Wednesday, February 04, 2009

PRGO

This chart has been in my rifle scope. I believed that it was in distribution and had formed a top. I bought some FEB 25 puts at a whopping .25. It was a bit of a flyer, and I even bought some of the stock to pick up some uptick. I had fully funded puts that I just left. Oh, it was not very much mind you....a handful. But I sold them for $2 yesterday. I consider that a dividend. They traded as high as 2.90---but I was busy at work, and looked in after I saw they reported yesterday morning. Good historical numbers but reduced guidance. Huge gap down. I didn't overstay.

Here's an inverse chart for WH--my Chinese tubular steel maker (for oil services). They announced some good news and sold off a bit yesterday on about 1/2 volume of the day before. I remain long in a small position.

I remain very conservatively positioned.....I don't feel that the market has priced in all of the bad news----largely due to the rather serial nature of the bad news, meaning that it is keeps coming with no relief. It appears to me that the market is expecting some good news around the corner.

The healthcare sector has been enjoying a resurgence of interest. If you are looking for areas to find some action, you could look there. Here are a few names that I found with Stock Fetcher--13 day moving average moving above the 34 day moving average on in 2x increase volume in the 5 day v. 10 average volume:

5 comments:

sysin3 said...

Well, Leisa, 8x your money in no time at all is a doggone good return. A heap more than the bank is paying these days.

Nice trade !

do the math on 1 percent per day, 250 days ;-)

Leisa said...

Sysin...This is one instance where I wished that I had been sitting there to capture a better part of the day's high note. But. The payoff was grand even if it were on just a few of them.

russell1200 said...

If it wasn't for the fact that people hate the drip and drab tiny losses. Out of the money puts can be an awfully good hedge in a wild market.

From what I gather, the well heeled investors that invested in Taleb's fund tended to use it in just this way. They lost a little along the way, but when they hit big, it was really big.

Leisa said...

I remember reading about Taleb's strategy of buying OTM's put. If one is forecasting a nuclear winter, buying long-dated, OTM's is a cheap way to reap some rewards. Buying them when the VIX is low and euphoria is high is key to getting a good price.

And one has to just ignore the loss and recognize the underlying strategy--the long hard fall. Also if one uses the puts as a hedging strategy at first, and then the portfolio is positioned to milk the good while having insurance. As the market deteriorates, the long positions can be closed and the puts become the primary exposure.

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