could emerge from a quick trip through bankruptcy court. Markets hardly seem to bother with the “potential” news. Gone are the days when a move in GM was a move for the America, or at least for the stock markets.

    Monsanto (MON) is down almost 4% in pre-market. It may find support at around $80. It may influence other agrochemical stocks i.e. POT, AGU, etc. Watch-out for weakness as well as weakness or strength in US$.

    Trade carefully, also be aware of window dressing,

    Profitable Trading, OP

  • Thrilling Expiration Friday

    rambo3Too much to handle for the week which slowed down the postings this week. What a “Rambo Fed” action that was (I was looking for a picture replacing Bernanke with Stallone but gave up after a few searches). But guess what, was this really surprising, I don’t think so. Uncle Ben has already made this clear long time back.To find out what other tools Uncle still has in his magic box, you may want to read his speech delivered on Nov 20, 2002. For those who would like to know more deflation etc this does make a good reading.

    This “printing press” has created trillions out of thin air, and probably more can be create to fight deflation. The battle is on  by almost every other central banker around the globe. What was remarkable is the action of few things. Gold that shot-up from a low of 890 to 950 within a matter of minutes, EUR surged almost 400 pips (yes 400 pips), resource and commodity stocks shots (so did the Dow and S&P just to gave gains back later). Citi (C) planning for a reverse split and many more.

    Markets are behaving precisely the way expected and the  Nov lows probably will resist the Bulls move. But don’t be surprised if this rally continues further. This rally does have some substance to it and is different from the rallies we have seen so far.

    Today is March options expiration day. There will be plenty of opportunity to trade. If you are looking for some plays, may I point you to AAPL, AMZN, GOOG, GS, POT and may more. OPNewsletter subscriber could look for some real example of how we played google pinning in the past that resulted in +60% profit in a single day.

    Those who are looking for trading thrills SKF, SRS and other ultrashorts will lose a lot a intrinsic value today. The moves will be very strong and leverage will be extremely high.

    Have a Thrilling Friday,

    Profitable Trading, OP

  • Pre-Market Losers

    A fantastic day (of course assuming that one embraces volatilities well) for some bearish play.

    Bearish plays on a bearish day can yield significant returns but one needs to be very careful and should clearly defined entry and exit points well in advance. Before I share the list, pls note that we may play some speculative trades for OPNewsletter subscribers as bonus alert, so pls stay in touch with the forum.

    TTWO, AAPL, RIMM, FSLR, GOOG, AIG, BAC, JPM, GS, CS, EWZ, POT, CF, MOS, MON

    One you have determined your entry exit points, choose whichever bearish strategy you would like to play (Put diagonal, bear call, bear put, straight put and many more).

    Trade carefully, trade profitably, OP

  • POT (+54%), CF (+28%)

    Before market opened I talked about Fantastic Four (POT, MOS, MON and CF) and to keep an eye for bearish strategy. Here are the intraday trading results of the two bearish play I used for my intraday trading set-ups (POT and CF). Though these fell even further, but double digit gains for less than 1 day holding aren’t bad by any measure.

    Few month’s back I had written about where we were headed and what were the key points. Those I still consider to be valid and something that my readers should be watchful. These are tough times and hence careful trading and due dilligence is of utmost importance.

    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