Yoo,

Banking analyst Meredith Whitney upgraded Goldman Sachs this morning, citing higher trading profits that should give the firm stellar results for this past quarter. This sent the financials stocks sky rocketing this morning, the broader market caught up and we a strong rally today. AIG was one of the financials that was lifted up, by 24% - the stock closed at $14.57, sending my July 14 calls to a high of $1.68. I closed out my position to lock in profits. The trade is below:

Bought 3 AIGGN (July 14 calls) for $40: $120
Bought 3 more this morning at $1.50: $450
Total: $570

Sold 6 AIGGN for $1.60: 960

Total Profit: $390
Gain: 68.4%

I quickly opened a strangle position on CIT :

Bought 10 CITSI (July $1 Puts) for $15: $150
Bought 5 CITGZ (July $2.5 Calls) for $5: $25

CIT is definitely the talk of the markets right now. The lender is facing a possible bankruptcy filling if it doesn’t secure FDIC backing of debt it plans to sell. The strangle is biased towards the short side because CIT doesn’t really pose a systemic risk to the financial system. It appears the company is in “advanced” talks with the government - what ever that means. It was good enough to send the stock up 25% to $1.69 in after-hours trading. It looks like the calls will be profitable tomorrow but it’s still way to soon to tell.

It definitely felt good to be back trading today. The AIG puts aren’t a complete write off yet - I’ll wait until Friday (expiration day) to see if they hold any value. In any case, it’s good to have insurance and they have definitely served their purpose.

Let’s see what tomorrow holds!

Cheers,

Nik

Yooooooooooooooooooo,

So, I”m officially a graduate. Got my B-school degree last night and I’m ready to get back in to trading FULL TIME! Keep in mind this is going to be my major source of income, so my perfromance will determine if I eat, lol. This feels good.

So, my first trade is a strangle on AIG:

Bought 6 AIGSB (July 7.5 puts) for $30: $180
Bought 3 AIGGN (July 14 calls) for $40: $120

So that’s a $60 bias towards the downside and 15% of my capital invested. A couple ground rules:

1) NO more than 50% of my capital will be invested at any given time, I just can’t risk it.
2) Every trade will be hedged. These markets are too volatile to play naked.
3) Allocation of funds will be biased towards the side I think is going to win.

The AIG play is based on their awfully low equity levels (around $45 billion) and their exposure to European credit default swaps. Let’s make this simple: if capital markets do well, AIG doesn’t loose that much money, if markets tank this company is worthless. Markets are definitely looking like they’re going to tank soon as anxiety over how long a recovery will take persists and the fundamentals of our economy get worse and worse.

The losses on their Euro + US CDS portfolio could easily wipe out whatever equity is remaining, sending the shares to pre-split levels. The disposition of assets also drains equity, so it’s like a double whammy. The insurance on this trade is because the government might step in with an other blank check - bolstering equity levels and sending shares higher.

If the S&P break 750, I think we’re going to free fall. It it manages to maintain, then we might go sideways with economic news driving the markets. In any case, this is a very interesting time.

In any case, I’m ready to get my PARTY on this weekend! I’m also ready to do what I love to do - trade full time all day.

Hope you guys have a beautiful weekend!

-Nik

P.S. - BULLY BANK 2.0 COMING VERY SOOOOOONNNNN!!!

Sorry for being so inactive, life has been a bitch and a half recently and I’m finding that staying positive and enthusiastic is becoming harder and harder. On top of regular work, I’m taking a semester of summer school to finish up college - I’ll be done in 2 weeks!!

School is a complete time drain. It’s the most irritating time drain in the world simply because I’m paying them, normally the other way around is well worth my time. With the end of school comes the prospect of having most of my time back. More time to dedicate to research, more time to dedicate to trading, more time to dedicate to DJing (did I mention I’m a DJ :P) - more time to dedicate to things that truly make me happy.

So with this in my future, why am I finding it hard to be positive? Simple, I’m broke. We called oil perfectly, we called DRYS perfectly but the one thing beyond our control is timing. One day after options expiration all of my plays hit, or at least would have shown a profit. I’ve been racking my brains for the past week trying to figure out a way to hedge against timing but this unpredictable element is just a bitch in nature.

