The Baltic Dry index has nearly doubled in the last few months. During the height of the financial crisis the index tumbled from a high of around 11,600 to a low of about 630 of like a 95% drop. We are nearly a hundred points away from testing resistence at around 4200.
Historically this index has been a leading indicator. I have been making a lot of plays in the dry bulk shipper space and plan to do so until it does not work anymore. Sounds like most of the catalyst is coming of China.
But there is one thing to keep in mind while playing these company's. And that is theat the upside is a bit limited through 2010 and 2011 as a majority of these company's have locked in a lot of there vessels in contracts in order to risk their business and cash flow risk. But by reducing their risk they have taken a lot of the upside off the table. This just means we probably will not return to the high flighing prices that we saw in 2007 like DRYS at over $100.
But I still see good upside overall. Especially on rally's in the dry baltic index.
Currently I have the following positions in the Dry bulk shipper space:
10 naked puts on DRYS @ $7.50 strike with Jan '11 expiry for a total max gain of $2,710.
10 Vertical spreads on DRYS @ $2.5/$5.00 with Jan '11 expiry for a total max gain of $1100
200 share covered call position in EGLE at $5 with Dec '09 expiry for a total max gain of $134
And as you recall I have already closed my 10 naked puts on EGLE for front month experation last week.
I will keep you guys posted.
Good Luck Trading!!!
Sold 2 Dec 8 09 covered calls on my DRYS position. Will sell more as the stock moves higher. Currently have a 600 share position.
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