Initially I was fairly upset not participating in the past two days of gains. While it is still true pretty much all the stocks I wanted to get back into would be profitable, the action in the broader market is giving me pause. Two times now we have broken above resistance and sold off back below. It is somewhat a confusing time because the Russell already broke and closed above resistance which would lead one to believe the S&P will follow suit. On the other hand, many of the sectors are significantly overbought at fairly historic highs in the bullish percent figures. What this generally means is there is significantly more risk to the downside and much less opportunity to the long side.
This doesn't mean I run out and try and short everything in sight but I will be looking for some good put candidates and may need to buy back my JBLU puts as my original thesis could be broken.
I doubt the old saying of "sell in May and go away" really applies, it is just the fact that stocks have run so far so fast it is only natural to have a pull back but it could be significant if we don't keep getting decent catalysts showing some economic recovery. I am again annoyed by myself in that I have not taken risk day trading as the past 2 days would have been profitable had I traded my plans. It is obviously worthless to say since I didn't do it but at some point I'd like to be comfortable taking the risk again with confidence.
My account gyrated between profits and losses as we traded in a fairly large range but ended up essentially flat. My only real position of concern is JBLU right now with the swine flu weighing on it and if the market rolls over it will not be helped at all. I would be fine if I thought this was a simple dip that will be bought but that has yet to be seen, if people don't buy at 865 or so it could signal an end to the uptrend in the short run and possibly longer. Overall I think people still want to buy the dip, but they may want a much larger dip this time to be enticed to buy.
Total Return for 2009: 133%
Thursday, April 30, 2009
Wednesday, April 29, 2009
New Highs
Even after a dismal GDP number of -6.1% the market rallied as there was evidence the consumer is actually much better than expected. Intraday we hit new highs and the Russell 2000 broke above it's 480 resistance. The S&P still finished right at resistance however this price action can't be ignored. I will look to buy back in on a dip although I am worried it may not come very soon. I considered buying futures at the open and just sitting on them but decided not to take action ahead of Bernanke speaking (aka I wussed out).
Overall the materials are looking to be heating up again on the idea we may actually pull out of this recession by the end of the year. Tech could continue to do well as well, I'd like some china exposure as well. Financials are actually looking fairly strong, MS could be a good play but it is lagging behind GS which is slightly concerning.
Overall I feel like I should be well positioned with my short option positions and I could just sit on those but I likely would be missing out on a lot of good movement and profits. We'll see how things unfold tomorrow.
Total Return for 2009: 133%
Overall the materials are looking to be heating up again on the idea we may actually pull out of this recession by the end of the year. Tech could continue to do well as well, I'd like some china exposure as well. Financials are actually looking fairly strong, MS could be a good play but it is lagging behind GS which is slightly concerning.
Overall I feel like I should be well positioned with my short option positions and I could just sit on those but I likely would be missing out on a lot of good movement and profits. We'll see how things unfold tomorrow.
Total Return for 2009: 133%
Tuesday, April 28, 2009
Mass Hysteria Persists
While I don't believe the swine flu scare is the main reason for a lack of direction as of late it definitely has hindered some of my current positions. JBLU rallied at the open then gave it nearly all back by the close with the continued lack of travel concerns. NVAX was back up another 25% today as people looked to make a quick dollar on a stock that wouldn't be able to help this situation for at least 12 weeks even if it could do anything. AAPL and AMZN fell slightly helping my positions. Overall I was down half a percent, no big deal but of course I'd rather be up, or have bought back my JBLU puts at the open.
Tomorrow I think is make or break day for the rally. I have to admit I was surprised to have a profit when I checked late in the day as I assumed the scare of Citigroup and Bank of America would have kept the sell off going. Buyers continue to step in on dips. If we had a severe sell off today I would have been inclined to take some risk to the long side going into the GDP announcement. I looked at a lot of stocks I want to buy on the assumption of a more sustained recovery but held off because it would be fairly irresponsible to take on more risk ahead of this announcement when I don't know what the outcome will be.
There are some bleak predictions on GDP, one as low at -8.00%, concensus is around -5.0%. A much better than expected consumer confidence number helped stocks and could help the market absorb a slightly worse than expected GDP number, I feel like as long as it improves over last quarter it should be viewed as good but who knows. I'll see how things react after it comes out tomorrow morning then make a decision. If we react positively and get above 870 I think it could point to a lot more upside.
Total Return for 2009: 130%
Tomorrow I think is make or break day for the rally. I have to admit I was surprised to have a profit when I checked late in the day as I assumed the scare of Citigroup and Bank of America would have kept the sell off going. Buyers continue to step in on dips. If we had a severe sell off today I would have been inclined to take some risk to the long side going into the GDP announcement. I looked at a lot of stocks I want to buy on the assumption of a more sustained recovery but held off because it would be fairly irresponsible to take on more risk ahead of this announcement when I don't know what the outcome will be.
There are some bleak predictions on GDP, one as low at -8.00%, concensus is around -5.0%. A much better than expected consumer confidence number helped stocks and could help the market absorb a slightly worse than expected GDP number, I feel like as long as it improves over last quarter it should be viewed as good but who knows. I'll see how things react after it comes out tomorrow morning then make a decision. If we react positively and get above 870 I think it could point to a lot more upside.
Total Return for 2009: 130%
Monday, April 27, 2009
Profiting from Pandemic Panic
I don't want to sound insensitive and I can't predict the future but as of right now things don't add up. All financial journalism was focusing on the supposed "swine flu" pandemic possibility after 100 people in Mexico died and we have some reported cases in the US and abroad. Let's think about this logically for a minute. During the normal flu season, there are 36,000 deaths, does this cause a panic? No. This strain of Influenza A, which has caused deaths in Mexico where they likely have much less preventative vaccines and had direct contact with pigs have had 149 deaths. All the cases in the US have been mild and people have made full recoveries. Is this cause for panic? The media loves it, and again it may turn into something more severe but I highly doubt it and for people's health I hope it doesn't.
Because I thought this was completely overblown I thought about ways to profit from the exaggeration. Imagine it as a bubble but very short term. There were small biotech companies doubling in value because of this so I thought it would be a profitable idea to fade their rallies. I decided to sell calls on one company and the company would currently have to double again to even hit the strike price I sold. I had to sell June paper as that was the only option but if the stock collapses back down as I suspect I'll buy them back for cheap and close the trade.
Airlines got killed today, and normally I would not go out and be long an airline however one airline in particular seemed like a much safer play. Jet Blue is near relative highs and has very defined support and resistance. Unfortunately I got in too early and could have gotten quite a bit more premium but the window of opportunity was only about 10 mins. I sold puts near support. I sold puts because I figured it would snap back but if it didn't I don't mind owning the company as it is one of the few airlines doing well and has some sound fundamentals.
