Ares Trading

Amid the current Bernanke-Paulson hearings regarding the federal $700 Billion bail out plan, Ares Trading has shifted its positions.  After this mornings announcement of Buffett’s $5 Billion stake in Goldman Sachs, Ares Trading expected financials to see some upside.  The broad market started off with steam but moved sideways through most of the day, following the Q-n-A with Bernanke and Paulson.

The XLF position was stop-lossed at 50% loss and closed out. Although the strategy to exploit the wide swings in XLF caused by new developing news events was decent, the execution was poor.  The calls were purchased too early and should have been purchased at lower premiums.  As the VIX spikes above 40 once again, there are tell-tale signs that XLF and the market will have a short term rebound.  Yet, for Ares Trading, the risk exposure to the XLF calls were too much at this time.

The AAPL calls are regaining their value slowly as AAPL stages a rally today.  Although this article is clearly biased, Ares Trading likes the points made by the author supporting AAPL.  As previously stated, Ares Trading expects AAPL to crush their earnings estimates come September 30th, and trade the October calls for a profit as soon as possible.

As a hedge against general market downturn, Ares Trading has established a considerable position long Gold.  Using the GLD ETF, Ares Trading has purchased 2x November 08 Call 95 contracts today at 3.00 a piece.  If the bail out plan finally goes through, the value of the dollar will face a sharp decrease, conversely moeny will be invested in gold, raising the price.  If there is no bailout, the markets will drop further, and panicked money managers will invest in Gold, causing an price rally.  In addition to these fundamental factors, Ares Trading has discovered various technical indicators which hint at a upcoming rally.

Here is the current state of the positions at a a 20% loss: