I am going to put partial hedges (shorts) against my long positions in both Sequenom (SQNM) and American Science & Engineering (ASEI). Both we've discussed a lot of late - these are currently my only 2%+ positions on the long side.
I think there is a lot of fuss over nothing in American Science & Engineering (ASEI) but let's protect ourselves a bit. The 50 day moving average is $75. After yesterday's hammering the stock bounces right back to that level; I had a limit buy to short placed at $73.50 for a 1.9% stake (so I'm quickly underwater but I'm good with that) My long position is about 2.2% so this is almost fully hedged 1:1.
Strategy here is if ASEI regains the 50 day moving average to get rid of the short and yesterday's Motley Fool flap was nothing but a short term blip. If ASEI continues downward my short exposure will offset just about all of my long exposure and I'll cover as we fall.
Same idea with Sequenom (SQNM) but I was hoping to get a price closer to $17 - the stock gapped down to $15 this morning after yesterday's earning report, and is now back in the low $16 range. So I slapped on a partial hedge - 1.3% of the portfolio vs the long side which is 3.3%. As we get closer to $17 I will increase the short and try to make this around a 2:3 ratio at least (short: long) Then as this very volatile name swings around we'll be able to play both sides and more importantly be protected from a downside move.
I wrote this morning
With the recent drama and "sell the news reaction" to the latest test results the stock is firmly below the 200 day moving average of $17 and hence poised for more weakness rather than strength from a technical viewpoint, until it gets back north of this area. If the market rolls over Sequenom could be retesting that $13-$14 area from early winter.
So we are starting that idea; I am hoping to get a bit of a better price to layer on more short exposure.
You can do the same thing with (buying) puts against long common shares, but doing this efficiently is not achievable for me with my tracking system in Investopedia.com so I'm going with common shares against shares.
Long/short American Science & Engineering, Sequenom in fund; long Sequenom in personal account
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