Both of these plays are working out so far. The concern I have is more of the fact that we could be setting up for more downside. The BKX is close to breaking a support level which would signal further downside. US Steel reported after the bell and missed badly showing that materials demand is still soft at least for steel in the US which could weigh on materials. This could give me my opportunities to get in but if there will be further downside I must be cautious. With the fed meeting coming up I'll likely wait to do anything unless I see some opportunities where I think things are getting over done to the upside or downside. There are some great looking entry points but it is hard to buy dips with the idea of more downside risk. I still think there is the possibility of bullish surprise to GDP but that has yet to be seen and we have to get through the fed meeting first. We did work off some of our overbought levels today a bit more and if we happen to have a large down day it would be a good opportunity to take lower risk long positions. For now I'll be patient and see what the market does. Futures are pointing lower right now.
Total Return for 2009: 130%
Because I thought this was completely overblown I thought about ways to profit from the exaggeration. Imagine it as a bubble but very short term. There were small biotech companies doubling in value because of this so I thought it would be a profitable idea to fade their rallies. I decided to sell calls on one company and the company would currently have to double again to even hit the strike price I sold. I had to sell June paper as that was the only option but if the stock collapses back down as I suspect I'll buy them back for cheap and close the trade.
Airlines got killed today, and normally I would not go out and be long an airline however one airline in particular seemed like a much safer play. Jet Blue is near relative highs and has very defined support and resistance. Unfortunately I got in too early and could have gotten quite a bit more premium but the window of opportunity was only about 10 mins. I sold puts near support. I sold puts because I figured it would snap back but if it didn't I don't mind owning the company as it is one of the few airlines doing well and has some sound fundamentals.
Both of these plays are working out so far. The concern I have is more of the fact that we could be setting up for more downside. The BKX is close to breaking a support level which would signal further downside. US Steel reported after the bell and missed badly showing that materials demand is still soft at least for steel in the US which could weigh on materials. This could give me my opportunities to get in but if there will be further downside I must be cautious. With the fed meeting coming up I'll likely wait to do anything unless I see some opportunities where I think things are getting over done to the upside or downside. There are some great looking entry points but it is hard to buy dips with the idea of more downside risk. I still think there is the possibility of bullish surprise to GDP but that has yet to be seen and we have to get through the fed meeting first. We did work off some of our overbought levels today a bit more and if we happen to have a large down day it would be a good opportunity to take lower risk long positions. For now I'll be patient and see what the market does. Futures are pointing lower right now.
Total Return for 2009: 130%
Saturday, April 25, 2009
Sidelines Suck
The market continued higher Friday which makes me wonder how high it can ultimately go. It also makes me irritated I am not long anymore . Optimism continues to win out and we have gotten some better than expected indicators to keep that optimism alive. Up until now I really have not doubted the rally so it begs the question of why start to doubt it now, especially since there hasn't been much reason for negativity as of late. Jobless claims continue to rise although not as quickly, housing was much better than expected as well as durable goods being not as bad. Those could have been reasons to sell it off but it keeps being somewhat of a surprise or a reason to not sell. There are people on TV who say "this is a bear market rally we aren't interested." While I am not delusional and realize it is a bear market rally there is no reason to not ride it while it lasts.
So far I have captured a majority of the move but the dilemma is to decide when to get out. The market is at a critical point finishing just at the 870 resistance level but not able to break above it. The odd thing I have noticed which could be a bearish divergence is the fact that while the market is back at new highs, the stocks I was in that were previously leading are not at previous highs themselves. PCU is still below resistance, ACH also off its highs. This could be sector rotation but generally materials demand is a good indicator of economic recovery. The other possibility is that these stocks are making a lower high and could possibly start reversals over the short term. Then again, shippers are looking strong and coal could be turning around also both things I'd like to be involved with when they happen. From a technical standpoint if we break above 875 it's likely we go to 900 like I had said before. Like I also said I am just hesitant to commit longer term capital at these overbought levels but it sucks not participating in a trend.
AMZN was up 4 dollars on friday after earnings, again going higher when people said there is no way it should. Even with that move up I did make money on the calls I sold. This is a perfect lesson on why options can be risky and why speculating about earnings has to be done with care. Those with in the money options likely made out nicely from the day before but the people who bought the options from me lost money even on a nice move higher because so many things are going against you. From my couple years experience it is generally better to hold options up until earnings then sell if they are out of the money still, or do like I did and sell a couple strikes out of the money if you feel there is some safety but again manage risk. AAPL was down on the large up day which was good as well for my position.
Going into next week I'll see what the market does. It is hard to know what is built into stocks and what isn't. GDP will be announced and I actually have a feeling it will be not as bad as feared again which is bullish but if it is worse that will likely be the catalyst for pause. The 10 year treasury is at a critical level of 3.0%, if it breaks that it should point to higher stock prices as well and more favorable to commodities and foreign currencies. Bernanke made his large announcement about the fed buying treasuries last time we were near this level and something could be said again to try and keep rates capped for the time being but ultimately the market will win out.
My short call positions netted a small 1% gain, which is less than I am used to but again it isn't a loss.
Total Return for 2009: 125%
So far I have captured a majority of the move but the dilemma is to decide when to get out. The market is at a critical point finishing just at the 870 resistance level but not able to break above it. The odd thing I have noticed which could be a bearish divergence is the fact that while the market is back at new highs, the stocks I was in that were previously leading are not at previous highs themselves. PCU is still below resistance, ACH also off its highs. This could be sector rotation but generally materials demand is a good indicator of economic recovery. The other possibility is that these stocks are making a lower high and could possibly start reversals over the short term. Then again, shippers are looking strong and coal could be turning around also both things I'd like to be involved with when they happen. From a technical standpoint if we break above 875 it's likely we go to 900 like I had said before. Like I also said I am just hesitant to commit longer term capital at these overbought levels but it sucks not participating in a trend.
AMZN was up 4 dollars on friday after earnings, again going higher when people said there is no way it should. Even with that move up I did make money on the calls I sold. This is a perfect lesson on why options can be risky and why speculating about earnings has to be done with care. Those with in the money options likely made out nicely from the day before but the people who bought the options from me lost money even on a nice move higher because so many things are going against you. From my couple years experience it is generally better to hold options up until earnings then sell if they are out of the money still, or do like I did and sell a couple strikes out of the money if you feel there is some safety but again manage risk. AAPL was down on the large up day which was good as well for my position.
Going into next week I'll see what the market does. It is hard to know what is built into stocks and what isn't. GDP will be announced and I actually have a feeling it will be not as bad as feared again which is bullish but if it is worse that will likely be the catalyst for pause. The 10 year treasury is at a critical level of 3.0%, if it breaks that it should point to higher stock prices as well and more favorable to commodities and foreign currencies. Bernanke made his large announcement about the fed buying treasuries last time we were near this level and something could be said again to try and keep rates capped for the time being but ultimately the market will win out.
