ZC on precipice and LULU

Back from Greece and looking to fire up the blog:  ahead on short ZC position from 760; about to break through 735 which has been the repeated low of the last month:

Prior to the summer run up Corn was in the 550s.  I have no idea if it can rapidly return there but feel this is a decently safe position to enter into an extension of the position.  I did the same on the LULU short, less for technical reasons than increasing fundamental conviction at 68:

I’m down on the effective ZNGA long position (by shorting Jan 13 & 14 puts at 3 & 2.5; the premiums got most of the move down and I also feel there isn’t much further move down there but perhaps could have waited a bit longer to enter the position: now trading underneath net asset value makes the risk minimal I think.

 

 

Three Cash Rich Video Game Stocks

The video game industry is cyclical, and leadership within sectors is cyclical as well.  A proverbial “buy when the blood is running in the streets” opportunity I think has emerged with three very cash-rich companies.  I wrote puts (ZNGA) or bought outright the following three video game stocks.

Zynga @ 2.90

Nintendo @ 13.82

Perfect World @ 11.14

At Interactive Brokers you need to pay $3/month for real time quotes on pink sheet foreign stocks like Nintendo which is ironically hard for me to stomach but then the transaction cost was the same as any other stock — much different than what I remember from the Fidelity desk to buy a foreign OTC stock.  I haven’t checked the margin implications.

Margins of safety are hard to come by in technology whose rate of change makes persistent advantages hard to find.  But when there are firms that do have some moat — Nintendo’s franchises might be among the deepest in gaming — with nearly 2/3rds of the market capitalization in cash in the first two cases and half for PWRD (offset by some debt) then it is time to back up the truck.

 

China gooses Dr. Copper (or CAT?), position update

I’m wary of global economic growth but stimulus is stimulus and I’m not going to Fight the Chinese Fed.   According to Bloomberg a stimulus of the kind that actually builds roads and infrastructure is on its way.

I’m awfully tempted to play this right now…week’s positions have been ho hum; exited soybeans at 1772, got back in at 1738 but losses on S&P Futures (just 7 points, missed getting whacked by the huge rally) evened that out.  My tight stop on Gold hit, which I’m looking to get back into, but slightly ahead on long Corn and short Treasury trades.  Sold APPL for slight profit but it was underperforming S&P on big move today so thought the money would be better put to work elsewhere.

Copper is just over the highs hit twice in July, but employment report looms tomorrow morning.  Close correlation between corn & soybeans means I may lighten either (or both) positions to establish one in Copper.  May also halve position on Treasuries given the risks of a rebound there.

Shorting Copper was one of the great trades I had in August 2011: am I emotionally obscured by it, even if going long?  I’ve bought one contract of Copper at 3.567 which is a way to implement strategies to see how I feel being in the position and brings the contract to various screens of my Interactive Brokers account.

Going long CAT might also be a decent play here but haven’t given it much thought beyond initial feelings about CAT at low valuation and weak arguments to the contrary.

Chart forCaterpillar Inc. (CAT)

FWIW, CAT Jan 2014 120s & 125 calls in the low $2 range…82.5 strike at 13.10 if one feels more cautious.  I’m not sure I have the patience to let that play out.

Small other position update…Selling ZNGA Jan 13 & 14 calls at 2.5 & 3 strike prices is slightly ahead and I’m feeling good about that position.

UPDATE: did swap out of ZN at 132 ‘100 for copper at 3.575 – ZN is still in a range with a big unknown coming up in a few hours; HG is breaking out; Soybeans and Corn feel the risk/reward is better than ZN short term to swap out of them.  Set HG stop at 3.5245; HG & ZN are probably decently correlated in short term so the one breaking out of range right now is more appealing.

Position Update August 30

Well as feared the Russians were coming, and wiped out my short grain position.  A pretty bad loss whose saving virtue was sticking to stop loss plan and indeed getting short the S&P at 1406 which I’m ahead on, and even going long — though a smaller number of contracts of soybeans at 1733 which is now up a solid 1%.

I added this morning to it at 1746 which knock wood appears to be the low of the morning and moved up a stop to 1736.xx.  This is an awfully tight stop but the soybean supply/demand situation is not as bearish as with wheat or even corn with murmurs of $25 soybeans.   They look really good right now, and the thesis is after all is to trade into breakouts and let it ride:

I have also added a small position in Live Cattle at 125.575.  Here is the six month chart.  Barron’s wrote about Live Cattle in late January and I’ve kept my eye on it since, with another brief small trade earlier, and appears to be poised for a robust technical formation (similar to Cotton right now at 77 which I may nibble in as well)

I feel comfortable even if just slightly ahead on soybeans & S&P but is this an internal trading signal that there is little consternation or just a false hope generated from relief after the surge in wheat and soybeans that knocked me for a loop?

On the stock side, large cap tech and ZNGA under 3 among others still looks insanely cheap but I am waiting for a downswing or the S&P at least to head back to 141x before putting on a position like that.

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