VLCCF – Trade Entry – 19-Dec-2014

VLCCF has sold off massively into year end, mainly due to oil price. All small cap shipping stocks have been destroyed. Fortunately we sold 200 shares for about $14 earlier this year, so we have about $1000 profit to play with. So in Nov 2014 started selling puts against the position, with a view to getting either extra income or being assigned. Vol was high, so was a good play, however was still “early”. Sold $7.5 Dec 2014, when VLCCF was approx $8 in mid Nov, but got totally caned in Dec (but still better than buying stock outright). Put will be assigned (deliberately) today on 19th Dec at expiration on the close today.

Table below summarises our stock position, which has an unrealised loss of approximately ($8.08 average price - stock close price $4.71 x 560 shares = -$1887). However we realised a gain earlier in the year (May 2014) of $1011, selling 200 shares at $14.15. So our total loss on the stock is about  -$876. However we have dividend reinvested, so that is lowering the average price as well (hence the 60 or so extra shares, over the original 500 share position). Original cost basis was 500 shares at $9.79 = $4895. So loss is -17%, however given that stock price is down -%52 since purchase, that could be claimed as a small victory.

Our aim is to try and get out of this position, with a patient long term approach coupled with option trades and tactical stock sales to reduce overall cost basis.

Stock Position
Shares
Cost Basis /
Average Price
Cost Basis Principal
Existing VLCCF position3608.873193.2
Dec 2014 $7.5 put assignment (deliberately assigned on 19th Dec 2014)200$6.51300
TOTAL560$8.024493.2

The implied vol is 140% (very high) in Dec 2014, so are looking at volatility strategies, namely selling options. The stock is cheap enough (under $5) to consider very conservative put selling strategies, which when coupled with high IV makes it a good candidate for the philstockworld.com style trade (or longer term premium selling). We havent done this trade before, so will be conservative on the first one.

Look at the option chains for June 2015 shows the $7.5 and $2.5 puts. This trade was executed by selling puts and selling calls (premium on both sides).

VLCCF150619C7.5CALL (VLCCF) KNIGHTSBRIDGE JUN 19 15 $7.5 (100 SHS) -5 $221.07 $0.44/Share
VLCCF150619P2.5PUT (VLCCF) KNIGHTSBRIDGE JUN 19 15 $2.5 (100 SHS) -5 $313.12 $0.63/Share

This makes $221.07 (call premium) and $313.12 (put premium) for a total of $552 if VLCCF finishes in between $2.5 and $7.5 in 6 months time. What are the possible scenarios in Jun 2015:

Closes Below $2.5: This is effectively committing to buy 500 shares at about $2.5 – total option premium of $1.07 (or about $1.43 per share). This would be a bad outcome, and would have average price of about $4.75 on 1000 shares. Assuming stock would not go bankrupt (!) would have to look at option premium trades again (to further lower cost basis), or just buy and hold and wait it out. This would not be good, but would be way better than buy and hold from $9.79 to $1 to $2 range.

Closes Between $2.5 and $7.5: since the IV is VERY high there is a higher likelihood that vol reduces over the lifetime of the trade, so that will also give a way to profit even if stock doesn’t move anywhere over the next 6 months. This is like a “psuedo” dividend assuming the stock stays in a ride range – the options market currently prices this at about at 50% chance of happening, but if the IV comes down the percentage chance of it happening will be reduced as well. The “normal” IV for this stock is about 40% and that would price it at about a 75% of chance of happening (much better odds). The P&L here would be the stock P&L, plus about 5 contracts x $1.07 option premium or about $535 (the “pseudo” dividend). If stock price is over $7 by Jun 2015 expiration then this is breakeven on the currently unreleased open positions, however if you add the $1011 profit from earlier in the year, then the breakeven since position inception is approximately $5 (which looks achievable, and is not a bad outcome given that the position was started at $9.79).

Closes above $7.5 : If the stock is above the $7.5 strike in 6 months, then the entire position will be assigned for a profit:   –  $8.08 average cost basis + $7.5 strike assignment + $1.07 option premium = about $0.49 profit on 500 shares. That would make a small gain on $250, which added to $1011 from earlier this year, would give about a 25% profit on original position (and would have exited with VLCCF position with a decent gain, not having given up on it when it was a loser as it is today).

