October 2020 Performance

I guess October is one of those typical months where you give back one’s gains. My long positions didn’t fair well as it declined with the market. What saved me somewhat was the merger arb opportunities out there. I took advantage of several in October and they all paid off nicely. My current portfolio allocation is 85% equities and 15% cash, which is fairly consistent for much of the year.

Let’s get into the merger arb plays… (1) I entered a Short Put position in Aimmune Therapeutics. I went in big after they received HSR approval. The puts still had a fairly decent premium as the company was waiting for German antitrust approval. Nestle also owned a big chunk of Aimmune Therapeutics stock so meeting the minimum tender threshold was a certainty. This was one of those plays where the odds of closing were so favorable that it was literally free money in my book. (2) I played Immunomedics via Short Puts and Long Common. This one has a nice spread, which I still couldn’t figure out. I couldn’t go too big in this one as most of my margin money was tied up in Aimmune. (3) Finally, Tiffany… I play this one with Short Puts when news leaked that Tiffany and LVMH had agreed to a lower price. I still have some November Short Puts in Tiffany. I’m still looking to add some Short Puts and / or Long Common. The probably of this deal breaking is literally 0% with this updated merger agreement.

I’ll continue to play it safe by focusing on merger arb plays. This is were I am able to generate some decent income in the face of a 0% interest environment. Just trying to survive in this crazy market…  

2020 YTD Performance = +13.6% with the running monthly returns as follows:

January +2.7%
February -6.8%
March -9.9%
April +12.3%
May +6.6%
June +3.8%
July +6.1%
August +11.8%
September -4.2%

October -6.7%

September 2020 Performance

What goes up must come down and that was the story for September. There were no changes to my long positions and still maintaining a cash position of ~ 14%. The interest I am receiving from my cash is a pathetic at 0.01%, can it go any lower? Anyways, I have to keep a good chunk of the cash at my brokerage as it serves as maintenance requirement for my margin trades.

I initiated merger arb positions in Momenta Pharmaceuticals and Aimmune Therapeutics via Short Puts. Momenta just closed and those options will be accelerated to expire on October 16^th. Aimmune received HSR anti-trust approval and is currently awaiting German anti-trust approval, which is expected on October 8^th. The Aimmune tender is scheduled to close on October 9^th. I am also keeping an eye on Immunomedics, which has a nice arb spread for some reason.

I’m still interested in Ant Financial and Airbnb IPOs, but the price has to be somewhat reasonable.

2020 YTD Performance = +21.8% with the running monthly returns as follows:

January +2.7%
February -6.8%
March -9.9%
April +12.3%
May +6.6%
June +3.8%
July +6.1%
August +11.8%
September -4.2%