Leaving money on the table?

Perhaps we are. All three pairs that we closed between 6.5% and 8% range went on to make more than 11% eventually. Well, we are probably closing out a little too soon.

On a separate note, the strategy has a stop loss at 15% on each pair. At this point no single pair has reached that stage. RS/SID is getting close though. If you have a lower risk appetite, you could close out at the current loss of 10%. Steel companies in US were hit by Areclor's poor results. SID, based in Brazil is not hit as much.

Industrial parts (Trade Entry)

Long CLC at 33.28, Short wts at 26.95 ---Beta diff 0.02

Close out SONO

Close out SONO at 22.08, TMO at 45.79. Profit of $196. A 6.7% return in 1 day.

Cut Exposure (SPG )

Close out 1 contract on SPG at $85. Loss of $25.

Medical Products (Trade)

Long SONO at 20.62, Short TMO at 45.61 --- Beta difference of 0.21

Close out ARO

Close out the option on ARO at $40. Pocket $50... Not too bad in a matter of a week.
Still hold on to SPG (Small correction, the portfolio invested (or rather went short) on two contracts on SPG).

New Trade (Mining)

Long RS at 36.31, Short SID at 24.78. Beta difference 0.12.

Close out ETN

Close ETN at 50.50, DOV at 35.00 to pocket $232 (7.7% return)

REIT Short...

My argument against Commercial Real Estate is the aggressive cap rate assumptions being made. The recovery will most likely be muted. There will be more pain at the Malls and other parts of CRE. Accordingly would recommend a short in SPG at a strike of $60 (sell August $60 to pocket $60).

AVB could be another short play on the Apartment REIT. Although liquidity of the trade is a concern.

Another REIT pair

Long PPS at 12.9, Short BXP at 50.73

First convergance

Close VNO at 48.46, EXR at 8.12. Total P/L of $236 -- 8% gain.

Day 2 return

Will update the performance numbers on a daily basis when possible. The information is from the time the portfolio is launched. A good start for the MNS (Market Neutral Strategy). The big contributor was ETN, which jumped 6% on the first day of launch after not so bad earnings.

The net short is coming from the speculative short on ARO. I hope to keep speculation to the minimum in this portfolio.
Eventually as the portfolio gains history, I would provide additional risk/performance attribution results.

The beginning

Hope to post pairs trading ideas on this blog. Also will add my market commentary once in a while. Specific sectors, stocks in sectors, will be discussed.
Ideas will be long/short, sideways bets, volatility plays.
For all long/short ideas, the expected close out is when you make a gain of 10% on your investment. Ex:- If $1K long X, $1K Short Y, when the net p/l is $100 close out. Make sure that market values of long, and short legs are matched.
For starters
Long -- SNY at 31.12, and Short AZN at 44.85. Both stocks have closely matching betas.
Long ETN at 45, and Short DVO at 33.5. Beta difference of 0.2.
Long INTC at 18.28, Short VSEA at 28.9. Beta difference of 0.03.
Long VNO at 44.46, Short EXR at 8.1. Beta difference of 0.03.

Speculative play
Short ARO at 40. How to do it: Sell August 40 call to collect $90 per contract.

I'll also track the performance of a sample portfolio with initial cash of $25K. Each pair will have an investment of $3K on each leg. Will also post gross, and net leverage information on a delta adjusted basis (Mainly for the option positions in the portfolio). Will also try to post end of day portfolio value.

I am assuming transaction cost of $2 per pair to enter, and $2 to exit. This is based on the current pricing structure followed by brokers like Interactive Brokers.