My short call positions netted a small 1% gain, which is less than I am used to but again it isn't a loss.
Total Return for 2009: 125%
Thursday, April 23, 2009
BMC vs. S&P 500
I figured I would make a graph from when I started tracking my performance and compare it to the S&P 500 over the same time period. As a full disclosure the S&P graph was hand calculated using 931 as the closing high at the beginning of the year and rounding to the nearest whole percent.
The graph looks fairly impressive but I will only be impressed if I can keep the upward trend in tact and have fairly low volatility and draw downs because this is also over a period of time of the market jumping about 30% off it's lows. Even with that being said I have four times the gains so it's not too shabby.
In regards to today, the volatility continues. We rallied into the close in the opposite fashion of yesterday, finishing pretty much right at 850 again. We started to break down and I sold my last small position in DSX as to not give up the rest of the gains but it recovered as the market did. So I am in cash besides my short call positions in AAPL, despite the stock being up almost 4 dollars I made money on my short calls, thanks to an over 10% collapse in volatility the one time I welcome it. AMZN reported after hours and is moving up but again I suspect the volatility decay will overall work in my favor. DSX was an example of frustration when the stock is down 30 cents but the option is down 40 cents when the delta is only supposed to be .75 but acts like 1.25 because of decay.
It seems like the extended pull back may not happen or at least not for now. We had generally positive earnings and reactions after hours today from AMZN, MSFT, AXP. That will go up against the supposed "stress tests" of the government releasing details tomorrow. If that is a negative surprise it could cause the sell off but with a slew of better than expected earnings we could push higher. I am reluctant to put long term money to work so I may take the opportunity to do some day trading. Many of the positions I cut yesterday continued lower today which is another reason to follow rules and sell on breaks of support. CHK failed to finish over 20, ACH is looking decent but if the market is going to roll over everything will get pulled down with it. ANR was strong again which was annoying because I'd like to get in but will have to keep waiting.
I had a small loss today which is always annoying but in the context of my broader performance I have managed the draw down fairly well so far.
Total Return for 2009: 124%
Whiplash Wednesday
Wednesday was fairly frustrating as I got out of pretty much all my positions. IPI gapped down 10% on a downgrade from GS which at the time was not really public knowledge so I had no idea why it was happening, the general rule of thumb is if you don't know then sell, which I did. The stock then rebounded but finished right where I sold it originally so overall it wasn't a huge deal. PCU broke down below support and was already pushing past my 2% loss limit so I cut that loose, it rebounded but broke down again at the end of the day, again making my sell alright. I sold my puts as we started to rally which was genuis when we hit highs but dumb when we came back to the lows. CHK also broke down below my line in the sand during the day so I sold as natural gas does continues to trade down.
As of this writing CHK is higher, I will wait for it to close above 20 again to get back in. I decided to sell some calls ahead of both AAPL and AMZN earnings. Seems like a stupid plan to sell calls on two of the strongest stocks of the year right? Maybe, but I went with a conservative option, the probability of the stocks gapping to my strike prices is very unlikely. I sold 135 calls on AAPL and 90 calls on AMZN. In Apple's history of the past 2 years the most I have seen it gap is 14 dollars and that was in a bull market without a run up before hand. Apple is up 40% this year already going into earnings so I assumed any reaction would be muted and the volatility decay would be in my favor. So far it is working out, we'll see what happens with AMZN. I only have 3 positions, my remaining position was my only recent remaining profitable one in DSX.
I am thinking I'll sit on my hands for a while as I have been off a bit lately and given back some money and I feel like this volatility could be a sign of a pullback. I am really wanting a significant pullback to occur to get back into the market but I don't know if it will happen, like a move down to 800. I'd like to get back into energy and materials at lower prices. ANR is looking good but has moved about 15% in the past 2 days so it's hard to buy it up so high.
We'll see how the day finishes out, I'd like it to finish lower, or at least below 850, maybe have a large down day after the stress test info, the next day gap down to 800 then reverse higher would be ideal and likely what others are watching for as well.
Total Return for 2009: 124%
As of this writing CHK is higher, I will wait for it to close above 20 again to get back in. I decided to sell some calls ahead of both AAPL and AMZN earnings. Seems like a stupid plan to sell calls on two of the strongest stocks of the year right? Maybe, but I went with a conservative option, the probability of the stocks gapping to my strike prices is very unlikely. I sold 135 calls on AAPL and 90 calls on AMZN. In Apple's history of the past 2 years the most I have seen it gap is 14 dollars and that was in a bull market without a run up before hand. Apple is up 40% this year already going into earnings so I assumed any reaction would be muted and the volatility decay would be in my favor. So far it is working out, we'll see what happens with AMZN. I only have 3 positions, my remaining position was my only recent remaining profitable one in DSX.
I am thinking I'll sit on my hands for a while as I have been off a bit lately and given back some money and I feel like this volatility could be a sign of a pullback. I am really wanting a significant pullback to occur to get back into the market but I don't know if it will happen, like a move down to 800. I'd like to get back into energy and materials at lower prices. ANR is looking good but has moved about 15% in the past 2 days so it's hard to buy it up so high.
We'll see how the day finishes out, I'd like it to finish lower, or at least below 850, maybe have a large down day after the stress test info, the next day gap down to 800 then reverse higher would be ideal and likely what others are watching for as well.
Total Return for 2009: 124%
Wednesday, April 22, 2009
Which Way Do We Go?
We started off the day down a decent amount, sold off a bit more then stabilized and rallied. By the end of the day we were back at guess where...850. Obviously, typical technical analysis says this should serve as resistance now that we are coming from the underside. The day was slightly confusing because it did show that buyers are still active, and many of the names I wanted to buy into would have been great buys right at the open, however we didn't have enough conviction to break back above. Bank stocks started off with significant losses and ended up fairly positive on the day, again a bullish sign but less convincing as most of the news is already out to propel stocks higher.
We have MS on tap tomorrow and better than expected earnings could prop the market a bit depending on guidance. It has held up very well so far, if there is some bad news though it could give up its trendline in a hurry. I pulled my hedge off near the lows of the day as we stabilized then put it back on towards the end but slightly early because I am sitting with a decent loss right now, but the futures are down nearly 1% so it could still be a smart move.
Another catalyst in some direction could be FCX, it reports tomorrow and could determine the fate of my PCU position as to whether or not I sell or hold. Copper prices tested 2.00 today and rebounded, which is positive but the stocks have had a good run and without real demand it could be hard to keep it up. Shippers did well today and again I missed the opportunity to buy at support before they shot up, luckily I still have my reduced position size on but would have liked to have a full position.