So, with the brokerage account drained thanks to being off by ONE day and the bank account looking bleak as ever, I think massive change is in my future. This site was created to be a learning tool for readers and as a vehicle for J and I to note our trades. I’ll be dedicated to the success of this website until the internet ceases to exist but of course money is one of the most important things and without it it’s hard to, well, trade.

I’ve been mulling around the idea of selling my car and using half of the proceeds to start trading again. The strategy is going to be a lot more conservative with a focus on risk management and consistency, instead of naked positions relying on a one sided movement. Using simple strategies like strangles and straddles I’m confident I can rack up consistent gains, minimize losses, and use compound gains to my advantage.

Obviously, living without a car would be a huge disadvantage but I feel like a sacrifice has to be made on my part. If nothing else I’ll learn a lot by putting myself in a situation that most would consider absolutely nuts. But, what if this doesn’t work? Then I’ll be sending my resume out to investment firms in search of something that I haven’t needed in a long time: a full time job.

I am, however, excited the change will come with the release of BULLY BANK VERSION 2.0. The new site will have TONS more content, it will be more interactive and look a lot cleaner. It really is the next level manifestation of our vision for Bully Bank. I’m super excited about it and can’t wait for you guys to check out the new sections and of course, the new look :).

I’ll keep you guys updated on what I decide to do. As it stands it looks like the car is out (I’ll miss my beater, lol) but life is unpredictable.

Hope your all having a fabulous week so far.

Cheers,

Nik

I have a open limit order for 30 puts on the USO. The price of oil, IMO, has gotten way ahead of itself and the inventory numbers that came out this morning proved that. Supply is ahead of demand in a big way.

The USO is currently off 4.5% and my order is at a limit price of $10/contract. I’ll update when it’s filled.

Update: My order executed at $10/contract for UBORD - USO June 30 Puts. I waited 2 hours for that price, so I’m glad it paid off. USO is currently off 3.96%, that little ramp up was enough to drop the options price.

Trade:
8 contracts x $10 = $80.

Cheers,

Nik

Common as Dow Jones:

The Lex Luthor bailout:

Hahahahahaha….

-Nik

Sorry I haven’t been updating much, I’ve been SUPER busy with finals this semester but thank god they’re almost over! I’ll be back in full swing by the end of this week, I can’t wait to get back to trading.

In the meantime, have you had a credit card company drastically higher your interest rate? Got a notice that terms have changed AFTER they’ve actually changed? That’s all about to come to a stop as the latest regulation on credit card companies passed today. Here are some key points from the bill (thanks to the Wall St. Journal):

Existing balances: Issuers cannot retroactively change the rate on an existing balance unless the account is 60 days delinquent.

Payments: A consumer payment above the minimum applies first to the balance with the highest rate.

Teaser rates: Issuers cannot raise rates for the first year after an account opened. Promotional rates must last at least six months.

Bills: Issuers must send a bill 21 days before the due date.

Over limit: Issuers cannot charge over-limit fees on credit cards unless the consumer has signed up to allow such transactions.

Minors: For consumers under 21 years old, a company must get the signature of a parent or another to take responsibility for the debt, or it must obtain proof that the under-21 consumer can repay credit.

Disclosure: Cardholders must get 45 days notice of change in terms.

Fees: Issuers cannot charge fees to pay by mail, phone, and electronic transfer or online, except for expedited service.

Gift cards: All gift cards must have at least a five-year life.

Look out for BULLY BANK VERSION 2.0 - launching VERY soon!

Cheers,

Nik

The S&P 500 has staged a dramatic rally since it’s lows on March 9th and is now actually bordering on being positive for 2009. Corporate earnings have come in a lot stronger than anticipated and banks are starting to loosen lending standards. China’s economic stimulus plan is kicking up manufacturing in the country and the U.S. consumer is showing some signs of strength. Housing prices continue to fall but at a lesser pace while existing home sales are ticking upward. New construction is still a gray area and unemployment remains at high levels with most firms saying they’re not ready to call people back to work.

GDP in the first quarter shrunk at a 6.1% annualized pace, a little better than the 6.3% contraction we saw in the fourth quarter of 2008. Businesses were very effective at drawing down inventories last quarter, which means manufacturing will tick up in this quarter, making the GDP reading for the current quarter a lot better - although still negative.

