The Volatility Trader
105 W. Monument Street
Baltimore, MD 21201
Thursday, February 8, 2007
Email – #248
UPDATE ON SIMON PROPERTY GROUP AND NEW TRADE
Dear Subscriber,
I wanted to take a few moments to update you on Simon Property Group (NYSE: SPG).
The stock rallied significantly over the past two days based on news that Mills Corp. (an owner of prime location shopping malls throughout America) received a second takeover offer from Simon Property Group and Farallon Capital Group. The news triggered a huge move in Simon Property Group, which jumped up over $4 a share.
Although we have put options on the company, I am not worried about this move. First, the deal is NOT done, and it’s important to note that Mills has been plagued with accounting issues over the past year.
Second, even if Simon and Farallon win the bid for Mills, the dividend yield produced would likely be less than what the 10-year Treasury is paying.
While yesterday’s move might have been discouraging, please hold your positions. We’ve gone out to March for expiration, so there’s plenty of time for the stock to correct.
In the meantime, we are going to implement another commercial REIT trade…
I don’t want to over-leverage the portfolio in this sector, but there are going to be some BIG wins here, when the market sees that these stocks are fundamentally overvalued.
Action to Take:
Buy the Boston Properties (NYSE: BXP) March 2007 $130 puts (BXP-OF) for no more than $2.90.
Exit is everything,
Mark Whistler
Current Portfoli
Boston Properties (NYSE:BXP)
March 07 $130 puts BXP-OF
Purchased: NEW
Current Price: Buy at $2.90 or better.
Simon Property Group (NYSE: SPG)
March 07 $110 puts SPG-OB
Purchased: 1/29/2007
Current Price: $0.40
Diamonds (AMEX: DIA)
Mar 07 $126 puts DAW-OV
Purchased: 1/18/2007
Current Price: $1.40
Tyson Foods (NYSE:TSN)
Apr 07 $17.50 puts TSN-PW
Purchased: 12/18/2006
Current Price: $0.55
S&P 500 (AMEX: SPY)
Mar 07 $146 calls SFB-CP
Purchased: 11/16/2006
Current Price: $1.25