Tech will be in focus for AAPL and AMZN and I get the feeling they won't do much to the upside and likely pull back on announcement considering the run they have had so far but you never know. I have considered selling some strangles but with so much time to expiration I don't know if that is a smart choice. A more extended pull back in tech and most of the financial earnings digested could be a reason for a deeper pull back in the S&P to near the 800 level. This is an annoying time when the market lacks direction and we wait for the next catalyst to move us higer or lower.
I was having a decent day till the end when my hedge ate up most of my profits but I still eeked out a gain. Getting out then back into my hedge did save money though.
Total Return for 2009: 127%
We have MS on tap tomorrow and better than expected earnings could prop the market a bit depending on guidance. It has held up very well so far, if there is some bad news though it could give up its trendline in a hurry. I pulled my hedge off near the lows of the day as we stabilized then put it back on towards the end but slightly early because I am sitting with a decent loss right now, but the futures are down nearly 1% so it could still be a smart move.
Another catalyst in some direction could be FCX, it reports tomorrow and could determine the fate of my PCU position as to whether or not I sell or hold. Copper prices tested 2.00 today and rebounded, which is positive but the stocks have had a good run and without real demand it could be hard to keep it up. Shippers did well today and again I missed the opportunity to buy at support before they shot up, luckily I still have my reduced position size on but would have liked to have a full position.
Tech will be in focus for AAPL and AMZN and I get the feeling they won't do much to the upside and likely pull back on announcement considering the run they have had so far but you never know. I have considered selling some strangles but with so much time to expiration I don't know if that is a smart choice. A more extended pull back in tech and most of the financial earnings digested could be a reason for a deeper pull back in the S&P to near the 800 level. This is an annoying time when the market lacks direction and we wait for the next catalyst to move us higer or lower.
I was having a decent day till the end when my hedge ate up most of my profits but I still eeked out a gain. Getting out then back into my hedge did save money though.
Total Return for 2009: 127%
Monday, April 20, 2009
Buy This Dip?
The market pulled back fairly decently today, the S&P lost about 4%. This was the fast move I was thinking may happen and the reason I kept my hedge on. The decision to sell some positions on Friday was a good one, the materials and energy sector pulled back across the board by quite a bit which is where a majority of my positions are. The dilemma is that I have longer dated options so I could hold them through this down draft as I don't feel like this is a huge cause for concern just some decent profit taking. My hedge cut my losses in half compared not having it on at all which is key. Having smaller draw downs and larger increases is what it is all about. I am close to cutting my PCU position as it is right at my loss limit but still holding a support level. I'll give it a chance to hold but if it doesn't I will cut the loss.
It was hard to not go out and buy everything in sight today as most things had very nice pull backs to support however like I said before we could get down to 800 if we break 850 which we have so I am waiting to see what the market does, if we get some buying I will likely buy as well but I may sit on my hands until earnings season is done and we get more clear info on the state of the economy.
Total Return for 2009: 126%
It was hard to not go out and buy everything in sight today as most things had very nice pull backs to support however like I said before we could get down to 800 if we break 850 which we have so I am waiting to see what the market does, if we get some buying I will likely buy as well but I may sit on my hands until earnings season is done and we get more clear info on the state of the economy.
Total Return for 2009: 126%
Saturday, April 18, 2009
Topping Out?
So I am still disappointed by my week end performance, I could have added quite a few more profits but instead have only managed small gains due to my hedge being in place. Options expiration actually had more movement than I expected. I decided to take some positions off before the weekend as they had moved a decent amount in a short time and I will look to get back in on a pull back with different options to lock in profits. Same story, different day but it continues to work so why stop?
I feel like this rally has just about run its course over the short term. Earnings are definitely coming in better than expected and we MAY be turning the corner however once earnings season is done with the market will again look to actual signs the economy is recovering and if it doesn't happen as expected this could lead to a decent pull back. 875 used to serve as good support and now should serve as resistance. If we take out that level then a run to 900 is likely. I am going to look for some more put plays to get into so I am more balanced going forward. I think we could pull back to 850 then resume higher. A break of 850 would signal a break of the recent uptrend and horizontal support and likely cause some more selling down to the 800 level.
Until the 850 level is breached the uptrend is in tact and it makes sense to be long biased. My feeling though is that a move down could be fast given the significant run we have seen and may not offer much time to recognize it. If we continue to have good earnings AND good economic indicators there really is no telling how high the rally could go. Again, the trend works until it doesn't and I have to assume it will continue to work until something changes and I will change my bias to the short side as needed. As long as the market trends I believe I can continue to profit fairly well as long as I am willing to be flexible. I still have yet to see that large rally and exhaustion I would like to see before going short. Maybe it will come next week or maybe it never comes I'll have to manage risk properly either way.
Total Return for 2009: 132%
I feel like this rally has just about run its course over the short term. Earnings are definitely coming in better than expected and we MAY be turning the corner however once earnings season is done with the market will again look to actual signs the economy is recovering and if it doesn't happen as expected this could lead to a decent pull back. 875 used to serve as good support and now should serve as resistance. If we take out that level then a run to 900 is likely. I am going to look for some more put plays to get into so I am more balanced going forward. I think we could pull back to 850 then resume higher. A break of 850 would signal a break of the recent uptrend and horizontal support and likely cause some more selling down to the 800 level.
Until the 850 level is breached the uptrend is in tact and it makes sense to be long biased. My feeling though is that a move down could be fast given the significant run we have seen and may not offer much time to recognize it. If we continue to have good earnings AND good economic indicators there really is no telling how high the rally could go. Again, the trend works until it doesn't and I have to assume it will continue to work until something changes and I will change my bias to the short side as needed. As long as the market trends I believe I can continue to profit fairly well as long as I am willing to be flexible. I still have yet to see that large rally and exhaustion I would like to see before going short. Maybe it will come next week or maybe it never comes I'll have to manage risk properly either way.
Total Return for 2009: 132%
Thursday, April 16, 2009
Hedge Hinders Profits
So I put the hedge on yesterday of puts on the S&P at the close. We had a good report from JPM as well as a jobless claims decline for the first time in a while. Stocks however did not explode higher on the open. We basically traded around up and down for a while until the after noon. I basically checked in on my positions, saw that not much was happening and stepped away for a while. I came back to the market breaking out and I had some decent gains but my hedge was losing money and really capping my gains. At that point I didn't think the rally would go much higher so it didn't make much sense to take it off and since it was still right at about my 2% loss limit and I had no other puts I decided to leave it on. Either way a gain is a gain, however I would have had 4x the gains without the hedge in place. A smart thing to do could have been to look and see what would have constituted a break out, and set a sell order at that point to close the position and let the rally go.
At this stage in the overall rally I am more inclined to keep a hedge on because we almost reached 875 in the cash market which was my target. Some of my positions continued to trade not as strong as I'd like but were mostly profitable for the day. We are reaching even higher into oversold territory which means we should have a decent pullback in the near future.
