Thursday, July 31, 2008

BMO Option Position Closed, WEE Releases Earnings

Today, I closed my option position in BMO. I had 10 call contracts expiring in August which I'd bought when the price was 0.30, and sold today for 1.65, a 450% profit. After commission, that means I pocketed $1310.10. Not too shabby for such a small risk, but still a bit disappointing given that this time last week had them trading around 2.50. I'd intended to hold until tomorrow, since I expected the stock to peak on its dividend record day, but was just getting to jittery and worried about it.

Whatever, you win some, you lose some, and just win less than you could have.

So that leaves me with the same stock holdings I've had for a while. BMO, FR, WEE. I doubled down on WEE yesterday, buying an additional 500 shares at 1.90.

Today, WEE released their 3rd quarter financials, and I'm not sure what to make of them. From all the news releases recently, I'd expected to see an increase in revenue, and there wasn't much of one. Their losses continue at much the same pace as they've been for the last year. One bright spot was the mention of their PowerWave's performance at boosting oil production. In one field where they are demoing the technology, production is now more than 80 barrels per day higher than when it was installed, and almost double what production forcasts would have expected without the PowerWave. So that bodes well for future sales.

The company remains in a great cash position, thanks to recent equity offerings, and 9 million brought in from exercised warrants this quarter. So there's no concern about the company going under for many years. So, while I was a little disappointed by the quarterly figures, I'm still liking the company as they've got a great technology, and enough money to get the product to market.

Wednesday, July 30, 2008

The Stock Market Appears to be Broken

Okay, call me crazy, and I know you will, but something seems wrong here.

Because of the size of the option bet I have on BMO right now, I've been watching its stock performance quite closely. Given its dividend payment on Friday, I'm counting on it to outperform financials this week.

But today, it's acting oddly. Driving me mad, actually. The financial sector is pretty much universally up today, but BMO is not. That, in itself, doesn't really mean anything's broken...just not going the way I planned. But what is broken is that BMO is up about 2% on the NYSE, while being down about 0.3% on the TSX. They are otherwise moving together. This is the same stock, so the difference between the two's performance should represent only change in exchange rate, which is not the case here.

Of course, the two prices aren't linked directly, but are connected in that large institutional investors could buy on one exchange and sell on the other if the gap was big enough to make it worth their while.

Anyway, pissing me off, but what else is new. Still hoping for good performance going into Friday.

Friday, July 25, 2008

Sell or Hold?

It's been an emotionally intense week. After last week, when BMO continued to drop and I was worried about whether I'd recover any of the $320 I'd spent on August 48 calls, the stock shot up. Too fast, I would say. By the end of Wednesday, I was almost a full dollar into the money, and my calls were worth around $2500. But I had this target...I expect a peak next Friday, so I held off on selling them.

I'm still deliberating on whether or not that was a mistake. Thursday saw all of Wednesday's gains wiped out, dropping my calls by half their value. Today has been very up and down, the value of BMO has been sidelining, occasionally going down slightly, but generally hovering between $47.50 and $47.80. I have a history of holding onto stocks that have had good gains, only to see all those gains wiped out, ending in a loss. On the other hand, I sold my last option bet for a small ($400) profit, only to see them worth thousands more a week later.

So I'm really torn. I'm still telling myself that next Friday is the day. And if I've still got them, I'll definitely sell them then for whatever I can get. But getting that far without pulling my hair out will be a challenge.

Thursday, July 3, 2008

Another Option Bet

The past month has continued to be fairly dull. I am hanging on to my positions in FR, WEE and BMO. FR and WEE have recovered from my earlier losses and are now hovering around my purchase price (I purchased FR at several different price points, so it is profitable for me at $4.71). BMO did the reverse, and so my portfolio continues be doing little for me.

But with the BMO drop, I saw an opportunity. August 1 is the day of record for the next dividend. At today's value, the $0.70 dividend is the equivalent of 6.5% interest, with lower taxes. So it seems likely that the stock price will recover significantly before August...the last dividend date saw the price spike up to $52. So I bought some August calls, with a strike price of $48. Currently, they're trading for peanuts - I paid $0.30, and they're currently at $0.20, but it seems like a good deal.

I like calls for a few reasons. They magnify the effects of normal market movements, so you can actually make a significant amount of money off of them, with limited downside. For instance, even in the worst case scenario that I hold them to expiry and they never go into the money, the most I can lose is $300. On the other hand, if the price were to repeat the last spike - to $52 - I would take home $4000. Somewhere in between would be fine by me.