Friday, September 19, 2014

Weekly: BABA IPO, hedge fund divestment

In the news this week is the IPO of Alibaba at $68. BABA rocketed to over $90 on the first day of trading. Yahoo, which owns 22%, dipped slightly. Also in the news California pension funds decide to stop investing in hedge funds. North Carolina is considering a similar move. There are over 10,000 hedge funds today, over 1,000 just for emerging market securities.

Funds charging their clients 2 and 20 (2% of assets and 20% of profits) find it difficult to perform net of fees. The nearly straight up bull market (over 1000 days without a 10% correction) means low cost stock index funds have been the big winners for this cycle.

My trading week was so-so. I'll post a monthly update in a day or two. I cover more short calls for losses. I get pinched on MSFT on expiration day. I open a new net long position in VRX, new long in TTM. I take a loss in GLD. Here are the trades:

Fri Sell AMGN Oct 130 puts @142.7. Rebalance Oct short strangles on Amgen. AMGN continues to rally. I am short the Oct 125 puts and Oct 155 calls. I rebalance as the stock moves up by selling another layer of puts.

Cover short SWK Sep 95 calls @93.5. Stanley Toolworks gapped up in the morning on analyst comments. I put in an order to close my short puts and got filled as SWK whipped back down. The spreads are wide on expiration day, so better to close the position, than having to sit on pins and needles into the close. I have a similar situation in Microsoft.

Sell VRX strangles, I leg in: Sell Oct 95 puts @117.0,
Sell VRX Oct 145 calls @117.4. New net long position in Valeant Pharma. VRX has been a good trading stock for me all year. I skipped the September option cycle.

Cover short MSFT Sep 47 calls @47.4. Crunch, another loser. Looks like shenanigans as open in interest is over 70,000 contracts at this strike. I placed several limit orders, but Microsoft kept rallying. I end doing a buy to close market order about five minutes before the close of trading. Fortunately, the dollar loss is small, even if the percentage loss is about 300% basis the premium collected. It has been a while since I had to "dance with the devil" just before expiration. I am not a nimble trader so I don't enjoy playing it so close.

Thu Cover short IWM Sep 102 puts @115.0. I free up some margin by covering these Russell 2000 puts that were about to expire. Normally, I would let them expire worthless, but am redlining on buying power.

Cover short GLD Sep 118 puts @117.4. I cover for about a 180% loss, as gold declined late on Wednesday after Fed news. The dollar rally related to Scotland's independence referendum is the main reason given. Scotland vote is later today, so there is a chance that this is the short term low. There is also a chance that GLD accelerates to the downside. With the option in the money, I move to the sidelines. When in doubt get out.

Wed Sell FDX Oct 150 puts @161.0. I open an October position in Federal Express. FDX breaking out from a chart base on earnings news. I am short September strangles.

Cover short BRKB Sep 140 calls @140.0. I cover short calls on Berkshire Hathaway for a big percentage loss (about 400% basis the tiny premium collected). This is the second loss this option cycle selling BRKB calls.

Cover short AMGN Sep 140 calls @140.9. Double ouch. I cover short calls on Amgen for about a 300% loss basis the option premium collected. AMGN has a squirrelly day. It was up strong in the morning, then dipped into the red, and then ralied strong after the Fed news. Another big loss. I believe this is the fifth big loser from maybe ten layers of calls that I sold on the dip in early August. It has been a strong five week rally. I have sold more puts to offset, but closing out these calls two days before expiration is painful.

Sell DIS Oct 87.5 puts @90.6. I open an October position in Disney.

Tue Sell TTM Oct 39 puts @45.8. Tiny new long position in Tata Motors, the India car company.
Sell HON Oct 87.5 puts @94.9. I open a small October position in Honeywell, was short September strangles (both puts and calls).

Position Summary:
net long AMGN SLB VRX 
net short SPY 
closed/expired: FB GLD SWK VRSN XLU

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