Sunday, December 14, 2008

12/14/08 Bottom Fishing Portforlio Update - Down During an Up Week

On Friday, October 3, 2008, I couldn't resist the temptation of buying some stocks before the bailout vote. I bought shares of Bank of America (BAC), J.P. Morgan (JPM), Wells Fargo (WFC) and Monsanto (MON). I believed that these three banks will not only survive this financial crisis, but will be one the four major banking powers in the next year. Monsanto was down over 50% from its high and its seed and agricultural businesses are still very strong.

As part of this portfolio, I have also been selling put contracts to open on specific stocks. On October 3, I sold a November 60 put on Monsanto. On November 12, 2008, I sold a November 20 put contract to open on Energy Conversion Devices (ENER). On November 20, I sold the December 40 put contract to open on Monsanto. Finally, on November 25, I sold the December 20 put contract to open on Energy Conversion Devices.

Two weeks ago, I decided to buy some Ford (F) call options, to capitalize on a possibility of a rebound if Congress supports an auto industry bailout. On December 2, 2008, I bought the December 5 call and on December 3, 2008, I bought the January 7.5 call.

In hindsight, I bought the financial stocks way too early. I've learned my lesson. I will not purchase any more financial company stocks, until there is a more clear turnaround in the financial crisis of 2008. It also appears that I have been overly optimistic about the occurrence automaker bailout.

The portfolio was down 7.8% in the past week. The overall portfolio is down 31.11%, after reaching a low of -45.30% three weeks ago.

Bottom Fishing Portfolio
Stock or Option [purchase date]SharesPurchase Price

Price on 12/12/08

Bank of America(BAC) [10/3/08]100



J.P. Morgan (JPM) [10/3/08]100



Wells Fargo (WFC) [10/3/08]50



Monsanto (MON) [10/3/08]50



Ford Dec 5 call (FLA) [12/2/08]1000



Ford Jan 7.5 call (FAU) [12/3/08]1000



Currently, I have profited from two put contracts which have been closed or allowed to expired. I sold two more put contracts to open and both are currently profitable.

Put Contracts Sold Short to Open
Option [short date]SharesShort Price

Price on 12/12/08

Monsanto Nov 60 put (MONWL) [10/3/08]100


closed on 10/29/08 for $0.91

Energy Conversion Nov 20 put (EQIWD) [11/12/08]100


expired 11/21/08 at $0

Monsanto Dec 40 put (MONXI) [11/20/08]100



Energy Conversion Dec 17.5 put (EQIXW) [11/25/08]100



Unfortunately, it appears the rally from the Obama economic announcements has ended. The rally was the first five day rally since July, 2007 and the largest five day percentage gain since March 16, 1933. At this point, I am not very optimistic about a Santa Claus rally occurring.

Disclosure: At time of publication, I own Bank of America, J.P. Morgan, Wells Fargo and Monsanto shares and call options for Ford. I also am short put contracts on Monsanto and Energy Conversion Devices.

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This is not financial or investment advice. Please consult a professional advisor.

Copyright © 2008 Achievement Catalyst, LLC

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