closing BTU +22% , long FAZ

Given Wednesday's market action, a near-term correction within this bull market rally seems more certainly underway and we do not wish to risk a winner becoming a loser so we close our BTU, Peabody Energy, long for a 22% profit after holding for 5 months.

As recently as a week ago we had reasonable hopes for a much greater gain in BTU which were scuttled by the reaction to its earnings report, so we must accept what we are given and considering the stock is barely higher than what we originally paid (we effectively reduced our cost via covered call sales), and that the general markets are lower than they were when we bought the stock, we feel we did well with this position.

The BTU saga is chronicled within these past postings :

BTU covered calls action update

selling BTU and VZ covered calls, shorting GCI

selling BUD +11% in 6 weeks / +100% on puts, buying BTU


Our "bottom" call of March 9 remains our current thinking, however we feel we'll first see a drop of 5-10% before the rally resumes, if it resumes at all. We hold existing longs and there's little we wish to buy & hold at these levels so we prefer to take fresh short positions in stocks exhibiting relative weakness as diarized here recently - MATW, MANT, and AIPC.

Outisde of positions we've written about in this blog, we have some calls on stocks that are effectively free of cost since we sold enough of the positions on the way up to cover our original risk. In this fashion we hedge our bets within what we believe is an ongoing bear market rally.


With our positions in a prudent relative balance, we feel a wild speculation would make things more interesting. "Investors" seem unimpressed with the fudgy numbers the major financial companies have posted recently, so we go long the Direxion Financial Bear 3X ETF, FAZ.

This is something that must be totally understood and its leverage respected. Due to the extreme volatility inherent in such instruments we will close the position for a loss immediately should it trade below $9 Specifics on this below. That's roughly a 10% risk based on Wednesday's close of $9.91

As we write, markets look to open higher Thursday morning so the entry at the market open on FAZ should be lower than Wednesday's close thus the risk also lower. With the ongoing earnings season and turmoil surrounding financials in particular, plus Credit Suisse posting positive surprise numbers overnight in Europe, this one's a coin toss.

If FAZ trades as low as $8.94 we will close the position intraday and will not advise such after the fact in a new posting in order not to waste time and space on the obvious. That is our nominal stop level. If triggered, we will diarize the sale the next time we post a trade idea. Should the position move in our favor we will post an update outside of market hours once we decide to sell, as per usual.



We receive no remuneration or incentive directly or indirectly in any way, shape, or form for buying or selling the stocks we do, or for mentioning any stocks or companies in this blog. If we hold existing positions we divulge the fact, otherwise we generally buy and sell as detailed here. This blog is merely a diarizing of our thoughts and trades and is in no way whatsoever to be considered investment advice of any kind. Always without fail consult a competent, experienced, and honest broker or investment advisor before making any investment or speculative decisions.

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