Another week another lesson relearnt

 

So that was an interesting week and another lesson in the futility of trying to predict macroevents and central bank policy. I was absolutely convinced there would be no new QE announcement by Bernanke and the FED. How wrong I was!

Yes, the world economy looks a bit shakey, unemployment is still high in many countries but stock markets (certainly in the US) are holding up, companies are making profits and we certainly aren't in the middle of a 2009 financial event that requires extreme measures.

In any case Bernanke announced more bond buying but this time with an unlimited time horizon, I guess we can thank him for saving us from all the talking head chatter when QE3 finishes and when/if QE4 will start! Stocks went mental with some of my watch list such as SKF, Boliden, Atlas Copco jumping 5% in just one day!

I personally don't understand why this latest QE is really needed and seems overdone. I can only imagine that the situation behind the scenes is worse that it looks. Another theory of mine is that this is all designed to recapaitalise the banks who can borrow the cheap money and then relend it with increasing profit.

I suspect this will continue until the banks are no longer considered a risk to the financial system. That's all conjecture of course. It's not my job to understand why the FED did what they did, just to trade the markets the best I can whatever the situtation.

Another stock on my put selling watch list is Norwegian oil company Statoil, P/E 6, P/B 1.6. Looking at the three year price chart there seems to be good resistance at 120-130.

 

This kind of makes sense when we look at the dividend. Statoil has paid out between 6-6.5 NOK per share over these years, so buyers are stepping in at these levels to get a large cap oil company with a dividened yield of about 5%. Very attractive!

On Wednesday with the price around 148 I tried to sell the Nov 145 puts for 3NOK. That would have earnt me 2% on my capital and got me in at 142, near the years lows. I could have always rolled down in the event of a pullback. Unfortunately the order never got filled as the stock price drifted up slightly.

I didn't chase it as I expected a disapointment from Bernanke and a subsequent drop in stock prices. Instead he announced a new round of QE and Statoil jumped 3% to 154, driven I assume by higher oil prices. I will now need to sell 150 strike price to get the desired income I want from this trade.

I will wait for the moment to see if there is any pullback or consolidation at this new level. If investors keep piling into stocks and prices continue to rise in the coming weeks it will certainly be very tricky to find acceptable strike prices on stocks that are considerd good buys.