Sabrient Select Opportunity Portfolio
August 19, 2010 - Harvest Partial Profits in short position GDP
As I have discussed before, I am a proponent of "profit harvesting," in which you take partial trading profits in a position once it moves strongly in your direction. In general, for swing trades, I would look to bank some profits (e.g., 1/3 position) once a stock position has provided a 10% gain, and then again (e.g., another 1/3 position) when the balance of the position has reached a 20% gain. Earlier today, we booked profits in short position FHN, and now we have an opportunity to book some profits in another short position, GDP.
I previously stopped out of half of my original position in GDP on surprising relative strength despite a poor quarterly report. However, the stock has tanked lately along with Energy and the market in general. I'd like to lock in some gains to offset the previous loss.
Some of you might want to go ahead and close the whole position into this weakness. But I am going to close 1/2 of the remaining position (1/4 of the original position) at $11.44, which gives us a 10% gain on this portion of the trade. I'll let the balance of the short position ride in anticipation of even lower prices.