Tuesday, April 19, 2011

CF Industries Holdings, Inc. (CF)

Aside from being great stocks to trade, CF Industries, Mosaic, and Potash Corporation have taught me a great deal about correlation, position sizing, and non-systemic risk. 

1. LONG the week of 10.2.06 at $17.91. With the stop at $14.99 the initial risk (R) on the trade was $2.92. Stopped out and reversed to short the week of 9.22.08 at $90.78. The percentage gain on the trade was 406.9%, and the reward-to-risk ratio was $72.87/$2.92 = 24.97.



2. SHORT the week of 9.22.08 at $90.78. Using $164.45 for a stop, the R was $73.67. Stopped out and reversed to long the week of 3.23.09 at $72.76. The percentage gain on the trade was 19.9%, and the reward-to-risk ratio was $18.02/$73.67 = 0.24.

3. LONG the week of 3.23.09 at $72.76. The stop was $45.63, so R = $27.13. Stopped out and reversed to short at $84.88 the week of 4.19.10. The percentage gain on the trade was 16.7%, and the reward-to-risk ratio was $12.12/$27.13 = 0.45.

4. SHORT the week of 4.19.10 at $84.88. With the stop set at $102.29 the R was $17.41. Stopped out and reversed to long the week of 8.2.10 at $84.21. The percentage gain on the trade was 0.8%, and the reward-to-risk ratio was $0.67/$17.41 = 0.04.
 
5. LONG the week of 8.2.10 at $84.21. The stop was $62.02, so that makes R $22.19. Closed at $129.98 last week with a $113.33 stop. The percentage gain on this trade is 54.4%, and the reward-to-risk ratio is $45.77/$22.19 = 2.06.

Scorecard:
Winning Trades: 5 | 100.0% | $29.89/share avg.
Losing Trades: 0 | 0.0% | -$0.00/share
Average Trade: Gain of 99.7% | $29.89/share | Reward-to-Risk Ratio (R): 5.55

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