Sunday, August 15, 2010

August 15, 2010 Breakin Even on Oil


August 15, 2010 Breakin Even on Oil

I leave you guys alone for one week and look what happens.

My first hint of issues was Saturday night as we were driving to a nice dinner with some friends and one of them said, how did you do in the market last week? Now no one ever asks me this when the market is going up so I know it had to be bad news. I was watching the market from England so when I clarified the question (At first I thought I might have missed a huge drop on Friday), I discovered the lackluster week in the market, but was fully aware of the 4% drop.

I could not access my Schwab account because I was out of network in the UK and I was to lazy to go through the hurdles of getting signed back in again. I did this evening and was pleased to know our only trade for the week was a stopped sale to close on a January USO $30.00 oil ETF call. We stopped out at the same price we bought in at $6.60. At the end of the day we lost about 60.00 dollars in fees. I have looked at the June posts and must apologize as I cannot see where I indicated I bought the calls. Just as well as they did not perform too well.

(I have new reader who admitted they only get the political cartoons I have been doing, so let me explain the trade as it occurred. On June 18, USO, an oil commodity based Exchange Traded Fund –In this case a fund based solely on the movement of crude oil- was selling for 35.41 per share. I was thinking that oil should begin a move upward based upon apparent –now questionable-global demand. We did not want to tie up 35 dollars a share on this speculation, so we looked at the 6 month plus window of opportunity by using a call option. That would be the right but not the obligation to control 100 shares of USO valued at 35.41, for the contract price of $6.60. The contract in question had a January 22, 2011 expiration date. It also had a contract price of 30.00 a share. In essence we were controlling 3,541 dollars of USO for 660 dollars. We were betting that by January 2011 USO would be selling above 36.60 a share- $30.00 contract price plus the $6.60 call option price. At $36.61, we would be “In The Money”. At some time, I think the first week of August, we were up about 9% on the call option meaning it was selling for 7.25 and I set a stop sell order for 6.60 to eliminate any losses. While I was away, the price fell though the $6.60 mark and Chuck-Charles Schwab- executed my order.)

That was the only trade during this yucky week in the Salve Lucrum account. In another account we did have some WFC sell off at a small profit. (4% for a one month investment) And that transaction was replicate in another account. We need to look at Wells Fargo before considering getting back in.

The SL Portfolio dropped about 3.2% last week. Mostly weighted by an 8% drop in AAPL. Ouch. We are now Down 1% on Apple.

I only had the chance to get into the portfolio, lick the wounds and check in with you all. I will be reading this week’s Barron’s tonight and should have more goodies tomorrow.

"Please hold on to this claim check so you can get your robes and things later"

Salve Lucrum


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