Blog Archive

20 April 2010

Anarchist Pig Investment Advice for April 20th

As I mentioned in my last Anarchist Pig update, I liked the prospects for Citigroup (NYSE: C) and was in position for a good jump after earnings were released on April 19th. Citigroup was, of course, battered by the financial meltdown and could rightfully blamed for precipitating the crisis itself. Still, I'm not here to point fingers, I'm here to make money.

My strategy was to go long on Citigroup shares so I opened the position about a month ago by purchasing 500 shares at $ 4.14 per share. At the time, Citi's book value of around $ 5.00 made this a compelling value play and I also felt that the bank's new management was making good strides to streamline their business groups and return to profitability. A few weeks after taking the long position, I further reinforced my optimism by buying 10 call contracts on the strike price of $ 4.00 expiring in September 2010, and 5 call contracts on the strike price of $ 5.00 expiring January 2012. Currently, these positions have yielded the following returns-

500 Shares Long + 17 %
Sept. 2010 call options + 62 %
Jan. 2012 call options + 22 %

Overall, this was a pretty risky bet on Citigroup. Not only was I long on shares, I also took option positions that could have been rendered virtually worthless. The call options clearly show how when you are firm in your decision they can accelerate returns above and beyond the underlying share value.

At this point, I will probably take profits on the September 2010 options position and move that money into the January 2012 options position. I am making this move because I remain very bullish on Citigroup and will also retain the 500 shares that I am long on. My personal opinion is that if you can get in at anything less than $ 5.50, you should enjoy solid returns provided you can endure the inevitable dips and panics that come with owning a battered company this one.

Next week, I will review how I sold covered call options on my position in American Rail Car Industries (ARII.) When my position in ARII reached a profit of nearly 100 %, I sold a covered call option contract because I felt it couldn't go any higher- problem is, the damned stock price has done just that !

Anarchist Pig Investment Advice is just that- advice. I am not an investment advisor, broker or investment professional and if you use this advice, you are using it at your own risk. If you take my advice, you need to do the research to see if it supports your investment goals. In other words, if it doesn't work out, don't fucking call me.

No comments:

Post a Comment