GOOG reported better than expected earnings but did comment on the tough times and the stock traded higher initially then reversed. I wish this would have happened tomorrow because it is a good day to day trade options since it will be expiration and GOOG just had earnings. The tough thing is the day may be very low on movement due to expiration and pinning. If C has decent results that could move the market higher as well as GE. My opinion is that a majority of this rally is done short term so I am less inclined to take risks to the upside. I will look for more specific put plays to balance out my bullish positions. What I would really like is an extreme up day tomorrow then balance myself out ahead of the weekend. A good filter for candidates I think would be those still below their 50 day moving average. Futures are currently down 5 points, we'll see how earnings go and how things react.
Total Return for 2009: 131%
At this stage in the overall rally I am more inclined to keep a hedge on because we almost reached 875 in the cash market which was my target. Some of my positions continued to trade not as strong as I'd like but were mostly profitable for the day. We are reaching even higher into oversold territory which means we should have a decent pullback in the near future.
GOOG reported better than expected earnings but did comment on the tough times and the stock traded higher initially then reversed. I wish this would have happened tomorrow because it is a good day to day trade options since it will be expiration and GOOG just had earnings. The tough thing is the day may be very low on movement due to expiration and pinning. If C has decent results that could move the market higher as well as GE. My opinion is that a majority of this rally is done short term so I am less inclined to take risks to the upside. I will look for more specific put plays to balance out my bullish positions. What I would really like is an extreme up day tomorrow then balance myself out ahead of the weekend. A good filter for candidates I think would be those still below their 50 day moving average. Futures are currently down 5 points, we'll see how earnings go and how things react.
Total Return for 2009: 131%
Wednesday, April 15, 2009
The ACH That Got Away
My decision to sell positions yesterday appeared smart early in the day as we opened lower. However, I noticed that pre-market trading ACH was up a dollar and I thought, "damn". What happened was news was released that they would possibly be taking a larger stake in Rio Tinto with a loan and this was positive news. The gap held and it went higher ending up two dollars on the day. This would have translated into another 10% gain in the account and likely a 100% return on the option itself. I am upset because it always sucks to see something go higher without you but in reality I have no idea that news is coming out and in reality the stock likely would have pulled back as expected without that news. This just makes it a bit harder to be patient and wait for a pull back but I must wait, probabilities are in my favor to not have it run in exponential fashion higher.
One concern is PCU which I re-entered today on a pull back. It traded poorly all day even with copper futures hitting new highs. I am sitting with only a small loss at the moment but it didn't participate as much in the rally into the close as did other stocks. I'll watch it and if it continues to trade poorly I'll cut it loose. I did get into some steel which was my only saving grace today, it looks poised to continue higher as it finished on its highs at the close.
My tech play in AKAM traded down to support today which is also testing my patience, with the VIX breaking down it is pulling the option premium down as well so even though its higher than where I got in I am losing money due to the decay in volatility and time. It is only a small loss though, and if it breaks support i'll hop out, GOOG could be the catalyst for it to move higher or lower tomorrow with it's earnings.
At the end of the day we did stage a fairly impressive rally especially in financials to finish right back at 850. I only was up slightly on the day which is better than the losses I had earlier of course. I did buy some puts on the S&P at the close as a hedge against poor earnings tomorrow sending us back down. My thoughts are, if earnings from JPM and GOOG are good with good guidance on JPM then we go higher, possibly much higher to 875. If they are poor then we may have a significant sell off. I am still long biased but am more comfortable since I have my hedge on. We'll see what happens.
Total Return for 2009: 129%
One concern is PCU which I re-entered today on a pull back. It traded poorly all day even with copper futures hitting new highs. I am sitting with only a small loss at the moment but it didn't participate as much in the rally into the close as did other stocks. I'll watch it and if it continues to trade poorly I'll cut it loose. I did get into some steel which was my only saving grace today, it looks poised to continue higher as it finished on its highs at the close.
My tech play in AKAM traded down to support today which is also testing my patience, with the VIX breaking down it is pulling the option premium down as well so even though its higher than where I got in I am losing money due to the decay in volatility and time. It is only a small loss though, and if it breaks support i'll hop out, GOOG could be the catalyst for it to move higher or lower tomorrow with it's earnings.
At the end of the day we did stage a fairly impressive rally especially in financials to finish right back at 850. I only was up slightly on the day which is better than the losses I had earlier of course. I did buy some puts on the S&P at the close as a hedge against poor earnings tomorrow sending us back down. My thoughts are, if earnings from JPM and GOOG are good with good guidance on JPM then we go higher, possibly much higher to 875. If they are poor then we may have a significant sell off. I am still long biased but am more comfortable since I have my hedge on. We'll see what happens.
Total Return for 2009: 129%
Tuesday, April 14, 2009
Surviving the Sell-Off
We had a pull back today in the broader market by about 2% on the S&P, the financials pulled back significantly, the XLF ended down 7%. Today was almost perfect in terms of my positions, the XLF was down a lot, 2 were down slightly and the remaining 4 were up significantly. I got a bit greedy and waited too long to take profits and gave up a few percent more on the day but I guess you can't get them all. I again struggled on whether I should just let my longer term options ride or roll into higher strikes as they went higher to lock in profit.
I decided to take profits on 2 long positions as we started to pull back, I dont want to get in the habit of taking profits too soon but they had a good run the past few days with no pullback so I figured they were due for a little correction and I can get back in then. Selling them did save me a few percent by the end of the day but you never know what will happen tomorrow, and I did let them slip too much before selling. I was then more evenly positioned as it appeared we were breaking down. I watched the XLF on the daily chart and held my puts until the downtrend that had been in tact all day was broken. This was good initially as we did rally but that was given up by the end of the day and it finished at the lows. It may have been smart to just stay balanced into tomorrow however I felt there was more upside risk with Intel's earnings release and the fact that I assumed we would have some selling for options expiration. The VIX was down even on this deeper pullback, which is either bullish divergence or market maker manipulation.
I am now positioned long in four positions but much less than before so if the pull back continues it should be a limited draw down for me and I can look to take advantage of pull backs in the stocks I like. I will be frustrated obviously if they gap up again tomorrow without me but again you can't get the entire move, and I'll wait for a better entry.
Intel reported better than expected results but issued weak guidance and the stock sold off about 6% after hours. This looks bearish for the market tomorrow and tech in general. Some bullish signs was the statement that they thought pc sale declines had bottomed already. At some point even though we have run up significantly so far I think people need to recognize we have had fairly decent earnings and this could in fact be a turn around.
I'll be watching the oil inventories tomorrow because oil has been selling off going into it so if it is bullish then materials could be the relative strength once again and it would convince me to be back into my aluminum and copper plays. My hope is we see a pull back in the morning, then a bullish inventory report and they rebound. With the significant pull back in the financials today it could be building in some more negative surprises since most will not be like WFC and GS, if they are then we will go higher in a hurry.
