The Options Trader
105 W. Monument Street
Baltimore, MD 21201
Monday, May 17, 2004
Email – #169
** Time is on Our Side
At times like this when the market is tanking, it’s a good time
to review our strategy. I strongly espouse the belief that a few
dollars at risk is more prudent in a volatile market.
If you look across our portfolio, we are profitable in all but
two positions – even though the market has sold off significantly
in the past month. And even those two “down” positions, Hewlett
Packard (NYSE: HPQ) and Nokia (NYSE: NOK) – are down a fraction
compared to the shares in dollar terms.
This is very important since at the end of the day, while returns
are spectacular ways to measure performance, it is real dollars
that count. And, in the case of The Options Trader, I want to
limit our REAL dollar risk.
Right now, the market is very shaky. However, fundamentals are
looking very good for the months ahead. Companies are reporting
better numbers, have lower debt, and the Fed, while no longer
neutral, has a long way to go before it will really crimp the
pocketbook.
The real wild card is oil and Iraq. Oil prices rising are a real,
daily tax on businesses and consumers. However, all indications
point to lower prices by the end of the year. High prices
encourage more supply and less demand.
Add to this the cheating that is bound to occur within OPEC, lots
of oil already in the pipeline and on tankers heading in this
direction, and a deliberate slowdown in China, and you have the
setting for a 10% to 20% correction in oil prices by the end of
the year. IF THAT HAPPENS, then the markets will turn positive.
Iraq and global geopolitics are very uncertain – that is not new.
But this time the situation in Iraq is focused on our role there
and that can have a detrimental effect on the consumer. If it
gets worse there, then we could suffer a national depression in
mood, followed by a natural recession in spending.
We are covered in either case – we are short oil through Yellow
Corp., long on political uncertainty with Placer Dome, and long
on technology with HPQ, NOK, and Motorola (NYSE: MOT). And, we
are covered on defense spending and Iraq with our long position
in Lockheed Martin (NYSE: LMT). And, we are long on natural gas
and energy with Chesapeake.
All the while, we are at risk with VERY few dollars since most of
our portfolio is hedged.
If the market continues its downturn, we will be ready to buy
more LEAPS at cheaper prices – that is my goal. So keep your
powder dry. In the meantime, we still have over one 1/2 years
left on all of our positions.
Regards,
Karim Rahemtulla
———————————————————-
Current Portfolio:
Company / Symbol Option: Lockheed Mart./ LMT Jan 06 $55 call
Symbol: WLA-AK
Date Purch: 4/7/04
Current Price: $2.70
Comment: Hold. Sold call against Jan 06 $50 position.
Company / Symbol Option: Lockheed Mart./ LMT Jan 06 $50 calls
Symbol: WLA-AJ
Date Purch: 3/15/04
Current Price: $4.50
Comment: Hold. No trailing stop.
Company / Symbol Option: Yellow Freight /YELL Jan 06 $40 calls
Symbol: YBQ-AH
Date Purch: 4/7/04
Current Price: $3.60
Comment: Hold. Sold call against Jan 06 $35 position.
Company / Symbol Option: Yellow Freight /YELL Jan 06 $35 calls
Symbol: YBQ-AG
Date Purch: 3/10/04
Current Price: $5.60
Comment: Hold. No TS.
Company / Symbol Option: Placer Dome / PDG Sell Jan 06 $25 call
Symbol: YDI-AE
Date Purch: 4/1/04
Current Price: $0.90
Comment: Hold. Sold call against Jan 06 $20 position.
Company / Symbol Option: Placer Dome / PDG Jan 06 $20 call
Symbol: YDI-AD
Date Purch: 1/23/04
Current Price: $1.70
Comment: Hold. No TS.
Company / Symbol Option: Hewlett Pack. / HPQ Sell Jan. 06 $30
call
Symbol: WPW-AF
Date Purch: 2/3/04
Current Price: $0.70
Comment: Hold. Sold call against Jan 06 $25 position.
Company / Symbol Option: Hewlett Pack. / HPQ Jan 06 $25 call
Symbol: WPW-AE
Date Purch: 12/10/03
Current Price: $1.45
Comment: Hold. No TS.
Company / Symbol Option: Nokia / NOK Sell Jan 06 $30 call
Symbol: WIK-AF
Date Purch: 2/9/04
Current Price: $0.20
Comment: Hold. Sold call against Jan 06 $30 position.
Company / Symbol Option: Nokia / NOK Jan. 06 $22.50 call
Symbol: WIK-AX
Date Purch: 8/29/03
Current Price: $0.45
Comment: Hold. No TS.
Company / Symbol Option: Chesapeake En / CHK Sold Jan 06 $15 call
Symbol: WZY-AC
Date Purch: 11/6/03
Current Price: $2.30
Comment: Hold. Sold call against Jan 06 $12.50 position.
Company / Symbol Option: Chesapeake En / CHK Jan 06 $12.50 call
Symbol: WZY-AV
Date Purch: 7/28/03
Current Price: $3.20
Comment: Hold. No TS
Company / Symbol Option: S&P 500 MITT
Symbol: MCP
Date Purch: 7/18/03
Current Price: $10.10
Comment: Buy under $10. No TS
———————————————————-
Copyright – 2004 Mount Vernon Publishing. Mount Vernon
Publishing does not act as an investment advisor or
advocate the purchase or sale of any security or
investment. Mount Vernon Publishing expressly forbids its
writers from having a financial interest in any security
recommended to its readers. All Agora employees and agents
must wait 24 hours after an Internet publication prior to
following an initial recommendation. And for hard-copy-
only publications, 72 hours after the publication is
mailed. Investments recommended in this letter should be
made only after consulting with your investment advisor
and only after reviewing the prospectus or financial
statements of the company. Mount Vernon Publishing
provides its members with unique opportunities to build
and protect wealth, globally, under all market conditions.
The executive staff, research department and editors who
contribute to recommendations are proud of the reputation
Mount Vernon Publishing has built since its inception in
1984. We believe the advice presented to its members in
our published resources and at our meetings and seminars
is the best and most useful available to global investors
today. The recommendations and analysis presented to
members is for the exclusive use of members. Copying or
disseminating any information published by Mount Vernon
Publishing, electronic or otherwise is strictly
prohibited. Members should be aware that investment
markets have inherent risks and there can be no guarantee
of future profits. Likewise, past performance does not
assure future results. Recommendations are subject to
change at any time.
