Morrie’s Wigs: Thoughts on LPS

Morrie: Henry, you’re a good kid, I’ve been good to you, you’ve been good to me. But there’s something really unreasonable going on here. Jimmy’s being an unconsionable ball-breaker. I never agreed to 3 points on top of the vig! Am I something special? Some sort of schmuck on wheels?
Henry Hill: Morrie, please! You borrowed Jimmy’s money, pay him.
Morrie: I never agreed to 3 points on top of the vig! What am I, nuts? Come on!
Henry Hill: Are you gonna argue with Jimmy Conway? Just give him his money so we can get the fuck outta here!
Morrie: Hey! F ’em in the ear! What are you talking about? F ’em in the other ear, that son of a bitch! Did I ever bust his balls? Did I? Did I? I could’ve jumped the dime a million times, and I wouldn’t have to pay tip!
Henry Hill: Come on, Morrie, you’re talking crazy, stop it!
Jimmy Conway: [Grabs telephone cord and chokes Morrie with it, then his wig falls off and Henry starts laughing] You got money for that f’in commercial. Commercial, you don’t got my money, you don’t got my money, huh?
Henry Hill: Jimmy, he’ll pay, he’ll pay.
Jimmy Conway: I’ll kill you, get the money, you cocksucker, you hear me?
[Phone rings]
Jimmy Conway: Pay me my money.
Morrie: Hello? Who’s this? He’s here.
[Gives phone to Henry]
Henry Hill: Jimmy, I’m sorry.
Jimmy Conway: Yeah? You should be sorry. Don’t do it again and give me the money. Give me the money, You hear me? You hear me, I gotta come here and you bust my balls? Give me the money.  — Goodfellas

Oh these financials and oh this LPS in particular. There’s been a reprieve for the financials of late and our financial puts and shorts have been a steady bleed on the portfolio for the last month. The move of bringing NY AG Eric Schneiderman into the “mortgage settlement negotiations” has let shareholders breathe a sigh of relief and has forced shorts to capitulate.

LPS is still down a full 50% from where I originally flagged it as “the best short in the market”, but the last month or so it has rallied from $14 to $17 and has acted sticky up here lately.  It’s still by far my biggest short and as I explained in the chat yesterday, I still think it’s a likely zero before it’s all said and done. But timing can be tricky and we can’t expect the markets and the politics in this country to work our own time table, but rather on their own time table. Morrie’s Wigs they’re not.

So don’t force it. Use tranches. If you haven’t shorted LPS yet, I’d sure rather start shorting now while it’s up than later when it’s too late to catch its next breath now. Even if it takes months. Use common stock and just short it outright if you don’t want to mess with longer-term puts. Longer-term puts refers to options that give you the right to sell 100 shares of LPS at a set price at a set date in the future and the longer-term means that set date is out there at least six or nine or twelve months. I’d use strike prices right around the current quote of $17.50 and since options like these have such a big difference between what you buy them for and what you can turn around and sell them for, I’d put a bid in between the current bid and ask on puts with strikes ranging from $15 to $20.