Options expiration week is always somewhat of a guessing game of where the stock will get pinned, it may be smart for me to just wait till monday of the new month when options are cheaper to get into some different names. We could see a deeper pullback in stocks as the retail sales number may have made people realize things aren't as good as they may seem and when people don't have jobs they don't spend. I was surprised by such a poor number which is why I was more pleasantly surprised to do as well as I did. Until individual trends start breaking I will continue to buy dips but may do so with reduced position sizes until we get out of the rest of earnings season and establish more direction.
Total Return for 2009: 128%
I decided to take profits on 2 long positions as we started to pull back, I dont want to get in the habit of taking profits too soon but they had a good run the past few days with no pullback so I figured they were due for a little correction and I can get back in then. Selling them did save me a few percent by the end of the day but you never know what will happen tomorrow, and I did let them slip too much before selling. I was then more evenly positioned as it appeared we were breaking down. I watched the XLF on the daily chart and held my puts until the downtrend that had been in tact all day was broken. This was good initially as we did rally but that was given up by the end of the day and it finished at the lows. It may have been smart to just stay balanced into tomorrow however I felt there was more upside risk with Intel's earnings release and the fact that I assumed we would have some selling for options expiration. The VIX was down even on this deeper pullback, which is either bullish divergence or market maker manipulation.
I am now positioned long in four positions but much less than before so if the pull back continues it should be a limited draw down for me and I can look to take advantage of pull backs in the stocks I like. I will be frustrated obviously if they gap up again tomorrow without me but again you can't get the entire move, and I'll wait for a better entry.
Intel reported better than expected results but issued weak guidance and the stock sold off about 6% after hours. This looks bearish for the market tomorrow and tech in general. Some bullish signs was the statement that they thought pc sale declines had bottomed already. At some point even though we have run up significantly so far I think people need to recognize we have had fairly decent earnings and this could in fact be a turn around.
I'll be watching the oil inventories tomorrow because oil has been selling off going into it so if it is bullish then materials could be the relative strength once again and it would convince me to be back into my aluminum and copper plays. My hope is we see a pull back in the morning, then a bullish inventory report and they rebound. With the significant pull back in the financials today it could be building in some more negative surprises since most will not be like WFC and GS, if they are then we will go higher in a hurry.
Options expiration week is always somewhat of a guessing game of where the stock will get pinned, it may be smart for me to just wait till monday of the new month when options are cheaper to get into some different names. We could see a deeper pullback in stocks as the retail sales number may have made people realize things aren't as good as they may seem and when people don't have jobs they don't spend. I was surprised by such a poor number which is why I was more pleasantly surprised to do as well as I did. Until individual trends start breaking I will continue to buy dips but may do so with reduced position sizes until we get out of the rest of earnings season and establish more direction.
Total Return for 2009: 128%
Monday, April 13, 2009
The Trend Is Your Friend
The most basic principle in trading; trade the trend until it is broken. Dip buying continues to be profitable, I got back into positions I wanted to near the lows of the day on the pull back with higher strike options and into a couple new positions as well. Towards the end of the day I had a nice profit and we were hitting up against resistance I had expected so with GS earnings in mind and the fact that most financials had run about 20% since WFC pre announced I figured we may be due for a pull back if GS was even the slightest bit disappointing. I bought puts on the XLF as a hedge but still have a long bias. After the bell the XLF started jumping around and my position was flucuating between a profit and loss and I wondered what the hell was going on.
Apparently, GS released earnings early and completely blew them away, earnings almost double expectations. They also announced a capital raise of 5 Billion. The stock is down slightly after hours. Had they not announced the capital raise I suspect it would be up big in afterhours. As of right now I am sitting on a small loss on my puts which is fine given the protection I had to disappointment and my view of limited upside risk. I am torn on whether or not to leave the hedge on, the position size is slightly large for my taste so maybe I'll keep it but scale it back. I'll watch how the financials trade in the morning, GS was likely one of the strongest to report so others may not fair so well making the hedge a good one. This is bullish for the overall market though, so far not too many disappointments where it counts.
Intel reports tomorrow, I think it will beat and guide higher but the market also expects that so it may be built in, either way that is likely bullish for tech, retail sales should be decently strong for March as well, another reason to keep going up.
We seem to just keep trading near these oversold levels, we'll pull back enough to ease off then go up again. If we have another gap up I think that will be the time to sell into it and position a bit more bearish in the short term to take advantage of a pull back. With options expiration this week I have to expect we pull back at some point fairly decently, but of course I could be wrong.
I picked up exposure to some agriculture and dry bulk shipping as this reflation trade continues. In addition to picking good stocks I have sidestepped a few disasters by being disciplined. My puts on WYNN for example I was in at 20 and out at 21, now it's trading at 32. I sold out of WFR and was planning to buy on a pull back or roll into better options but after the close thursday they had a warning that sent it down 15% which would have turned my profits into a loss(this was lucky but my action of taking profits saved them). Last is ESRX, announced it was buying Wellpoint and was up big on that news which would have given me a large loss on my puts. The theme seems to be that it is semi-hazardous to be holding puts but I think that will change after earnings season and more information comes to light.
Total Return for 2009: 117%
Apparently, GS released earnings early and completely blew them away, earnings almost double expectations. They also announced a capital raise of 5 Billion. The stock is down slightly after hours. Had they not announced the capital raise I suspect it would be up big in afterhours. As of right now I am sitting on a small loss on my puts which is fine given the protection I had to disappointment and my view of limited upside risk. I am torn on whether or not to leave the hedge on, the position size is slightly large for my taste so maybe I'll keep it but scale it back. I'll watch how the financials trade in the morning, GS was likely one of the strongest to report so others may not fair so well making the hedge a good one. This is bullish for the overall market though, so far not too many disappointments where it counts.
Intel reports tomorrow, I think it will beat and guide higher but the market also expects that so it may be built in, either way that is likely bullish for tech, retail sales should be decently strong for March as well, another reason to keep going up.
We seem to just keep trading near these oversold levels, we'll pull back enough to ease off then go up again. If we have another gap up I think that will be the time to sell into it and position a bit more bearish in the short term to take advantage of a pull back. With options expiration this week I have to expect we pull back at some point fairly decently, but of course I could be wrong.
I picked up exposure to some agriculture and dry bulk shipping as this reflation trade continues. In addition to picking good stocks I have sidestepped a few disasters by being disciplined. My puts on WYNN for example I was in at 20 and out at 21, now it's trading at 32. I sold out of WFR and was planning to buy on a pull back or roll into better options but after the close thursday they had a warning that sent it down 15% which would have turned my profits into a loss(this was lucky but my action of taking profits saved them). Last is ESRX, announced it was buying Wellpoint and was up big on that news which would have given me a large loss on my puts. The theme seems to be that it is semi-hazardous to be holding puts but I think that will change after earnings season and more information comes to light.
