Archive for the ‘Ideas’ Category
Market Update – 09.22.2008 – 1:08PM EST
Crude has reached a $112 a barrell and the market has turned once again. The SPY is down 0.85%, DIA down 1.44%, and QQQQ is down 1.96%. Interestingly, Oracle (ORCL) is up 1.69% even though the technology sector is doing poorly. After recently beating their earnings ORCL has been rallying and entering acculmulation mode.
Ares Trading is bullish on ORCL
The usual suspects are down single digit percentage points: Banks (RKH), Insurance (KIE), Homebuilders (XHB). In this market, it would be prudent to hold on to short contracts in these sectors. In an inevitable down turn they are usually always hit the hardest.
Ares Trading is short RKH, KIE, XHB
Commodities and Energy are up. DBC, XLE. The current market activity could be large institutions shifting money around to revised asset allocation strategies after the recent AIG crisis aversion. The record high oil prices could also be helping the energy and commodities sector. The dollar is down, gold (GLD) and silver (SLV) are up – the most reliable rule of economics.
Ares Trading initiated a bullish position in AAPL when it was trading down 3.0% intraday, with the purchase of 2x October 08 Call contracts at the 160 strike for $1.58. Although the contracts are currently down close to 30%, Ares Trading is expecting a strong September 30th, 2008 Earnings Annoucement. The analyst coverage is mixed but Ares Trading believes this position has a low risk/reward ratio because of premium increases from higher volatility.
AAPL trades at above average volumes habitually, especially during earnings season. AAPL went from 120 to 140 in 1 day. Ares Trading beleives the new Google phone will not be serious competition for AAPL’s smartphone market share.
Current Positions: Valued at 2:01PM
| Ares Trading | |||||||
| October 2008 Open Positions Unrealized Profit/Loss | |||||||
| Total Invested: | $642 | ||||||
| Total Return: | $771 | ||||||
| Unrealized Profit: | $129 | ||||||
| Unrealized Profit %: | 20.09% | ||||||
| Total Positions: | 3 | ||||||
| Average Days Held: | Open | ||||||
| Date | Qty | Company | Contract | Strike | Expiration | Price | Cost Basis |
| 9/17/2008 | 2 | WFMI | Put | 18 | October 08 | $0.98 | $196 |
| 9/18/2008 | 2 | WFMI | Put | 18 | October 08 | $0.80 | $160 |
| Days | 1 | Profit % | -18.37% | Profit | ($36) | ||
| 9/18/2008 | 1 | XLE | Put | 71 | October 08 | $1.26 | $126 |
| 9/19/2008 | 1 | XLE | Put | 71 | October 08 | $3.65 | $365 |
| Days | 1 | Profit % | 189.68% | Profit | $239 | ||
| 9/22/2008 | 2 | AAPL | Call | 160 | October 08 | $1.60 | $320 |
| 9/22/2008 | 2 | AAPL | Call | 160 | October 08 | $1.23 | $246 |
| Days | Open | Profit % | -23.13% | Profit | ($74) | ||
Potential Plays
Ares Trading is currently looking at a few potential movers. Here is the initial perspective. Further analysis and due diligence are required before opening any positions.
ZMH – Zimmer Holdings Inc. Long
LEH – Lehman Brothers Inc. Short
SSL – Sasol Ltd. Long
CCRT – CompuCredit Corp. Short
AAPL – Apple Inc. Short (near short term)
GS – Goldman Sachs Group Inc. Long (Earnings Tomorrow)
