STI Hedge Fund January Performance

Starting off a new year of trading one always has hopes for good trading year ahead and with us 2012 certainly does especially after January results. We begin with significantly reduced expenses from margin costs and brokerage fees which were the lowest we have seen in well over a year. We add in the solid trading and dividends which provided a base to begin another year. The final results for January are a net gain of 24.96% and a nice cash flow position to begin 2012.  One note here for clarity, we will no longer be carrying unrealized capital losses going forward as a year end adjustment, but include them in any reports as year to date.  This will make our reports more realistic for readers of our posts.  With that in mind we did take an already announced small capital gain loss in HTS to exit that position during January and that is reflected in the month results. 

Trading profits this month were spread out among many sectors with oil, gold, and tobacco leading the way, symbols ERF, GG, and LO.  We did sell one very large long term option that will be carried on an outside balance sheet due to the size of 100 contracts and 7 month term of the option.  That option for FTR is a long term bet on the viability of the company and should not be considered by less than very experienced traders since there is significant risk in the position.  Once this trade is done we will explain the details. 

Fully 10 of the current 13 positions are 30 days or less reflecting the our desire to keep most positions short term and with less risk.  The seemingly extra position, since we have 12 trading stocks, was an additional option we sold right after AT&T reported their loss and with the stock down opportunity ringed.

January's balance sheet ends in pristine condition with no net longs and most option positions in short duration.  This should offer excellent cash flow going forward unless there is a significant market move downward. As we have acknowledged we reduced positions in trading to only 12 stocks due to what we consider as higher market valuations. The portfolio is also quite conservative in stock selection as well.  Looking ahead our goal for 2012 is to end the year at a 18% gain if market conditions remain similar to today.  This year could give an excellent idea of how conservative hedge fund trading could produce above average results. 

February therefore leaves us with 10 trading positions, but no dividend payments, so cash flow will almost assuredly be less than January. However margin costs will be zero so we could have another gain in the mid teens.  We left open about 5% of the fund's margin this month since we could not find a trade we liked and that is carried forward to February.