Total Return for 2009: 117%
Thursday, April 9, 2009
100% Return Barrier Broken
So I didn't do an entry yesterday, with the late day rally in stocks yesterday I had a decent gain on the day and ended up back at a 90% return. I cut my 2 losing put positions and held on to the remaining weak ones.
Today we had a huge gap up at the open thanks to Wellsfargo which essentially started my account back at previous highs which was nice. The two new longs I had taken were working out nicely as well as my previous long positions. I closed out my remaining put positions although I possibly should have held my LMT puts as it was not participating in the rally at all but I assumed it would. overall it finished about where I got out so it wasn't a huge loss.
I closed all but 2 of my positions at the end of the day and will look to get back in on monday after the holiday. I could have taken the new positions ahead of the weekend but I would have suffered needless time decay and also had the risk of bad news coming out over the weekend. The other side to that is we could have good news come out and it gaps again without me participating too much. My hope is that we open flat to slightly down and then I get the opportunity to get back into a few stocks with higher strikes so I lock in profits and can keep participating in the trend.
I obviously can't participate in everything but I regret not getting into MS when it was down yesterday, I had thought about it but there was some definite risk of uncertainty, would have been a nice gainer today though. As usual I'll look to get in on pull backs.
If we get confirmation of good earning and the reflation story is still solid I think the next big gainers could be the Agriculture names more than they already have been. The market is acting very bullish with the VIX breaking its 200 day moving average finally, treasuries are nearing the 3.00% mark which would be very bullish if that is broken.
Breaking 850 is a big deal, and if we finish higher from here that will be a good confirmation signal. In the short run I think we get to 875, then pull back and resume higher to 900 eventually.
More than my return performance I am excited by my discipline. I am positioned ahead of these moves and take profits or partial profits and am patient to re-enter on pull backs. I am still a ways off from recouping my learning losses of the previous 2 years however, I am very confident if I maintain this mind set I can do it fairly efficiently.
I contemplated taking only partial profits simply because I didn't want to be out of the next gap higher if people took this as confirmation of a break above 850, however that would have doubled my commissions which is already eating up 6.8%. I need to see if there is a better way to handle things but as of right now I am not extremely concerned. I am sitting in 90% cash looking for some good opportunities going into next week. If we see options getting cheaper in the future I may go back to the old strategy of selecting one strike out of the money but I think we may still be a ways off from that. We'll see what happens on Monday, expectations may be getting slightly ahead of themselves now, we will see how the market reacts to Goldman Sach's earnings on tuesday.
Total Return for 2009: 106%
Today we had a huge gap up at the open thanks to Wellsfargo which essentially started my account back at previous highs which was nice. The two new longs I had taken were working out nicely as well as my previous long positions. I closed out my remaining put positions although I possibly should have held my LMT puts as it was not participating in the rally at all but I assumed it would. overall it finished about where I got out so it wasn't a huge loss.
I closed all but 2 of my positions at the end of the day and will look to get back in on monday after the holiday. I could have taken the new positions ahead of the weekend but I would have suffered needless time decay and also had the risk of bad news coming out over the weekend. The other side to that is we could have good news come out and it gaps again without me participating too much. My hope is that we open flat to slightly down and then I get the opportunity to get back into a few stocks with higher strikes so I lock in profits and can keep participating in the trend.
I obviously can't participate in everything but I regret not getting into MS when it was down yesterday, I had thought about it but there was some definite risk of uncertainty, would have been a nice gainer today though. As usual I'll look to get in on pull backs.
If we get confirmation of good earning and the reflation story is still solid I think the next big gainers could be the Agriculture names more than they already have been. The market is acting very bullish with the VIX breaking its 200 day moving average finally, treasuries are nearing the 3.00% mark which would be very bullish if that is broken.
Breaking 850 is a big deal, and if we finish higher from here that will be a good confirmation signal. In the short run I think we get to 875, then pull back and resume higher to 900 eventually.
More than my return performance I am excited by my discipline. I am positioned ahead of these moves and take profits or partial profits and am patient to re-enter on pull backs. I am still a ways off from recouping my learning losses of the previous 2 years however, I am very confident if I maintain this mind set I can do it fairly efficiently.
I contemplated taking only partial profits simply because I didn't want to be out of the next gap higher if people took this as confirmation of a break above 850, however that would have doubled my commissions which is already eating up 6.8%. I need to see if there is a better way to handle things but as of right now I am not extremely concerned. I am sitting in 90% cash looking for some good opportunities going into next week. If we see options getting cheaper in the future I may go back to the old strategy of selecting one strike out of the money but I think we may still be a ways off from that. We'll see what happens on Monday, expectations may be getting slightly ahead of themselves now, we will see how the market reacts to Goldman Sach's earnings on tuesday.
Total Return for 2009: 106%
Tuesday, April 7, 2009
Worthless Hedging...
This has happened before and is probably the most frustrating thing possible. I position myself for protection against pullbacks so I am hopefully less affected, yet the relative weakness positions go against me at the times they should be even more weak.
I have obviously had large up days, and leverage cuts both ways and can have large down days but when you expect and plan for them and then have WORSE results because of new positions it makes you wonder if it is even worth it. In reality the positions didn't make it that much worse but it was worse nonetheless. In actuality I could have waited for a re-test after the break down in BAX, however with the market being down today(and that being my assumption yesterday) why would I assume a stock making new lows would be up on a down day? I wouldn't assume that and did not which makes it more annoying that it was causing most of the problems. All things said and done I would have avoided probably another 4% of losses had I just held my old positions through till today not to mention saved all the commissions I paid yesterday.
I got a bit spoiled having multiple up days in a row but it makes me think that I should possibly try and pick relative strength candidates and hedge with the broad market and not specific stocks. Had I chosen the SDS like was my other plan I would have had a nice hedge and limited my downside nicely yesterday and today as well it looks like.
Right now the futures are off by about 10 points near the all important 800 level. I am hoping tomorrow we test 800 and stabilize, if we do I will look to enter some nice long positions with good entry points. I feel like we could see significant upside in the financials if they come out better than expected but it definitely requires risk management. I've got a large list of stocks I'd like to buy but they were all at or near their trend lines today so tomorrow will be a true test where they could breakdown or hold.
Alcoa reported today, with a miss as was expected although a loss of .59 vs .56 is worse than expected. The stock was only off 3% in after hours though so it could be worse. Futures held up then sold off after market close. I feel like the market just needs to get to the 800 level and test it again and hold then resume after working off some of the overbought condition.