Two challenges still remains: The need that banks have for extra capital and the effects of the real economy. Stress test results are scheduled to be released on Thursday after noon, initial reports say at least 10 of the 19 banks tested will need fresh capital. The preferred method of raising this capital should be converting preferred shares in to common shares, which would likely wipe out the value of existing common shares. Some of the bigger banks might be able to raise private capital if prices are super low, although this is unlikely.

The effects of the real economy on business have not fully manifested. If unemployment remains high, housing prices will continue to fall and consumers will continue to default on all types of loans at a higher pace. The first real shock to the economy was the failure of the financial system, the second shock should be the effects of high unemployment. High unemployment creates a cycle of default that is hard to break out of, consumers cut down spending and have problems paying back loans, banks and businesses see results deteriorate, this leads to more layoffs and the cycle goes round and round. Although our economy is proving to be extremely resilient, it’s holding up because of government spending, not real and sustainable factors.

I think if you missed the rally it’s way to late to get in, however we might still have room to go up. The stress test results should shape the markets until we see real economic data that points to a recovery. I’m remaining very cautious to not get caught up in this rally, it could very well change direction on bad stress test results, or more bank failures. Simply, we’re not out of the woods yet but I do believe the free fall in the economy is over.

Cheers,

Nik

Sold my calls on FAS today for a 340% gain, huge in percentage terms, not so much in dollar terms, lol. I’m more happy we used an options strategy perfectly, stuck with it, and had it pay off at the end.

I think the financial rally is about over, even though Goldman Sachs blew profit numbers out of the water today, these stocks should see a pullback soon. They’ve just been way to hot recently and for investors not take huge profits in bank stocks would be irresponsible.

Futures are down for now but who knows what we’ll be in for tomorrow. I’m getting the feeling that we’ll have a pretty flat session, unless of course another random bank decides to report their earnings early.

More tomorrow! For now sleep!

Cheers,

Nik

And the sad part is, I’m being serious.

We’ve seen good economic data lately but it’s been offset but bad economic data. Sounds confusing? It’s because it is. Existing home sales, consumer confidence, and some other economic indicates were strong for February/March indicating to some that we’ve hit a bottom. On the other hand the United States continues to experience rising unemployment, less credit card usage, continued rising of the savings rate, home prices dropping at record rates, and record government efforts to infuse capital into the nations banking system.

The markets rallied strong in March off the economic news and pulled back a little recently acknowledging the reality that our economy might still erode further. Now we’re at a point where traders are waiting for more substantial news that points either to a bottom in the markets, not necessarily the economy, or news that will send us back down.

My gut tells me that we have further to go down and the issues in our financial system are not close to being sorted out and that markets will eventually fall further but that doesn’t seem to be happening. This leads to a situation where holding on to my strangle position makes a lot of sense yet the position is far from profitable at this point. A cardinal rule for me normally is that if I don’t know what to do, or feel uneasy, I don’t do anything. Being an independent trader allows me to do that. However, I entered in to a market neutral options position and even with it showing about a 95% loss I still feel comfortable since we’re still a week away from options expiration.

The lack of clear market direction does have me staring at my trading platform and CNBC endlessly during the day though, which gets really irritating. Volatility is what makes us money, swings in the market lead to profitable trades but a market that’s stagnant makes it very hard to put money anywhere. Of course reverting back to individual companies at this point is almost useless since it’s more like gambling then thoughtful trading.

We’ll get a much clearer picture of consumer spending in March today when retailers report their sales for the month. I have a hunch that most of them should report higher same store sales then expected but again, it’s anybody’s guess.

Remember markets are closed on Friday for Easter (Good Friday), so after Thursday closing bell I’m heading straight to the bar, lol.

I’ll update if anything significant happens tomorrow. I just really wanted to share with you guys my recent irritations with this market.

Cheers,

Nik

No real surprise here, analyst Michael Mayo started 11 major bank stocks with a “sell” rating citing escalating loan losses at the banks. The markets aren’t selling off as much as I thought they would following Mayo’s note to clients. The Dow’s down 115 right now, the S&P down 15 and the Nizzy down 35.

I’ve still got my strangle on the FAS and I feel comfortable with it. It’s nice to be market neutral going in to this week.

Also looking in to the possibility of Sun Micro getting offers from other companies, or maybe even a revised offer from IBM they actually accept. If Sun doesn’t sell itself soon, it’s going to have serious problems.

Updates later today. Looks like we will end the day lower though.

Cheers,

Nik