Email – #497
Not Rolling Over
This market is truly resilient. All the money managers I talk to can’t understand what is keeping it afloat. It’s down in non-US dollar terms, so that is one explanation of how an upward moving market can also look down to a lot of people. But it makes for nervous short sellers nonetheless.
We have a couple of shorts in our portfolio, for balance, and they are not performing well… yet.
Come January, we will make a decision on whether to continue holding some of our way-out-of-the-money positions on the short side, especially in the financials. Granted, our BAC short is a free ride, so that’s less of a worry. But we’re still holding FifthThird, which posted horrendous numbers but is still up.
Last week Meredith Whitney – one of the few analysts on Wall Street who went against the grain and called for bank shares to collapse and then recover – has turned bearish on financials, just like we are. She is calling for financial shares, particularly the bank stocks, to return to book value from current levels, which in most cases is a mark down of between 30% and 50% from current levels. I would not like to be long the market if and when that happens.
I hope that you enjoy the holidays ahead and I look forward to sharing a new pick with you, possibly next week.
Karim
Current Portfolio:
Company / Option: Electronic Arts Jan. 2011 $20 calls
Option Symbol: VZW AD
Current Price: $2.15
Comments: Hold.
Company / Option: Starwood Jan. 2011 $20 puts
Option Symbol: VVO MD
Current Price: $2.25
Comments: Hold.
Company / Option: Fifth Third Bank Jan. 2011 $7.50 puts
Option Symbol: OJH MU
Current Price: $1.12
Comments: Hold.
Company / Option: US Air Jan. 2011 $7.50 calls
Option Symbol: ZTG AU
Current Price: $0.45
Comments: Hold.
Company / Option: Bank of America Jan. 2011 $7.50 puts
Option Symbol: VBA MQ
Current Price: $0.45
Comments: Hold.
Company / Option: Dryships – bull spread
Jan. 2011 $7.50 call (bought)
Jan. 2011 $12.50 call (sold)
Option Symbol: ZDU AU
Option Symbol: ZDU AV
Current Price: $1.52
Current Price: $0.64
Comments: Hold
Company / Option: Pulte Homes – strangle
Jan. 2011 $7.50 put (bought)
Jan. 2011 $15 call (bought)
Option Symbol: OPN MU
Option Symbol: OPN AC
Current Price: $1.24
Current Price: $0.68
Comments: Hold
Company / Option: Manitowoc – strangle
Jan. 2011 $2.50 put (bought)
Jan. 2011 $7.50 call (bought)
Option Symbol: VMT MZ
Option Symbol: VMT AU
Current Price: $0.05
Current Price: $4.25
Comments: Hold.
Company / Option: United States Natural Gas (UNG) – bull spread
Jan. 2011 $20 call (bought)
Jan. 2011 $25 call (sold)
Option Symbol: ZZM AT
Option Symbol: ZZM AY
Current Price: $0.45
Current Price: $0.32
Comments: Hold.
Company / Option: Yamana Gold – bull spread
Jan. 2011 $10 call (bought)
Dec. 2011 $12.50 call (sold)
Option Symbol: VPP AB
Option Symbol: VPP AV
Current Price: $5.10
Current Price: $3.70
Comments: Hold
Company / Option: Akamai – bull spread
Jan. 2011 $15 call (bought)
Dec. 2011 $20 call (sold)
Option Symbol: OMU AC
Option Symbol: OMU AD
Current Price: $10.50
Current Price: $6.90
Comments: Hold
Company / Option: Motorola – bull spread
Jan. 2010 $7.50 call (bought)
Dec. 2010 $10.00 call (sold)
Option Symbol: MOT AU
Option Symbol: MOT AB
Current Price: $1.00
Current Price: $0.13
Comments: Hold