Friday, May 16, 2008

EverydayFinance Portfolio Performance and Market Commentary May 11, 2008

While the Everyday Finance portfolio did not make money for the week, it beat the return of the S&P500 as it has for the past several weeks by losing only .24% compared to a loss of 1.8% for the index. This is especially comforting given the relatively high Beta holdings and the additional upside that is garnered on up weeks. There were no trades for the week, as I was on vacation.

In the attached table, you'll see some wide swings in performance of individual holdings, but overall, roughly a flat week:

Some notables:

  • Vimplecom (VIP) had a nice run, with a 10.5% return for the week. The Russian stock market has been getting a lot of press lately, given the transition in power from Putin and a global recognition that Russia is actually cheap on a P/E to growth basis and they will continue to be a global power to recon with, especially given these oil prices and their vast revenues for Russia.

  • The leveraged Financial ETF (UYG) fared poorly given some renewed concerns over results and prospects for financial outfits and the possibility that the sub-prime contagion will now spread to prime loans. I've already sold off 1/3 of the position at a ~35% profit, but I will retain the rest, awaiting a bit of a bounce back as some of these fears subside in the coming weeks.

  • Suncor (SU), the Canadian tar sands outfit had a big week, up 12% in tandem with the continued run on oil pricing. On that note...

That Oil Options Position - Ouch!

Previously, I had described the synthetic options play on oil, banking on a downward move several weeks back. I had undertaken the position at $113 per barrel. Since the position had no protection and I was headed off for vacation with only sporadic access to a computer (and frankly, who wants to be bothered with worrying about their portfolio on vacation?), I covered the open calls and traded the net loss for a credit spread on USO at the 100 short/104 long price points. As this trend has yet to be bucked, even the 100s are now in the money, so I'm essentially losing money as USO trends past 100, but my losses are capped at $400 per contract, given the $104 calls I bought to counter the $100 calls I sold. In hindsight, my initial hypothesis was the oil was going to move far, and fast. I bet the wrong way. I should have just purchased calls at $100 and puts at $85 or something to that effect to capitalize on a big move in either direction. Anyway; these contracts expire in May, so there's a decent chance USO will drop back below $100 by week's end and the whole exercise will be a wash. I will update next week. I don't track this piece in the general portfolio returns, given the derivative nature; difficulty in updating/tracking each week.

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