WTF HUM? - This is why you diversify
My mother-in-law is from Scotland. They have a saying over there that popped to my mind when I saw HUM this morning, “For F*ck Sake!”
It was down 20% on sympathy with Well Point’s news that they were lowering earning forecasts. We have a huge bounce in the broader markets and I stand to recover a lot of my paper losses from yesterday and yet my two HUM April 65 puts are sinking me back to a loss again. I’m debating on what I’ll do with HUM. I have until April unless it’s assigned early, but maybe I should cut my losses now or maybe I should hope it comes back up some. It’s down $3 from when I first thought about it.
I wrote the above text about 30-45 minutes ago before getting caught up on something else at work. It’s 1:15 now and down a little more. I bought back one of my puts to split the arguing going on in my head. HUM is trading at 47.10 and I paid 18.00. I’d like to wait another day or two to see if it’ll rally any, but might change my mind and just dump the other one today.
Comment by spanjolska
hum really is getting beaten,,,really sorry ,,,i almost got burned same with kerx, but fortunately i got with small gain the day before they anounced that solunex- not good
Comment by Alex Fotopoulos
Yep, I really screwed up with this pick. I checked it again at 2:15 and saw HUM down another $3 to 41.15. I bought my second of two naked puts back. This one for $21.00. I lost a total of $3492.98 on HUM. Some of that loss came before today. What hurts the most is that I could’ve gotten out before lunch for a $2600 loss. At least most of my other holdings are up.
Comment by Options Strategery
Damn, that sucks. I know the feeling but then again, I’ve grown used to it. For example, I held PETM through earnings and got a 15% drop. It’s just Mr. Market. But I definitely agree that leverage makes it feel much worse. That is, to lose a couple grand to make a couple hundred.
Took a look at HUM and it seems like it has recovered from the absolute bottom. However, given my knife catching sense, I think it’s going to slowly drift down for a while. The options premiums spiked in volatility. I am going to wait until the strikes at these new prices come out. HUM might be an interesting play in the 30’s.
Clearly the drop today showed that it is not correlated with the financials…
Comment by mule65
Best to stay under 5% of portfolio and avoid leverage on any single company. 200 HUM put at $65 would be $13,000 which was too much. You’re not alone, I learned the hard way too. Now I only use leverage on certain ETF’s. Buy the dips in a bullish market and sell the peaks in a bearish market. Good luck.
Comment by Alex Fotopoulos
I ended the day up $42, so that’s better than down and I’ll try not to think of the “what ifs” since that’s just part of investing. I bought back one of my puts above the close and one a few bucks below. That’s just how it works I guess. I could’ve held, but agree it could end up drifting lower just as easy as it could drift back up, especially since they haven’t reported a revision in their earnings yet, just Well Point did.
Yep, I go up to 12-15% usually, but will let myself slip higher sometimes like on NVDA which clearly was a mistake. I don’t think I could find enough stocks to trade that I like if I kept myself limited to 5%. That would only be $4k per stock. I’d have to hold 40 stocks to be invested double like I aim for. ((80k*2)/(80k*5%)=40)
13% per equity lets me hold 15 stocks if I’m fully invested x2. ie 80,000 (my approx balance lately) x 2 = 160k/15 = 10,667. I go a little higher when I see a stock like POT and want to trade the 135 strike ($13,500) or in this case HUM at 65 ($13,000).
Comment by jgoldstein
Thank G-d for today!! Although we all “know” that we are in a “corrective” market, human nature makes us believe that it can’t get any worse. My AAPL has stayed between my $115 puts and $140 calls; MICC scared me when it touched $101 yesterday ($100 puts). I also hold the NVDA $20 puts. I have a long way to catch up on other positions. Emotion is keeping me in!I thank all of you for your comments - its reassuring to see others with a similar take in investing and I learn from all the comments.
Comment by Options Strategery
I have NVDA $22.5 out the wazoo. AMD/ATI is barely competition so the business is solid. E is gonna take a hit due to consumer spending drop. The problem I think that’s killing us right now is the P/E contraction across the board. Look at the Nasdaq 100, just a horror show.
Comment by Alex Fotopoulos
Man JG, now you’re just rubbing it in that I dumped my AAPL 115 puts.
Congrats on the good holds. I’m with you. It takes a lot to hold onto some old losers to wait for these big days. I had to have a lot of good ones to make up for HUM - these were the biggest: POT (+13.19), MON, NYX, VIP, FWLT - oh, everthing I was long on except BA and that’s just in my IRA so I’ll wait it out.
Comment by Alex Fotopoulos
@7 - I’m with you, it’s not just that e is dropping, but the muliples we’re allowed to get away with are coming down too. That’ll change again though.
Comment by Options Strategery
HUM down another 25%. See, now you look brilliant:).
Comment by Alex Fotopoulos
Exactly, was there ever any doubt? ha ha
Comment by Options Strategery
I thought it would never happen, but it’s up. This *never* happens to any falling knives I try to catch. Grrr.