Wednesday, May 4, 2011

Transocean Ltd. (RIG)

Honestly, Transocean isn't a great stock to trade. At least, not in the system we're talking about here. Sure, it's 4-for-4 on trades so far, but with an average gain of only 14.5% and a low 0.42 Reward-to-Risk ratio, you'd be better off trading Diamond Offshore (42.1% and 2.54). With a correlation of 95% between the two stocks the only downside would be slightly higher non-systemic risk. 



1. SHORT the week of 9.29.08 at $94.65. With my stop at $134.29 the initial risk (R) on the trade was $39.64. Stopped out and reversed to long at $68.20 the week of 4.20.09. The percentage gain on the trade was 27.9%, and the reward-to-risk ratio was $26.45/$39.64 = 0.67.

2. LONG the week of 4.20.09 at $68.20. The stop was $44.78, so R = $23.42. Stopped out and reversed to short the week of 4.26.10 at $72.32. The percentage gain on the trade was 6.0%, and the reward-to-risk ratio was $4.12/$23.42 = 0.18.

3. SHORT the week of 4.26.10 at $72.32. Using $95.77 for a stop, the R on the trade was $23.45. Stopped out and reversed to long at $64.35 the week of 9.27.10. The percentage gain on the trade was 11.0%, and the reward-to-risk ratio was $7.97/$23.45 = 0.34.

4. LONG the week of 9.27.10 at $64.35.  My initial stop was set at $47.86, so my risk was $16.49. Closed last week at $72.75 with a $70.57 stop. The percentage gain on this trade is 13.1%, and the reward-to-risk ratio is $8.40/$16.49 = 0.51.

Bottom Line:
Winning Trades: 4 | 100.0% | $11.74/share avg.
Losing Trades: 0 | 0.0% | -$0.00/share
Average Trade: Gain of 14.5% | $11.74/share | Reward-to-Risk Ratio (R): 0.42

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