Thursday, June 10, 2010

750% in 24 Hours

Turns out my Tuesday short call on BP was a bit understated. Readers who paid attention to that post should be ready to retire after yesterday's action. BP has lost 50% of it's stock value since the April explosion. . .15% of the adjusted value on Wednesday after trading 240 million shares.
Regular readers know I like to play the fringes of these disasters with out of the money puts . . in this case the near 25s which Tuesday were selling for a modest .15. Wednesday's high was 1.47 . . an 880% increase, but I was lazy and got out near the EOD at 1.30 for a 750% gain as volatility took a hit.
I don't think this is the end of story regarding the BP puts, but I prefer to play this one day at a time with the intent to fade any rallies, especially when and if they finally get a cap on it. With talk of bankruptcy looming BP could ultimately turn out to be another Enron situation with a stock value of zero, although it's not clear there was any criminal intent, just a series of bumbling miscalculations coupled with a lackadaisical attitude.
Also of note, Project Z initiated a new BUY on TLT at midday Tuesday. . a situation we'll examine in a bit more detail tomorrow.

1 comment:

The Average Jay said...

nice job.