Closing Bund, Euribor and Carmax trades

Bought back my £15/tick short in Bund futures yesterday at 115.21, for a profit of £1,356, and my Euribor March '08 short of £75/bp at 95.845, for a profit of £1,275. I still think Euro rates go higher for here, but would like the opportunity to trade it around, so will be looking to re-short the market if it went back up. The whole Euro curve now is basically at 4%, with ECB at 3.75% and going up, risks are too (much) higher yields. But I can't resist taking a profit. Completely flat on Euro rates trades now, have taken about £5,500 out of it in the last few weeks.

 

And I shorted about £10,000 worth of Carmax a few days ago, earnings out today saw the stock down 7% at one point. Sweet timing. Bought it back for exactly £500 profit.

Selling some Carmax (KMX)

Stock trading ~$53.50, I sold about £11,000 worth.

Can't remember which blog I heard of this stock on, but I liked the rationale at the time!

Try this for a first pointer of where to start your research.

Screw it, taking my 20 cents profit on OBL's

Just bought back my £100/tick OBL trade @ 108.54, £2,000 from the trade entry on Monday, can't complain.

Still fully believe in the trade, but lets see if we can trade it around.

Buying some Ford, and getting even bigger on Euro rates

Buying £20,000 of Ford, stock trading at 776. Some funny rumours doing the rounds today of Chinese buyers for the company, and with a mere $14bn market cap, that seems more than possible. This is one I don't want to miss, plus I think Ford may just turn things around, and having pre-financed a lot of their needs, so stockpiling cash, their near-term survival looks fine. (Although I think a slowing US economy could hurt them, the market seems very pessimistic on their long-term future, so maybe you get paid to take the risk).

 

 

And selling OBL's (that's 5y German Government bond futures) at 108.74 in £100/cent (so £500/basis point).

 

5y bonds are trading around 3.90%, as i mentioned in my commentary before with my Bund short (i am short £30/tick of Bunds, and £75/bp of Mar '08 Euribor also), this seems such a no-brainer. ECB rates at 3.75%, you can guarantee they will be going up to 4% by June at the latest, and you can also guarantee that the ECB will NOT be sounding dovish after that! This trade seems just TOO obvious to me. Rates in Europe are too low, Spain and Ireland have economies and property booms out of control, money supply growth is ridiculously high, I think the high points in rates will be way above what ANY economist thinks right now.

Another trade on Euro rates

Sold £15/cent of March 2008 EURIBOR @ 96.015...ie. its pricing in 3 month LIBOR at 3.985% in Mar '08. Given that the ECB is going to hike to 3.75% on Thursday, and money supply is expanding at far too rapid a pace, it seems logical to think that over the next year rates need to go up significantly in order to tighten excess in risk-taking markets. This is a no-brainer trade, and reminds me of when everyone was calling a top in the Fed Funds rate when it hit 3%, then 4%, then 5%.....

Lots of trades...shrinking the portfolio and taking profits

1) Sold my Short Sterling Jun '07 at 94.36 in £100/tick, profit £2,300
2) Sold my Dec '07 Eurodollar at 95.23 in £150/tick, profit £2,080
3) Bought £5/tick of Capital One Financial Jun '07 @ $76.45, profit
£3,838
4) Bought £5/tick of Exxon Mobil Jun '07 @ $71.02, profit £2,419
5) Bought £2/tick of KB Home Jun '07 @ $48.76, profit £1,012
6) Sold £2/tick of Whole Foods Sep '07 @ $47.59, loss just £43
7) Sold £3/tick of Motorola Sep '07 @ $18.83, loss just £62

And one new trade, I sold £15/tick of the March Bund future at 116.70,
10y Bund yields were around 3.90%. Seems far too flat a curve, given the
ECB will almost certainly be hiking to 3.75% on Thursday.

Rational on the trades is that I can't resist taking a decent profit in
a short space of time, and also whilst I am long-term bearish on asset
values, I'm not convinced that now is the time markets completely fall
apart, I think it's more likely this is just a short-term correction. So
I'll book some profits and use it to put on some fresh positions with
some fresh analysis.

Stock positions I still have is a short of about £14,000 in Vodafone
which I'm about flat on, going to take that off if I can get out flat,
and re-think it, am short WaMu still in about £43,000, think these guys
still have significant downside, as delinquency rates rise further due
to reduced access to credit, now lending standards are being tightened
across the board, and am long about £8,000 of Vonage, may increase this,
think market cap is too low (it's less than $1bn) for a company that has
built up a decent subscriber base in a new technology. And I still have
my Pipex communications in about £48,000, bit annoyed at this one, as it
hit my target level (around 14p) where my profit was £10,000 (about
25%), but I just didn't get round to selling. Will wait this one out.

Other risk is in DOW and S&P puts mainly, have a lot of DOW 12,000 Puts
so could do with another 500 points down in the DOW, and then I'll prob
take it off.

Covering my USD/JPY short

On Jan 4th, I sold USD/JPY Jun '07 at 116.51 in £4/cent (spot was trading at 119.00). Covering this now after last week's meltdown, buying Jun '07 at 115.24, with spot trading at 116.70.

 

You can clearly see how much negative carry I had to overcome on this trade. In 2 months, the carry on the forward was worth about 75 cents.

 

Will probably be taking off some other of my trades this week, almost everything has worked out during this sell-off. P+L updates will follow this week. First glance looks like I made about £15,000 last week.