My second trade is similar to my past call spreads. This is an Jan 10' XLE call spread funded with naked puts. I bought the $55 calls for $5.05, sold the $65 calls for $1.78, and sold the $45 puts for an average of $3.20. What I did here was sold half for Jan 10' and half for March 10'. I did this to make the trade a net zero out of pocket. With the stock at $53.50 I have 15% downside protection until the $45 puts start moving against me.
Thursday, June 11, 2009
VLO, XLE
VLO did a secondary offering last week to raise cash. They gave a huge discount at the time and sold 40M shares at $18 when the price was at $22.50, that's a 20% discount so needless to say they didn't have trouble finding buyers. Here is my play, assuming that $18 will be defended by the large institutional buyers at the $18 price, and looking at the stagnant chart since the offering on June 3, I sold June $18 puts for .51. If I had to take posession of these I would and immediately turn around and possibly sell a July $17.50 covered call. I sold 10 contracts. So I'm either going to steal $500 or have to pony up $17,500 and then sell calls, but I'm not afraid of this position.
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Good fucking god, I specifically waited a few days to see if the $18 secondary price would hold. It did, so I jump in. Nice fucking chart an hour after I sell puts.
ReplyDeleteI tend to agree with Dom's theory. Psychology plays a big role in what's going on. I think seeing the 4 digits in the S&P rolling in to 1000 makes people stop and ask "are things really that much better?" And same as the DOW hitting 9000. What is different now than when we hit DOW 9000 in early October after the massive sell off in September? I don't know.