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In today's edition, Brendan and Austin discuss the bull case for Boeing. The company is poised to take advantage of the aviation boom in the future, as the commercial aerospace market is expected to total a whopping $4 trillion by 2030. In order to capitalize on this, Boeing must deliver its planes on schedule. It has done a better job of this recently and is even poised to top rival Airbus on deliveries for the year, which would be the first time since 2002. Finally, Boeing's new fuel-efficient planes should drive sales in the future as airlines look for ways to cut fuel costs. The 737 MAX has been selling extremely well and should continue to do so.
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Report this Comment On May 24, 2012, at 12:08 AM, MHedgeFundTrader wrote:
This trade was an unmitigated disaster, and hopefully it will be the worst of the year. I’m glad we had one of these because it provides a wonderful opportunity to illustrate everything that can go on with a trade. Every loss is a learning opportunity, and a loss not learned from is an opportunity wasted, and dooms one to repetition. Let me count the ways:
1) I was too aggressive on the strike. I should have matched my long August $70 strike with a short May $70 strike instead of reaching for the extra income by selling the $72.50’s. I got away with this on the (PHM) trade. Not so on (BA).
2) I shouldn’t have leveraged up with a 1:2 ratio. Those who did straight 1:1 spreads did much better and slept well at night. They saw only a slight opportunity cost as some losses were offset by profits in the August $70 puts as intended.
3) I was not aware that individual investors were so harshly treated by margin clerks. Hedge funds only get charged margin on the delta plus some small maintenance, which they then continuously rehedge. Most retail investors were prevented from doing this trade by broker policies banning naked put selling.
4) The at Morgan Stanley guy who decided to price the Facebook (FB) issue on an options expiration day has to have a whole in their head. That only succeeded in increasing market volatility. I’m sure that when they made the call, they thought this would make (FB) go up faster. Instead, the reverse happened. On Friday, everyone’s portfolio effectively turned into a long Facebook position, tracking (FB) tick for tick. This did not end well.
5) This was a really unlucky trade. Although the global macro situation is pretty much unfolding as I expected, I didn’t think the rot would spread so fast once it set in. Even a one-day short covering rally on Friday would have turned this trade profitable. Thank Greece for that. Facebook too. It took one of the longest continuous market moves down, 12 out of 13 days, for this trade to lose money.
6) The only consolation is that those who had puts exercised against them and saw stock delivered into their accounts Monday morning at a cost of $72.50 were granted a huge short covering rally to sell into, with (BA) rising $2.85 back up to $72. This enabled shareholders to recover 85% of their losses on the position.
The Mad Hedge Fund Trader
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