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Bought 13 contracts of FFH leaps around 250 1 month ago sold recent few days.


yudeng2004
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Bought 13 contracts of FFH leaps around 250 1 month ago and sold last few days for an aggregate 60% gain overall. Profit is going into various undervalued stocks + slowly building put option position in various crap to hedge against market decline.

 

Pretty sure certain puts will lose money but those can be used to deduct gain.  Puts make up around 1% of portfolio right now, I will put 1% more into them for every 3% the market rises.  If market rises 30% more, I should end up with 10-12% of portfolio in puts.

 

I think rally was due to recovery from pessimism but not due to recovery from economic conditions.  Many things still have huge BK risk.  US consumer is toast.  I do believe certain companies will continue to rise even if market declines, as the market is still in the middle of a sorting process.

 

I look for 300-500% return on puts if market goes back to march levels.

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Hi Yu,

 

I think that you are bit early in both selling your FFH calls and entering your put positions. But, sometimes it is better to be early. Also, if you are obtaining more value with your new long positions than your FFH calls then it makes perfect sense to switch.

 

What is crap for you right now?

 

Looking at the charts, both Fairfax and the S&P have broken out. Fairfax has resistance coming up in the $320 to $330 U.S. range and could well break that level while the S&P appears capable to reach 1,150 to 1,200 by year end. Personally, I was close to market neutral with shorts and short ETF's until Meredith Whitney made her call on GS. The market was heading down since early June, but her call plus subsequent positive earnings reports changed the charts completely and I got out. I also entered new long positions. Glad I did! Charts are useful to me when shorting.

 

Looking at various data, it seems to me that there is a "recovery" in the U.S. Inventories were so low in cars and other industrial areas that production had to restart to simply re-stock to a sustainable level. However, this will not be accompanied by an improvement in employment. At some point (year end?), the market will flat line waiting to see more data in order to determine if we are going to see a real recovery with rising employment or if this was just a bounce from the bottom in economic activity. My guess is that the market will be disappointed with growth indicators and will retreat.

 

I plan to continue trading value, but I may sell some stocks in the next few months as most approach fair value to raise cash. However, I will not enter bearish positions until the market is at least in neutral. It is a freight train right now. I will let the market be my guide in terms of economic forecast (top down) since no one seems capable to do a better job: stagflation, depression, normal recovery, who knows?

 

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Yes it is probably too early, but I do this based on intuition, not indicators.  even if FFH goes to 320-330, that's only 20-25% upside left on those leaps. I can get better gains elsewhere.  I think commercial real estate is still crap.  I am too early into them.  It is ok, if they decline 10% I will take my profit and run. 

 

I am largely betting on pullback rather than actual decline. The big decline will not come for a while, but there is bound to be pullback after all this runup.  I want to profit from that pull back before the market actually recognizes the economic problems.

 

Hi Yu,

 

I think that you are bit early in both selling your FFH calls and entering your put positions. But, sometimes it is better to be early. Also, if you are obtaining more value with your new long positions than your FFH calls then it makes perfect sense to switch.

 

What is crap for you right now?

 

Looking at the charts, both Fairfax and the S&P have broken out. Fairfax has resistance coming up in the $320 to $330 U.S. range and could well break that level while the S&P appears capable to reach 1,150 to 1,200 by year end. Personally, I was close to market neutral with shorts and short ETF's until Meredith Whitney made her call on GS. The market was heading down since early June, but her call plus subsequent positive earnings reports changed the charts completely and I got out. I also entered new long positions. Glad I did! Charts are useful to me when shorting.

 

Looking at various data, it seems to me that there is a "recovery" in the U.S. Inventories were so low in cars and other industrial areas that production had to restart to simply re-stock to a sustainable level. However, this will not be accompanied by an improvement in employment. At some point (year end?), the market will flat line waiting to see more data in order to determine if we are going to see a real recovery with rising employment or if this was just a bounce from the bottom in economic activity. My guess is that the market will be disappointed with growth indicators and will retreat.

 

I plan to continue trading value, but I may sell some stocks in the next few months as most approach fair value to raise cash. However, I will not enter bearish positions until the market is at least in neutral. It is a freight train right now. I will let the market be my guide in terms of economic forecast (top down) since no one seems capable to do a better job: stagflation, depression, normal recovery, who knows?

 

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Yu guys are nuts :)

 

I met DengYu at the FFH dinner 2 years ago and was really impressed by him.  I think that we can all learn quite a bit from him.  Balancing risk and reward is extremely difficult and it is rare to find someone who can do it with such ease.

 

I have also purchased several options last month and I am sitting on an 80% gain.  Today I started to lighten up, but I think that there is still plenty of up side remaining in these options because the market tends to overshoot.

 

Even if I can get more later, I must first take the risk of holding on to the options before I can benefit from the potential reward.  Knowing when to back out is just as important as knowing when to get in.

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