Monday, November 24, 2008

Investment Plan (November expiration)

I'm down on my investment plan for the moment. I sold 10 UYG 6 Puts on 11/19, which got caught in the downward market spiral starting that day. So I bought these back for a loss of 600$ and at the same time sold the lower 5 strike for 600$. This weekend I was assigned the 1000 UYG shares at 5.00 which currently trade at 3.98.

I said earlier I wanted to start a longer time Portfolio on the idea, that without order being restored to the financial system, no recovery will be possible. I have no idea, if that assumption is correct or not. Maybe the banks will all be nationalized and the US government introduces the Chinese idea of capitalism. I don't think so. In Germany and a lot of other European states we have had government participation in private industries for a long time without becoming communist countries. Direct government involvement in private corporations can work and the US may only need to get used to it.

The government is like any other long time investor: They buy cheap and sell high. The German government sold most of it's silver -as we say here- until mid 2007. They had not a lot left (the railroads still have to be privatize) for future generations and they sure had become accustomed to the earnings these acquisitions provided for the last 20 years. Now everyone is running to the government for help and they provide that help at bargain prices against participation in the corporations. And this will be sold again into the next boom cycle. Governments have a lot more time than any private investor. It sure helps, if you can print the money you need.

Back to my portfolio, which consists of 1000 UYG now. Next expiry is 12/19 and the question is, will we get a x-mas rally or will Santa stay at home with a cold this year.

Well it doesn't really matter, I will try to sell 10 Calls 8 strike for 1 $, if I get it (it trades at 0.30 at the moment) and will sell 10 Puts 4 strike (I think) for 1.25. I will most likely have to sell the Puts first and might even decide to scale into them depending how Citi trades today as the development there was the reason UYG lost about 50% of it's value the last week.

Here is a copy of the trading spreadsheet.


Will keep you informed, how the story unfolds.

We have had a huge rally today.
And while I intended to keep the strike 3 and strike 4 UYG puts I sold this morning, I could not let the profits slip away after UYG made a 32.5% move today. This morning I was down about 800$ in my Options trading. This evening I'm up a total of 775$ after being stopped on my UYG position at 5.25.