Friday, May 10, 2013

Buy APC (sell puts)

Buy APC via selling Jun 72.5 puts @86.3
I open a tiny long position for June in Anadarko Petroleum. APC has been my biggest winner this year. This is yet another low risk, low reward trade, a little further out of the money than usual due to my red flag warning on the stock market.

Telsa Motors has had an amazing rocket move up, burning the many shorts in TSLA. For a brief time I was short May 50 calls. Had I stayed with that position it would have been an epic 100x loser. The other side, is that someone had the chance to make 100x on their money in a few weeks. Jackpot results are why people buy calls. However, like big slot machine jackpots, the math works out so that all the losers pay for the big winners with plenty extra to build and staff the huge casinos.

In precious metals, I continue to believe that those buying physical at the high premiums being asked for by dealers are unlikely to make much money. Silver buyers need about a 35% up move in the spot to get to about break even. Yikes. 

Averaging down in a strong bear market is the road to the poor house. It will only be in hindsight that we will be able to tell if the precious metal bear is Ursa Minor or Ursa Major. If major, then it might be more than a decade before those buying today will get a chance to get out even. As always I am talking about paying retail prices. The dealers are making money on the spread, the retail buyers paying that money.

Net long APC SPY
Net short LEN

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