Note: There are an extra 60 shares that have been acquired due to reinvested dividends, but that would just be bonus profit (e.g. if closed at $10, then would get $2.5 * 60 shares = $150 of extra profit). But that was not included above to keep calculations simpler.

 

VLCCF – Trading Journal – 28-Jul-2014

 
Trading Setup Summary
VLCCF
24-May-2012
9.09
500
4545
28-Jul-2014
8.93
355.05
568
4161.12
Current Date
Average Price
Current Shares
Current Valuation
Trading Days Held
Start Buy Date
Start Shares
Start Buy Price
Stock
Start Investment
Long Stock
Strategy
11.72
Current Price

Total Strategy Return
Gain Loss
Type
Gain Loss
Percent Return (%)
Category
Annualised
Percent Return (%)
Annualised Income Stream
(dividends+income+hedges)
Percent Return (%) – see Note *
Unrealized
992.08
21.83
10.01
Stock
Realized
1011.94
22.26
10.21
Stock
Realized
704.15
15.49
7.1
Dividends
7.1
Unrealized
0.0
0.0
0.0
Income
0.0
Realized
0.0
0.0
0.0
Income
0.0
Unrealized
0.0
0.0
0.0
Hedging
0.0
Realized
0.0
0.0
0.0
Hedging
0.0
59.58 %
TOTAL
$ 2,708
27.32 %
7.10 %
Buy and Hold Percent Return (%)
22.34 %
Note: The last column on the right hand side "Annualised Income Stream Percent Return (%)"  shows the 30 Day Trading strategy as an income stream of "dividends", option "income" (usually call option strategies) and option "hedging" (protective put options). By design this excludes stock unrealized/realized gain/loss so is deliberately different than "Annualised Total Strategy Percent Return (%)". This is a useful measure of the ongoing annual costs of running 30 Day Trading strategies (versus buy and hold). This can measure how effective the option "hedges" were over the course of the year (sometimes they may make money, but often option "hedges" are a drag on returns). Combining "income" option trades and "dividends" it can be seen whether or not these compensated for cost of "hedges" (sometimes they will). This is a unique measurement for 30 Day Trading strategies to see which category of "dividends", option "income" or option "hedges" helps (or hurts) annual returns.
Total Strategy Breakeven
Stock Price
% decline from current price
5.08
56.64



Gain Loss Summary per Trading Quarter
Year
Category
Gain Loss Type
Q1
Q2
Q3
Q4
Total
2014
Stock
Unrealized
0.0
992.08
0.0
0.0
992.08
2014
Stock
Realized
1011.94
0.0
0.0
0.0
1011.94
$ 2,004
TOTAL

Unrealised and Realised Gain Loss Detail
Year Qtr
Category
Type
Symbol
Qty
Unit Cost
Cost Basis
Price
Value
Gain / Loss
Liquidation Date
2014
Q2
Stock
Unrealized
VLCCF
300.0
9.09
2727.0
11.72
3516.0
789.0
2014
Q2
Stock
Unrealized
VLCCF
0.0451
11.09
0.5
11.53
0.52
0.02
2014
Q2
Stock
Unrealized
VLCCF
8.0
11.01
88.09
11.72
93.76
5.67
2014
Q2
Stock
Unrealized
VLCCF
1.0
9.93
9.93
11.72
11.72
1.79
2014
Q2
Stock
Unrealized
VLCCF
11.0
8.03
88.33
11.72
128.92
40.59
2014
Q2
Stock
Unrealized
VLCCF
1.0
8.94
8.94
11.72
11.72
2.78
2014
Q2
Stock
Unrealized
VLCCF
9.0
9.13
82.13
11.72
105.48
23.35
2014
Q2
Stock
Unrealized
VLCCF
1.0
7.2
7.2
11.72
11.72
4.52
2014
Q2
Stock
Unrealized
VLCCF
12.0
6.63
79.58
11.72
140.64
61.06
2014
Q2
Stock
Unrealized
VLCCF
12.0
6.44
77.34
11.72
140.64
63.3
2014
Q1
Stock
Realized
VLCCF
200.0
9.09
1818.0
14.15
2829.94
1011.94
21-Mar-2014

