Close Out (UMPQ/CBU)

Closing out the Pair.

UMPQ at 12.39, CBU at 27.93

Position Update

Currently running the portfolio at a gross leverage of 65%, and net short of 21%. A slightly bearish posture given the size of the rally. Somehow the skeptic in me is screaming SELL SELL.

Outright shorts in the portfolio now are

1) MAR -1.7%
2) PLL -9%
3) TIF -3.8%
4) CBU -6%


Long/Short

PNR/PLL
RE/PTP
HPQ/ORCL
UMPQ/CBU

Closing google time spread (Or trying)

Misread market closing time. Closed the Dec call at 4.2. Closing Jan call at 19.9 (hopefully).

New Trade (Software)

One of the rare software pairs trades on this site.

Long HPQ at 41.53
Short ORCL at 31.64

Some additional charts

Google Call Spread

Sell 12/23 Call at strike 600 --- $5.4
Buy 1/21 Call at strike 600 --- $20.9

Hypothetical Put/Call Time Spread

Another really short term trade idea. Opening up both a call time spread, and put time spread simultaneously. I'm using google as an example.

The strike is 600 for all four legs of this strategy. The bet is that google will trade between 600 and 610 between now and Thursday i.e. two days of trading. If that happens one could potentially make $750 in two days. Downside is if google rallies or drops 5% then you lose $1.5K. the info is based on one contract each.

Trade summary:

Ticker: GOOG
Instrument: Option
Type: Put
Strike: 600
Maturity: 2010-12-23
Buy/Sell: Sell
Price: 1.7
Implied Vol: 28%

Ticker: GOOG
Instrument: Option
Type: Put
Strike: 600
Maturity: 2011-1-21
Buy/Sell: Buy
Price: 16.6
Implied Vol: 28%


Ticker: GOOG
Instrument: Option
Type: Call
Strike: 600
Maturity: 2010-12-23
Buy/Sell: Sell
Price: 5.25
Implied Vol: 28%

Ticker: GOOG
Instrument: Option
Type: Put
Strike: 600
Maturity: 2011-1-21
Buy/Sell: Buy
Price: 20.6
Implied Vol: 28%

*Implied vol is an estimate. Could be +/- 2%.

Payoff chart:

Darn the google train!

Seems like is leaving without me :(... No worries. On a separate note outright short on NFLX seems dangerous at this time. With more than 20% of the float short, a short squeeze is a real possibility.

short CBU

Short CBU at 27.73

IB has an app for Droid!

Pretty nifty!

Short TIF

Ticker: TIF
Instrument: Option
Type: Put
Strike: 60
Maturity: 2011-05-21
Buy/Sell: Buy
Price: 3.45
Implied Vol: 34.5%

Close Out TIF Strangle

Good that we turned the short into strangle. TIF seems to be hitting bubble territory. Put goes worthless, Call closing at 4.85

Close Out (GOOG)

Closing out on google call spread. Still bullish on google, however slowing down for the holiday season.

Short PLL

Ticker: PLL
Instrument: Option
Type: Put
Strike: 50
Maturity: 2011-01-21
Buy/Sell: Buy
Price: 1.45

Close Out NAT/ERF

NAT at 26.02, ERF at 28.44

Quick One (Short NFLX)

Sell December 10 200 call at 0.35

GOOG call spread update

For most part it should be self explanatory. This is the performance impact for the stock price move for a Bull call spread taking google as an example. The total capital allocated in the portfolio is $59,400. If one wants to look at a different portfolio one could just use the P/L information which is based on one contract.


 

Portfolio Market Value	$59,400
Type	Call	Call
Expiry	12/17/2010	1/21/2011
Time to Maturity (Years)	0.02	0.12
Risk free rate	0.13%	0.13%
Volatility	28%	28%
Dividend Yield	0%	0%
Strike	600	600

The payoff function is based on entry price of 13.2 for the long call, and 4.0 for short call. 

Now let's see how this could turn into a black swan. Suppose we get a little greedy and sell one day call at strike 600. What's the probability of Google jumping $10 in one day? If it doesn't happen we get to keep $69 on one contract. If it does here's how it looks. A good 10% of the portfolio is wiped out if Google jumps to $646 by Friday morning... Given all the info about Gingerbread, chrome OS that is already out there is this likely?

 

Covering Some GOOG exposure

Selling Dec 600 Call at 4.0 (Keeping the January 600 Call open). In addition there's a small exposure through Short Dec 10 600 Call.

The portfolio is now net zero. Gross exposure is 62%. 

Close Out (ITW/IEX)

ITW at 50.4, IEX at 38.67

Short MAR

Buying two January 39 Puts at 0.49

Close Out MSFT

msft at 27.02, April 28 Call on MSFT at 1.08

Monthly update

Back after a two week break. Did some early season riding in Maine. Have not had the time to update the blogs.  Eventually I plan to move this trade signals platform over to collective2.com. I spent significant amount of time in enhancing the trading process. I will post additional results by the end of this month. I promise there will be some interesting findings.  It will give a better view into some of the industries, the return process, and back testing results of the portfolio.  The system is flexible enough to run for short term data as well as long term data. The only problem is the time required to run a 20 year simulation. To give an example, the commercial banks industry has 420 publicly traded names in the US. If we run co-integration test for all pairs in this industry, we are talking of 90 thousand computations for one day. When we run the process for 20 years the problem grows accordingly. We can add additional filters to reduce the number computations. Since I run four threads (because I use a quad machine) the run time is reduced signifincatly but still we are talking about a week to run the trading system for the entire US stock market (60+ industries) for a 20 year time window.


Now to the current portfolio. The pairs positions are being reduced mainly in anticipation of new findings. Better safe than sorry. The gross leverage in the portfolio is now about 130%, net of +50%.
I still don't have a complete picture of November performance.  For most part the month ended flat driven by losses in Google. This had to do with the inability to roll the hedges (on time spread) on black Friday (was on the slopes riding on first snow). No Groupon, and now google seems to be on the come back.  Closed several positions, but didn't have the time to update the posts. Will do a more detailed posting soon.

For now, GDP/TLM has been closed. KDN/WAB has been closed, a few opportunistic shorts on NFLX, and AAPL during last week worked well. The strangle on NFLX has been closed as well. The strangle could have been more profitable if I had used a balanced approach. The slight negative bias on NFLX worked against the portfolio.  January 600 Call on GOOG has been opened at an entry price of 13.2.