Monday, March 21, 2011

21 March 2011 Tuition for Lessons Learned


21 March 2011 Tuition for Lessons Learned

We had another up day today, but before you get all excited, volume was nearly non-existent, so we can’t put in the category of an accumulation day. We are still sittin on ready with our cash to either buy when the buying gets good or to give to our plethora of contractors who are just waiting to add the next item to our every growing punch list.

If you read the blog a week or so ago about lesson’s learned we explained about options and the fact that we had bought them way out too far. Friday we had our day of reckoning. We had 7 call options expire worthless. OUCH! While we won’t tell you the dollar amount, we can tell you the damage to our year to date realized gains. Again, this is money, cash, not still in the account. We had been enjoying an 8.7% year to date gain until Friday. As you know Friday was option expiration day

(Actually it was quadruple witching day when contracts for stock index futures, stock index options, stock options, and single stock futures all expires.) so that means those options that were about to expire expired worthless. The result was a stinger day to the Salve Lucrum Portfolio. Our year to date realized gains dropped from 8.7% to 7.01%. Now a 1.7% drop does not sound too bad, BUT IT AIN’T YOUR MONEY!

Now another thing to keep in mind about quadruple witching day, is we have to be real careful counting Friday as an accumulation day because much of the volume was driven by the option settlements. (I may have lost a few of you there, but if you want a detailed explanation, please drop me a note at Just don’t assume that a good high volume day on a triple or quadruple witching day automatically means an accumulation day by definition.

Pin action in the Salve Lucrum account.

We had entered our RAE order last night, but my buddy Ben know a little about the info we shared from the SEC filings. There was a merger recently and it looks like our upside was taken out of play above 2.00 a share, so we pulled the plugs on all of our limit buy orders at $1.75. Thanks Ben. We did add to what appears to be a good set up for EBIX and SMTC. Again, we would not ordinarily be swimming upstream, but like both of these stocks so we are buying them on the way UP. We are buying cheap insurance with some June PUTs.

The fact volume was so light today indicates the big girls and boys are sitting on the side lines. You can’t really blame them with all the possible and apparent volatility out there. Underneath all the uncertainty is a certainty. We have reset the clock for the US government to stop functioning another 3 weeks. Very quietly, President Obama signed into law a 3 week extension of our debt ceiling so our buddies in capital hill have find the 50 Billion dollar gap between the DEMs and GOPs budget proposals. This last extension did have a 6 Billion dollar hold up in appropriations.

To provide some perspective of that 6 billion dollars, last week we went though the drive through at McDonald’s and we dropped a nickel of our change.

That nickel is more of a percentage of our net worth than the 6 Billion is to the government debt. So you must now guess whether we have a very small net worth or if the government carries a lot of debt. I will give you 14.2 trillion guesses.

That is it for tonight. Here is a question for you. Assuming we post tomorrow, Wednesday will be a note worthy post. Any guesses why? Drop me a note.

Salve Lucrum


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