NEW Taken Down to Chinatown...
Well, "the gearing issue" has been resolved and the answer to our earlier questions about New Century's mortgage portfolio were answered today, with a sucking sound of a 10 point drop. In fact, we even wrote a report about NEW's portfolio and retracted it after the Investor Relations department came calling to straighten out a few factual errors on our part. Now the chickens are home to roost, and we are well underwater on our earlier call.
Fine.
So, that left The Yield Hoe with a problem, how can you scalp NEW's massive 25%+ TGTBT yield, while protecting yourself from a down draft, by shorting or perhaps using derivatives? Let's say for the sake of saying that theyieldhoe.com took a shot with NEW with say, 200 shares, and at the same time, shorted 2 Jan. 08 calls @ 40 strike price. How much offset would he get (enough to cover the loss?).
Well, you'd be up 67% today, with a gain of about a $200 dollar gain to offset your 2000 to 2500 dollar "loss". So the "gearing" question has been answered. How much of one balances a major move in the other, a subject that 100's of MBAs are sweating out of text books and HP calculators right now in places like Cambridge Mass and Currant Institute in New York.
The Yield Hoe was 10 percent right. We really needed 10 of these, not 2, and in spite of the 67% return from the falling knife, the miss is as good as a mile here.
Puts were clearly the ticket for NEW.
Fine.
So, that left The Yield Hoe with a problem, how can you scalp NEW's massive 25%+ TGTBT yield, while protecting yourself from a down draft, by shorting or perhaps using derivatives? Let's say for the sake of saying that theyieldhoe.com took a shot with NEW with say, 200 shares, and at the same time, shorted 2 Jan. 08 calls @ 40 strike price. How much offset would he get (enough to cover the loss?).
Well, you'd be up 67% today, with a gain of about a $200 dollar gain to offset your 2000 to 2500 dollar "loss". So the "gearing" question has been answered. How much of one balances a major move in the other, a subject that 100's of MBAs are sweating out of text books and HP calculators right now in places like Cambridge Mass and Currant Institute in New York.
The Yield Hoe was 10 percent right. We really needed 10 of these, not 2, and in spite of the 67% return from the falling knife, the miss is as good as a mile here.
Puts were clearly the ticket for NEW.
Labels: high yields dividend investing, NEW, new century
posted by TheYieldHoe at
5:28 PM
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