Tuesday 6 March 2007

The Energy Saga continues

The good thing about market sell offs is that it increases volatility. As volatility increases so do put option prices.

So, there I was thinking that the rest of the puts had to be written off and then bang, the Chinese market falls off a cliff because of a "possibility" that there is capital gains tax to pay on share gains.

Of course, this was the reason given, but it was just investors panicking. Following the sheep like mentality that they have.

As the market dived, I actually bought some more of my Chinese ETF as this is a 20 year holding for me. I have no intention of selling them. Thanks, you chinese sheep !!

As for my 390 puts, I had 70 left and they were worth about 2p. Then they were worth 8p so I sold 40 of them. Ok I get back half what I paid for them but that is better than a poke in the eye with a sharp FTSE.

Interestingly, I am still thinking how I can make back my losses on this stock by buying some more puts further out. Personally, I think this stock is doomed. Electricity prices are on the decline, so are their power plants. I think in a couple of years this could be an ex-stock, gone to the great market maker in the sky.

Anyway, time will tell.

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