Tuesday, October 28, 2008
I have my small double long exposures in DIG, SSO and UPW, accordingly I didn't feel like I was missing the party! I also have DUG, which was my hedge to some of my double longs. This may sound nutty to you, but I don't like to be in and out of positions over the course of the day. There are so many gap ups and gap downs overnight that I prefer to stay in my positions (in the anticipated direction of the gap) with an obverse hedge, so that I'm not killed if the market gaps the opposite of where I'm leaning.
You could rightly ask, "Well why don't you just keep a smaller position in the direction that you think that it will go?" It's a perspicacoius and wholly reasonable question. This is where "Know thyself" comes into play. It's hard for me to chase up positions. It's actually easier for me to sell positions that are down. It's a personal flaw, but sometimes you have to trick yourself.
I bought some HERO today. I've been in and out of this stock with mostly good results. Here's a chart that looks like many oil service companies!
It's worth noting, that in the not too distant past, Barron's had an article that HERO might go to $60. I do not buy stocks based on analysts or media people's expectations of price. If you look at most stocks that have fallen from grace, you will still price estimates FAR ABOVE the current price.
One of the things that the Barron's article had noted were the insider buys. Well, all of those folks lost a good bit of money. HERO's chart is NOT one that would indicate a buy by any stretch of the imagination, as it is still in a down trend. However, at 4.84 - 4.91, I felt that even if it went to zero, I'd not get killed! (Plus, I still have DUG).
Given that so much of the unrelenting selling, I think that the market would just go up in absence of sellers--forget about buyers. It seemed to be a good risk reward. I also entered UYG today at $7.67. Same thing--risk reward seemed reasonable. I think that a goose from the Fed and any good news (even if it is absence of bad news) may clear the deck of snarky and tenacious shorts.
Prior to today, and even during today, my UPW and SSO were solidly in the double digit down range. That first digit being a 2. At the close of the day, SSO was still double digit, but it now starts with a 1. UPW is in single digit loss range. My puts, though, helped buffer that. I'm still up for the year marginally in one account and 30% in another. But, it only takes one material mistake to undo all of that!
I hope that you had a good day.