Ok, so 29 days ago I blogged about how I thought that solar was over-valued and that I was considering buying some puts. At the time, Canadian solar (the stock I mentioned) was bouncing between $45-$51 a day.
My exact words were:
"Canadian solar was trading at around $17-$20 in February and March, for example, and now it's trading at $45-$51. According to google, it's trading at at P/E of 64.42. Between March and May, in the span of about 45 days, the stock more than doubled in price. Of course, my reading indicates that they did have a great Q1, but a freaking double???
The puts are expensive, but I'm debating making a play on this one. I mean, I can't really see the stock getting much higher. It would seem to me that this one is going to come crashing down to at least $30 or so, perhaps as low as $25. The question is when. Predicting when the oil bubble is going to bust...could be a tough call. And, of course, I'm just assuming that the stock will crash when the oil bubble pops."
It turns out, I was almost exactly right. The oil bubble popped (to some degree) and stock is trending between $27-$28 a share right now. I could have made some serious cash there.
However, the advice you guys gave me was wise (not to make plays shorting solar while oil prices were skyrocketing). I didn't make the play, even though I thought that solar, at least Canadian solar (CSIQ) was overvalued. It would have been difficult to predict when oil was going to go down, but in retrospect, buying at least a single put just based on "gut" instinct wouldn't have been a bad call in this scenario. Knowing when to take a caculated risk based on intuition and "gut feeling" is always a tough call. Gut feelings and intuition don't always match up with the market, and many times one winds up looking back and feeling silly or stupid for throwing money down the drain. Anyway, I missed out on some cash there. I don't blame you guys at all though. I made the decision not to make the play because I thought it was risky and you guys agreed with me. ...From my experience, I'm more likely to make a "gut" play if it's a cheap play with minimal cost. The puts were fairly expensive, and the risk was high, so I didn't make the play. Still, this was a play where my gut would have been right. Even though I didn't go with it, I'm still happy to know that my market intuition seems to be getting better.
With that said, I figure gas is going to go a little lower before skyrocketing again, either due to demand, or due to an attack on Iran. --It looks like Iran is unwilling to negotiate on uranium enrichment, and I think it's very clear that Israel will bomb Iran before they let Iran get nukes. If Israel is going to attack Iran's nuclear facilities, I think it will happen before Bush leaves office. I think the attack is likely, and it will cause gas prices to soar like never before. I'm not saying that the attack is going to happen, but based on the current political scenario, I think it is more likely than not likely. Iran's current government has proven that they're nothing but a bunch of hard-liner liars (I can give numerous examples, if you're unfamiliar with the situation), and and they've given nothing but tough rhetoric. Unless something changes substantially, I figure the odds are in favor of an Israeli attack on Iran's nuclear sites before Bush leaves office (for obvious reasons), which will make gas prices soar like crazy. --Again, I'm not saying an attack "will" happen; I'm just saying that unless things improve drastically, I do see the bombing happening and oil spiking.
Keep in mind that I'm not buying oil/gas or suggesting that they be bought. But I'm keeping my eye on that market. Really though, I'm not even sure how I would purchase oil/gas calls/puts. Doesn't oil trade as a commodity? Can I even trade that stuff on TK? Or am I better off just buying puts/calls/stock on oil and gas companies? (My newbie colors are showing off here....over a year of trading now, and there's still so much I don't know. But, at least I'm making a little cash.)
