I think there is a lot of fuss over nothing in American Science & Engineering (ASEI) but let's protect ourselves a bit. The 50 day moving average is $75. After yesterday's hammering the stock bounces right back to that level; I had a limit buy to short placed at $73.50 for a 1.9% stake (so I'm quickly underwater but I'm good with that) My long position is about 2.2% so this is almost fully hedged 1:1.
Strategy here is if ASEI regains the 50 day moving average to get rid of the short and yesterday's Motley Fool flap was nothing but a short term blip. If ASEI continues downward my short exposure will offset just about all of my long exposure and I'll cover as we fall.
The stock has been an ox in today's tape and after a morning sell off has been trending up all day, and is one of the few green stocks in my entire watch list. So while it stinks for one of your shorts not to work on a -4% day, I am ok with it since the long exposure was higher than the short. I'm dutifully impressed and wish to find something else to use as a hedge... I am closing out the remaining 0.7% short position with a 5% loss and we're only "long" at this point. The only day it closed below the 50 day was the Motley Fool article day and since then it has bounced nicely.
Now, if I had the perfect pairs trade I would of married a long in ASEI with a short in competitor Flir Systems (FLIR)! Aye carumba!
EDIT 4:10 PM - I just checked through my watch lists and only 12 stocks (of 500) that are not gold/silver related were in the green. That's amazing - two were based on earnings and two were stocks obliterated last week (LPHI, GERN). Talk about bad breadth; that's horrific.
Long American Science & Engineering in fund; no personal position
3 comments:
VMI reported a good qtr that beat expectation.
Do you think it has some legs given the Stimulus package is approved and VMI is an infrastructure play?
What is the rationale for shorting your long positions as a hedge, rather than just holding the net exposure you want? Would you do this in a real mutual fund, or would you usually utilize an options strategy for this? If so, how would you plan to incorporate options into the overall strategy of Rising Tide?
Robert, good question.
First, I'd use put options if the price were right
But since I cannot predict the future, and in the case of ASEI it broke below support I wanted to be able to benefit in case it went down to offset the long. It is hard to right size without knowing the future.
I am doing the same thing with SQNM with more success. I've been using 17 as a pivot, short it as it gets there, and its making me some gains while the long side sits there.
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