Trading and Income Activity Detail
Year
Qtr
Category
ActivityDate
Description
Symbol
Quantity
Price
Amount
2014
Q2
Stock
10-Jun-2014
KNIGHTSBRIDGE TANKER PRINCIPAL
VLCCF
0.0
2014
Q2
Dividends
09-Jun-2014
KNIGHTSBRIDGE TANKERS HOLDING
VLCCF
0.01
2014
Q2
Dividends
05-Jun-2014
KNIGHTSBRIDGE TANKERS HOLDING
VLCCF
71.0
2014
Q1
Stock
21-Mar-2014
KNIGHTSBRIDGE TANKERS TRADE AS
VLCCF
-200.0
14.15
2829.94



Year
Qtr
Category
ActivityDate
Description
Symbol
Quantity
Price
Amount
2014
Q1
Stock
11-Mar-2014
KNIGHTSBRIDGE TANKER PRINCIPAL
VLCCF
0.0
2014
Q1
Dividends
10-Mar-2014
KNIGHTSBRIDGE TANKERS HOLDING
VLCCF
0.06
2014
Q1
Stock
10-Mar-2014
KNIGHTSBRIDGE TANKERS PRINCIPAL
VLCCF
9.0
0.0
2014
Q1
Dividends
06-Mar-2014
KNIGHTSBRIDGE TANKERS HOLDING
VLCCF
95.55
2013
Q4
Stock
13-Dec-2013
KNIGHTSBRIDGE TANKER PRINCIPAL
VLCCF
0.0
2013
Q4
Dividends
12-Dec-2013
KNIGHTSBRIDGE TANKERS HOLDING
VLCCF
0.12
2013
Q4
Stock
12-Dec-2013
KNIGHTSBRIDGE TANKERS PRINCIPAL
VLCCF
12.0
0.0
2013
Q4
Dividends
10-Dec-2013
KNIGHTSBRIDGE TANKERS HOLDING
VLCCF
93.45
2013
Q3
Stock
13-Sep-2013
KNIGHTSBRIDGE TANKER PRINCIPAL
VLCCF
0.0
2013
Q3
Dividends
12-Sep-2013
KNIGHTSBRIDGE TANKERS HOLDING
VLCCF
0.15
2013
Q3
Stock
12-Sep-2013
KNIGHTSBRIDGE TANKERS PRINCIPAL
VLCCF
10.0
0.0
2013
Q3
Dividends
10-Sep-2013
KNIGHTSBRIDGE TANKERS HOLDING
VLCCF
91.7
2013
Q2
Stock
07-Jun-2013
KNIGHTSBRIDGE TANKERS PRINCIPAL
VLCCF
12.0
0.0
2013
Q2
Dividends
05-Jun-2013
KNIGHTSBRIDGE TANKERS HOLDING
VLCCF
89.6
2013
Q2
Stock
03-May-2013
KNIGHTSBRIDGE TANKER SALE PRICE
VLCCF
3.28
2013
Q2
Stock
26-Apr-2013
KNIGHTSBRIDGE TANKERS TR TO
VLCCF
-512.0
0.0
2013
Q2
Stock
26-Apr-2013
KNIGHTSBRIDGE TANKERS TR FROM
VLCCF
512.0
0.0
2013
Q1
Stock
08-Mar-2013
KNIGHTSBRIDGE TANKERS PRINCIPAL
VLCCF
12.0
0.0
2013
Q1
Dividends
06-Mar-2013
KNIGHTSBRIDGE TANKERS HOLDING
VLCCF
0.53
2013
Q1
Dividends
06-Mar-2013
KNIGHTSBRIDGE TANKERS HOLDING
VLCCF
86.98



Year
Qtr
Category
ActivityDate
Description
Symbol
Quantity
Price
Amount
2012
Q4
Dividends
12-Dec-2012
KNIGHTSBRIDGE TANKERS HOLDING
VLCCF
87.5
2012
Q3
Dividends
12-Sep-2012
KNIGHTSBRIDGE TANKERS HOLDING
VLCCF
0.35
2012
Q3
Dividends
12-Sep-2012
KNIGHTSBRIDGE TANKERS HOLDING
VLCCF
87.15
2012
Q2
Stock
24-May-2012
KNIGHTSBRIDGE TANKERS
VLCCF
500.0
9.09
-4545.0