Note: The Goldman Sachs direction neutral strategy empirical analysist is now available to Pro subscribers. Click pdf Goldman Sachs Option Strategy Pro Analysis 2009-08-05 09:52:44 1.02 Mb to access or proceed to the downloads section.

We have started with analyzing market neutral option strategies during the bull run of 2Q09. Also we have started with analyzing most optimal OTM Strangle strategies for the S&P and the companies we have covered over the last year. Below is a list of 12 companies for the purpose of analysis based on following criteria.

Criteria 1 :

a) More than 50% price change over the past one month / three month / six month and

b) More than 5% deviation from consensus mean

or

Criteria 2 :

b) More than 25% deviation from consensus mean

Based on the criterion above we have selected the list of 12 companies below. Before getting to the list, I want to make clear how absurd this rally has been. Notice the columns in the list and who has made the list... The worst performers with the worst prospects have been propelled the farthest, while the best performers with the brightest prospects have remained relatively static. I aim to mitigate the risk of prospecting for a correction with the direction neutral strategies described in my previous post.

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As mentioned in my previous post, an empirical backtesting of strategies that I have used and/or are contemplating using is available for download.

Direction Neutral Strategy - S&P 500 Direction Neutral Strategy - S&P 500 2009-08-04 10:14:35 1.38 Mb

As mentioned in my previous post, an empirical backtesting of strategies that I have used and/or are contemplating using is available for download.

Direction Neutral Strategy - S&P 500 Direction Neutral Strategy - S&P 500 2009-08-04 10:14:35 1.38 Mb

Saturday, 01 August 2009 01:00

New subscriber research available

The tricky dick bank's quarterly review is available for download. They have pulled what appears to be extremely aggressive accounting maneuvers to produce paper profits for two quarters in a row now. One would think that the regulatory authorities would bear down on them, for I feel their reporting is highly misleading as to the health and profitability of the institution. Alas, the accounting gimmickry appears to be good for their share price in the short term, though. The first quarter review is also included below for the sake of comparison.

BOK 1Q09 1Q09 2009-05-07 06:34:52 460.74 Kb

BOK 2Q09 review 2Q09 review 2009-08-01 05:04:06 1.05 Mb

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You can find the not in the downloads section or access it here: CVC Intelligence noteIntelligence note 2009-07-29 00:40:46 926.20 Kb

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Tuesday, 28 July 2009 01:00

PNC plus CRE = Doo Doo hitting the Fan

To highlight more of the damage to be done to TARP recipient banks such as Wells Fargo and PNC, I know turn my attention to the commercial mortgage sector (see the previous post BoomBustBloggers appear to be pressuring PNC for background info). We have already hashed out risk in the residential mortgage sector with valuable research that I released for free: see The Re-Release of the Open Source Mortgage Default Model and Green Shoots are Being Fertilized by Brown Turds in the Mortgage Markets for our in depth take on loan losses to come for all banks who participated in residential real estate lending. I have visited commercial lending risk many times before, starting with my work on GGP, which is now bankrupt, but not before I gave my readers a warning nearly a year in advance See my posts from 2007 and early 2008:

Now that the nation's second largest mall property owner and REIT has just filed chapter 11, after I warned readers over a year and a half ago of this very distinct possibility, others are finally starting to jump on the bandwagon (See General Growth Files for Protection in Biggest U.S. Real Estate Bankruptcy then go on to read the 80 or so pages of research that I have generated to support riding the share price down from $60 to near zero: GGP and the type of investigative analysis you will not get from your brokerage house.)

You may read more about what is happening in CRE lending in A Micro View of the Macro Damage to be Caused by Imploding Commercial Real Estate, but for now, I want to drill down to what these banks are holding.

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It looks as if a BoomBuatBlogger subscriber has made it into the news with a large option trade - STOCKS NEWS US-Bears flock to PNC Financial put options

PNC Financial Services fell 4.33 percent to $35.79. It reported a steep drop in quarterly earnings, hurt by credit losses and in its options, bears clawed at puts in the November contract, said Andrew Wilkinson, market analyst at Interactive Brokers Group. One player apparently enacted a ratio put spread in a bid to profit to the downside, he said. The Nov $36 strike had 20,000 puts bought for an average premium of $4.08 apiece spread against the sale of 40,000 puts at the Nov $31 strike for $1.97. The cost of the trade was 14 cents and yields maximum potential profits of $4.86 if shares fall to $31 by expiration. He also noted new put action at the Nov $29 strike and the $27.5 strike where 15,000 puts traded.

As subscribers know, we have determined that the overly lenient government stress tests (SCAP) will leave more than one bank requiring an additional capital raise before this credit malaise is all said and done. See The Re-Release of the Open Source Mortgage Default Model and Green Shoots are Being Fertilized by Brown Turds in the Mortgage Markets for our in depth take on loan losses to come for all banks who participated in residential real estate lending. These are the facts, unfiltered by green shoots mantra. PNC's government mandated $600 million capital raise was a joke,plain and simple. They will probably require multiples of that amount due to their National City acquisition and a careful glance at their balance sheet easily supports that assertion.

I have decided to show all a summary of what is arming subscribers to remain bearish against PNC, among other banks.

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