Thursday, August 26, 2010

Fool Me... Once?

In my previous post I mentioned the possibility of selling GMXR, and today I did just that (at a price of $4.13). I purchased GMXR on separate occasions in February and March at an average price of $9.57, so with my 1400 shares I ended up losing about $7,600... ouch!

Basically, GMXR has been killed recently along with a lot of other natural gas companies, and since my account is taxable I decided to lock in my losses (since I have significant gains from selling SHLD, USG, WTM, and DFS earlier in the year) and simultaneously buy Jan 2012 $5.00 CALL OPTIONS (50 contracts at $1.07) in a similarly punished E&P company that I've previously owned, SandRigde Energy (SD).

SandRidge is a company in flux, and IMO there's been quite a bit of selling pressure due to it's recent transformation. In fact, apparently the only people buying SD (other than me) are the company's insiders! Check out these two articles for a great introduction to the company: and

Anyway, I'll try to do a separate write up on my estimate of SD's fair value if time permits, but for the time being suffice it to say that I think SandRidge MIGHT be significantly undervalued. However, because SD is highly levered and because the price of gas & oil are huge drivers of the company's results, my fair value estimate has a large degree of uncertainty - I'm going keep my fingers crossed and hope for the best!