June – July Performance Update
| Ares Trading | |||||||
| June-July 2008 Positions Realized Profit/Loss | |||||||
| Total Invested: | $1,811 | ||||||
| Total Return: | $2,319 | ||||||
| Realized Profit: | $508 | ||||||
| Realized Profit %: | 28.05% | ||||||
| Total Positions: | 7 | ||||||
| Average Days Held: | 23.29 | ||||||
| Date | Qty | Company | Contract | Strike | Expiration | Price | Cost Basis |
| 6/18/2008 | 5 | PIR | Put | 5 | July 08 | $0.15 | $75 |
| 6/20/2008 | 5 | PIR | Put | 5 | July 08 | $0.52 | $260 |
| Days | 2 | Profit % | 246.67% | Profit | $185 | ||
| 6/18/2008 | 2 | PRGS | Call | 30 | July 08 | $0.70 | $140 |
| 7/11/2008 | 2 | PRGS | Call | 30 | July 08 | $0.05 | $10 |
| Days | 23 | Profit % | -92.86% | Profit | ($130) | ||
| 6/18/2008 | 5 | SJM | Call | 45 | July 08 | $0.28 | $140 |
| 6/20/2008 | 5 | SJM | Call | 45 | July 08 | $1.27 | $635 |
| Days | 2 | Profit % | 353.57% | Profit | $495 | ||
| 6/18/2008 | 1 | ZMH | Call | 70 | Sep 08 | $4.50 | $450 |
| 7/17/2008 | 1 | ZMH | Call | 70 | Sep 08 | $4.70 | $470 |
| Days | 29 | Profit % | 4.44% | Profit | $20 | ||
| 6/18/2008 | 1 | SSL | Call | 60 | July 08 | $2.30 | $230 |
| 7/11/2008 | 1 | SSL | Call | 60 | July 08 | $0.40 | $40 |
| Days | 23 | Profit % | -82.61% | Profit | ($190) | ||
| 4/10/2008 | 2 | CCRT | Put | 7.5 | July 08 | $1.51 | $301 |
| 6/27/2008 | 2 | CCRT | Put | 7.5 | July 08 | $1.52 | $304 |
| Days | 78 | Profit % | 1.00% | Profit | $3 | ||
| 7/11/2008 | 1 | LEH | Call | 15 | July 08 | $4.75 | $475 |
| 7/17/2008 | 1 | LEH | Call | 15 | July 08 | $6.00 | $600 |
| Days | 6 | Profit % | 26.32% | Profit | $125 | ||
The American and global financial markets are currently very volatile. The financial firms are still in the process of writing down their illiquid securities and the market sentiment is strongly bearish due to high oil prices, inflation, and a much lower dollar. Any negative news, such as rising oil costs, or a sector leader missing their earnings can cause a quick intra-day sell-off. Ares Trading cannot speculate in the current market state, rather there are larger macro issues which can be used for proper investment.
Financials have been hit hard, which can be seen by the Sector ETF: XLF performance in the last month. However, many firms have been hit harder than others due to the overall bearish sentiment for the financial sector. These firms face an upside risk. Research is being conducted on which Financial firms are currently drastically undervalued and have the potential to return to normal multiples.
An example of this was the quick trade made on LEH (Lehman Bros). Naked calls were purchased the day the share price hit $12.80 (18% decline in one day). Rumors were out that Dick Fuld, CEO, would take the firm private if the firm wasn’t valued higher. Sure enough, Lehman hit its support and had an upside momentum since. A quick 26% return within 6 days.
Other bets didn’t fare as well, i.e. SSL and PRGS calls. PRGS (Progress Software) was an earnings play which didn’t work out because although the company did beat consensus, they lowered their guidance. This sent the stock price into a strong downward movement. The calls should have had been sold by STOP-LOSS before they lost over 90% of their value. SSL (Sasol Ltd.), the South African integrated Oil and Gas company was simply a wrong pick in the short term. Although the company has strong fundamentals, it has been a victim in the recent sell-off. In the future there has to be more discipline and losses have to be cut at 30%.
