A Long Ride With Vicky
There used to be an old joke about going out with a girl named Vicky Vap-O-Rub. All she wanted to do was drive up and down congested streets! Baddah Bing!
Well we took quite a few people on a ride this year as we loaded up on January VXX call options at the strike price of $40.00. Now we bought most of these at .21 cents each from March till June. These were for our Salve Lucrum portfolio as well as 6 other portfolios we help manage.
The options have been in the toilette most of year reflecting a 99% loss for most of the time. Since this option is driven by the CBOE VIX index, as volatility has crept into the market over the last 5 or 6 weeks, the VXX options have awoken. Today, early this morning we had the chance to take some profit for all of the portfolios on the call options. It felt really good! We left ours in and might regret getting the 30% gain they enjoyed, but we are hoping for a double. If this week goes like we think it will, that is a distinct possibility. This will bring our portfolio back in line and we should be performing better than the overall market.
We have received several e-mails about GOLD. Yes, we have called the tops on the shiny stuff for the last couple of weeks. We indicated we could see 1,900 this week and we saw it today. 2,000 is quite probably by Friday. BUT (Behold the Underlying Truth), watch or from there. This has BUBBLE written all over it. Once it hits 2,000, you will have some profit taking. You might also see another margin call from the CME. The combined inertia of those events could pop the BUBBLE and you could see a 800-900 dollar correction.
Someone asked if they should short gold. (Not to be confused with Gold Shorts pictured above.) If you have it long like in an ETN like GLD, as we said but some cheap insurance with a January 150.00 PUT makes sense. To short without the long position does create a hell of a risk should we all be wrong and Gold goes to $3,000 or $4,000. With the PUT insurance, you lose the original cost of the put contract say $2.00 a contract (each contract controls 100 shares so $200.00). If Gold spikes through January you lose $200.00, but enjoy a huge upswing in your long position. You would lose thousands if you did a naked short. (meaning you don't own the underlying stock.)
NEWS FLASH
About 12:30 today as I was finishing my wakame seaweed salad
and a news story broke about Lloyd Blankfein, the CEO of Goldman Sachs. He had hired a powerful attorney and GS stock was shooting down about 5%. This seemed like a huge correction for such a benign piece of news. The rumors were flying. The old Wall Street adage, buy on the rumors sell on the news never seemed more appropriate. We picked up some October 22 call options for GS at 100.00 a share for 13.00 an option. So for $1,300 we are controlling $10,000 worth of Goldman. We are looking for a bounce back to 111 a share in the next day or so and our call should look attractive. Carnage in the market over the next couple of days might prove me wrong, but we think this news piece was over blown. If you get up early and are feeling crazy like me, you might be able to grab the call at 13.00 an option. CAREFUL werry werry wisky.
The market was a real nowhere man today. High hopes out of Europe had the market up early then sellers took some profit thinking it might be their last chance to see a profit for while.
With Gadahfi apparently leaving the building, oil went up 2 bucks a barrel. (A little counter intuitive to me since some of the last oil run up was due the chaos in Libya?) The bump in oil did not do much for that sector in the market? The sideline money stayed there waiting for some promising words from Bernanke on Friday. You get the feeling we are going to have a big let down when all he says is interests will remain low for 2 years? Disappointment will mean a market down turn and $2,000 gold. The volume today was lackluster and there was no string conviction in any sector except for the banks.
Be nimble and be quick. Remember winning in the market is all about not loosing.
Salve Lucrum
