There aren’t supposed to be second chances in the market, but that’s not true. We got a glorious second chance thanks to a combination of BTFD disease, an emergency rate cut, and Biden’s victory on Super Tuesday. All of this result in a multi-thousand point reversal on the Dow, which gave me an opportunity to gently position the necks of the bulls at exactly the right groove of the guillotine. Thus, Thursday was rocking.
I must say, after my night-of-talking-to-myself, and my “new way“, I was in a much better place mentally. It was cathartic and transformative. At least briefly.
Of the 116 stocks I’ve offered as short recommendations, all 116 have been glorious. Some of them have fallen 70%, or even more. Indeed, I would have been perfectly all right covering NOTHING – – including through that multi-thousand point bounce!! – – and would still have more profit than today. The short picks were simply that good.
I had pledged to myself to short no individual items, and I managed to keep that solemn pledge for all of three days. Funny enough, the most severely “oversold” items were the ones that kept falling the hardest. The airlines, for example, were all down double-digit percentages on Thursday alone, even though they had already had their collective nuts blown off.
There are some battered sectors that I suggested shorting months before Corona was anything except a mediocre Mexican beer. Seven months ago, I suggested shorting all the cruise liners (partly because I think the entire concept of joining thousands of fat people for all-you-can-eat buffets on a floating hotel is disgusting). That entire sector has been laid waste.
In any case, I was content loading up on put options and large ETF shorts. But over the course of Thursday, I kept falling so deeply in love with some of my Bear Pen items, I just couldn’t take it anymore, so I started doing that Old Tim Thing of shorting individual items. I’m not doing the “I’m short 80 positions!” thing, but I do have 16 individual shorts (3 ETFs, and 13 regular equities) on top of my 12 put positions. I’m about 130% committed.
Whether I regret this backsliding remains to be seen, but for the immediate moment, it was the right choice, as I glance at the after hours markets:
Yep, it’s our old friend AOBC, which I’ve mentioned again and again as one of the greatest H&S patterns I’ve ever seen in my life. It was such a frustrating stock, because the goddamned thing just wouldn’t break. Until tonight. Of all the thousands of stocks out there, there is no greater loser than AOBC. And I’m short the sucker.
It’s funny, because I came THIS close to doing a post about AOBC yesterday. Specifically, I was toying with the idea of buying put options on it. What struck me as bizarre, particularly in this environment, was how LOW the volatility seemed to be. The built-in Price Cone in SlopeCharts showed how modest the IV was.
I then looked at the options, and they seemed to be crazy cheap. In fact, I went all the way out to January 2021 – – ten MONTHS away!! – – and the $13 puts were almost entirely intrinsic value. There was almost no premium to be paid.
I poked around a bit and saw something or another about how the company was going to break up into two companies, etc., and I decided “screw this.” I figured something had already been agreed, and it was all getting too complicated, so I just shrugged off the whole idea. I had even put together some graphics for the post, but I didn’t want to embarrass myself by missing something simple, like they were already getting bought for $11 or something like that.
In any event, it’s quite evident none of that was the case, because about a quarter of their entire market cap got vaporized after hours, and the options I was looking at (which were incredibly conservative – – hugely in the money, and almost a year out!) will be up over 100% tomorrow. I’m pleased, at least, to have a short position, since frankly the profit will be very similar to what I would have had with the options.
This is all a roundabout way of saying that I’m back to my old tricks. I guess what they say about old dogs is true after all. Here’s hoping The Great Unraveling continues, because it’s the most fun you can have with your clothes on.