4-Star Stocks Poised to Pop: Deere

• Report this Comment On October 07, 2011, at 2:27 PM, MHedgeFundTrader wrote:

  I am bailing on my long position in the Caterpillar (CAT) January, 2012 $110 calls. I think there is a snowball’s chance in hell that the stock will make it back above $110 or more by the January 21 expiration. Therefore, I have to salvage whatever time premium I can before it goes to money heaven. In fact, it might even be worth going short a few of these calls, if your inclination is to pick up pennies in front of the bulldozer.

  I went into this trade with all the best intentions. I still love the company fundamentals for the long term, as its sales are still rising at well into double digit rates. But if there are fears of a slowdown in China, this is definitely a stock you do not want to own. Caterpillar shares also got blindsided by the meltdown in copper, which pared a stunning 35% off its yearly high in a heartbeat.

  I also turfed this out of my trading book because, quite frankly, I was getting sick of looking at it. This trade was leftover from July, when we were living in a distant, more equity friendly world. This was before the Tea Party threatened a Treasury bond default, and Standard & Poor’s downgraded them anyway, triggering the current collapse in confidence.

  Chalk it all up to a lesson on the value of using limited risk positions to control your risk in a trading book. My loss on this trade came to 4.81% of the total portfolio value. The options capped my maximum loss at 5%. Stop losses also showed their worth, which I woefully ignored in this case, much to my own expense.

  I don’t like being reminded of my mistakes any more than the next guy, so it is hasta la vista, baby, to the Caterpillar calls. I live in a world of instant gratification, so it is on to the next one. Anyway, with 18 consecutive profitable trades under my belt over the past two months, I am now well ahead of the curve.

  I do make mistakes. For the perfect track record you have to go to that other more expensive mentoring service down the street with the flashing neon lights and those aggressive, sexy touts offering the perfect track record. By the way, that track record is fake.

• Report this Comment On October 07, 2011, at 5:21 PM, 1caflash wrote:

  DE is O.K., but I like Lockheed Martin (LMT). It is hard not to welcome a 25 cents-per-share quarterly dividend increase. Do not be startled by all the "talking heads" who are scared that governments will drastically cut defense spending. Buy LMT on dips. Read how respected this company is internationally and relax.

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