New Positions Initiated for September
Ares Trading is back from a brief hiatus with new trading ideas. The current positions page has been updated with the new trades for September. There are a few changes at Ares Trading. The principal being traded has been increased to $3,000. Thus, larger positions and longer expiration contracts can be traded. In order to minimize risk/return ratio Ares Trading will now be focusing on trading index options. Nasdaq (QQQQ), Dow Jones (DIA), S&P (SPY), and Russell (IWM), will be heavily traded. Also, sector ETFs such as XLF (Financial Sector), XLE (Energy Sector), and DBC (Comodity Sector) will be researched and traded extensively.
Aside from the sector plays there are a few new individual company ideas. There is a classic acquisition arbritrage opportunity with International Rectifier (IRF) and Vishay Interntechnology (VSH). This article in IT world discusses the takeover bid by VSH for IRF.
“Chip maker Vishay Intertechnology Inc. said Wednesday it has raised an all-cash bid to buy to buy power management chip maker International Rectifier Corp. and will take the $1.7 billion offer directly to shareholders.”
VSH doesn’t want IRF, it needs IRF in order to remain competitive in the semiconductor industry. Thus, it is raising their bid and going hostile in order to takeover IRF. This presents the classic opportunity to short the company that is buying (VSH, since their cash levels will drop and they will face integration costs with the new company), and long the company being bought (IRF, since they will be bought at a premium). Obviously, this strategy doesn’t always work but in this scenario Ares Trading believes the play will be profitable. (As of 9/12/2008, 10:45AM, IRF is up ~2%, and VSH is down 5%)
Another position has been initiated in Whole Foods (WFMI). Ares Trading believes Whole Foods will decline due to lowered consumer discretionary income. In addition WFMI has fallen ~30% for the last 3 months. The in-the-money put contracts were purchased when WFMI was up 1.5% for October expiration.
Here are the positions for September. Profits have already been taken from trading the IWM (Russell Index).
| Ares Trading | |||||||
| September 2008 Open Positions Unrealized Profit/Loss | |||||||
| Total Invested: | $2,940 | ||||||
| Total Return: | $3,483 | ||||||
| Unrealized Profit: | $543 | ||||||
| Unrealized Profit %: | 18.45% | ||||||
| Total Positions: | 5 | ||||||
| Average Days Held: | |||||||
| Date | Qty | Company | Contract | Strike | Expiration | Price | Cost Basis |
| 9/9/2008 | 5 | IWM | Put | 71 | October 08 | $1.36 | $680 |
| 9/10/2008 | 5 | IWM | Put | 71 | October 08 | $1.97 | $985 |
| Days | 1 | Profit % | 44.85% | Profit | $305 | ||
| 9/10/2008 | 5 | IWM | Put | 71 | October 08 | $1.83 | $915 |
| 9/11/2008 | 5 | IWM | Put | 71 | October 08 | $2.38 | $1,190 |
| Days | 1 | Profit % | 30.05% | Profit | $275 | ||
| 9/11/2008 | 10 | IRF | Call | 22.5 | Septem 08 | $0.35 | $350 |
| Open | 10 | IRF | Call | 22.5 | Septem 08 | $0.28 | $275 |
| Days | Open | Profit % | -21.43% | Profit | ($75) | ||
| 9/11/2008 | 10 | VSH | Put | 7.5 | October 08 | $0.25 | $250 |
| Open | 10 | VSH | Put | 7.5 | October 08 | $0.30 | $300 |
| Days | Open | Profit % | 20.00% | Profit | $50 | ||
| 9/12/2008 | 5 | WFMI | Put | 20 | August 08 | $1.49 | $745 |
| Open | 5 | WFMI | Put | 20 | August 08 | $1.47 | $733 |
| Days | Open | Profit % | -1.68% | Profit | ($13) | ||