Total Return for 2009: 84.5%
I have obviously had large up days, and leverage cuts both ways and can have large down days but when you expect and plan for them and then have WORSE results because of new positions it makes you wonder if it is even worth it. In reality the positions didn't make it that much worse but it was worse nonetheless. In actuality I could have waited for a re-test after the break down in BAX, however with the market being down today(and that being my assumption yesterday) why would I assume a stock making new lows would be up on a down day? I wouldn't assume that and did not which makes it more annoying that it was causing most of the problems. All things said and done I would have avoided probably another 4% of losses had I just held my old positions through till today not to mention saved all the commissions I paid yesterday.
I got a bit spoiled having multiple up days in a row but it makes me think that I should possibly try and pick relative strength candidates and hedge with the broad market and not specific stocks. Had I chosen the SDS like was my other plan I would have had a nice hedge and limited my downside nicely yesterday and today as well it looks like.
Right now the futures are off by about 10 points near the all important 800 level. I am hoping tomorrow we test 800 and stabilize, if we do I will look to enter some nice long positions with good entry points. I feel like we could see significant upside in the financials if they come out better than expected but it definitely requires risk management. I've got a large list of stocks I'd like to buy but they were all at or near their trend lines today so tomorrow will be a true test where they could breakdown or hold.
Alcoa reported today, with a miss as was expected although a loss of .59 vs .56 is worse than expected. The stock was only off 3% in after hours though so it could be worse. Futures held up then sold off after market close. I feel like the market just needs to get to the 800 level and test it again and hold then resume after working off some of the overbought condition.
Total Return for 2009: 84.5%
Monday, April 6, 2009
Hedged for Earnings
Well, I was essentially a day late in doing this. The futures last night were up initially and I was glad because I was wanting to get into some put plays on a rally because I figured we would roll over at 850 given the fact that we haven't seen any earnings yet to support higher prices. But the futures sold off heavy and opened up lower so I didn't get the chance to hedge ahead of time.
From a bullish standpoint stocks rallied into the close to finish at the 835 level which was previously resistance and now support. This is supportive of higher stock prices and we saw the McClellan come off it's oversold levels.
I was pissed that the entire day my one hedge was going against me and not being a hedge at all. It's almost hazardous to be short anything with all the rumors of takeover going around it had my ESRX up all day until it eased off at the end.
I gave back some today but took the opportunity to balance myself a bit more for the uncertain times of earnings season. I doubled my number of positions and now have a 3:4 put/call ratio, so I am still bullish but much better than my previous 1:3. I think conservation of capital will be key right now so I can get ready to play the next leg, whichever way that happens to be. I have a dilemma because I could have either closed out all my positions and just day traded for the next few weeks, or hedged myself. I like the idea of not being exposed to gaps in either direction but hopefully I have taken care of that now. Depending on how this earnings season goes I may change my strategy in the future. I have 2/3 of my capital at work so if needed I can take advantage of day trading opportunities or longer term trends that present themselves.
I hope my relative strength and weakness plays work out mostly in my favor. I am actually fairly bullish however you never know what will happen with earnings. If financial stocks have decent earnings I think we have an uptrend for pretty much the rest of the year but we'll see.
Total Return for 2009: 96%
From a bullish standpoint stocks rallied into the close to finish at the 835 level which was previously resistance and now support. This is supportive of higher stock prices and we saw the McClellan come off it's oversold levels.
I was pissed that the entire day my one hedge was going against me and not being a hedge at all. It's almost hazardous to be short anything with all the rumors of takeover going around it had my ESRX up all day until it eased off at the end.
I gave back some today but took the opportunity to balance myself a bit more for the uncertain times of earnings season. I doubled my number of positions and now have a 3:4 put/call ratio, so I am still bullish but much better than my previous 1:3. I think conservation of capital will be key right now so I can get ready to play the next leg, whichever way that happens to be. I have a dilemma because I could have either closed out all my positions and just day traded for the next few weeks, or hedged myself. I like the idea of not being exposed to gaps in either direction but hopefully I have taken care of that now. Depending on how this earnings season goes I may change my strategy in the future. I have 2/3 of my capital at work so if needed I can take advantage of day trading opportunities or longer term trends that present themselves.
I hope my relative strength and weakness plays work out mostly in my favor. I am actually fairly bullish however you never know what will happen with earnings. If financial stocks have decent earnings I think we have an uptrend for pretty much the rest of the year but we'll see.
Total Return for 2009: 96%
Friday, April 3, 2009
Up, Up and Away?
The market managed to finish in positive territory near its highs after spending most of the day negative. The nice thing was that all my positions initially were working, my put positions were down and my calls were up, which is exactly why I had the hedge on. Throughout the day however IYR got very strong and it seemed like it would continue so I cut that position loose with a small loss. This was good as it continued its move upwards and would have resulted in more of a loss had I waited till the end of the day. I kept on my other position as it failed to participate in any rally throughout the day and I hope the weakness continues into next week and will help hedge against any pull backs.
One position I debated before was Visa which broke out huge today, sucks to be me but I'll wait for a pull back just like RIMM and look to get in there. I was tempted to add another put position at the end of the day but I think it would have been unnecessary to lose that time decay. I'll reassess next week. The interesting thing is just at the end of the day the VIX finally broke down below 40, albeit slightly which breaks its 200 day moving average. This generally should point to higher stock prices and easier option trading but we have yet to see many earnings releases. The dip is MS came and went today and I didn't get in unfortunately. I feel like it could run for the next week or so into goldman sachs earnings but I'll look at it next week.
I possibly should have taken some of my ACH off ahead of Alcoa earnings on monday however ACH already had their earnings so I don't see why that would really matter to my position. The ideal scenario is they are better or less worse than expected and ACH catches a bid.
All my positions are working nicely however we are reaching an oversold level in the markets so I am reluctant to take more risk to the long side right here and am more likely to take some profits or add some hedges. The dilemma I face is I have July dated options and I could just let them go but it is generally beneficial to roll them as they get deep in the money to lock in profit and have less delta in case of a pull back. I was unable to break the 100% barrier today but hopefully if things work well next week I can. That will be a nice mile stone but I still have a long way to go to recover from before but I'm definitely on the right track.
Total Return for 2009: 99%
One position I debated before was Visa which broke out huge today, sucks to be me but I'll wait for a pull back just like RIMM and look to get in there. I was tempted to add another put position at the end of the day but I think it would have been unnecessary to lose that time decay. I'll reassess next week. The interesting thing is just at the end of the day the VIX finally broke down below 40, albeit slightly which breaks its 200 day moving average. This generally should point to higher stock prices and easier option trading but we have yet to see many earnings releases. The dip is MS came and went today and I didn't get in unfortunately. I feel like it could run for the next week or so into goldman sachs earnings but I'll look at it next week.
I possibly should have taken some of my ACH off ahead of Alcoa earnings on monday however ACH already had their earnings so I don't see why that would really matter to my position. The ideal scenario is they are better or less worse than expected and ACH catches a bid.
All my positions are working nicely however we are reaching an oversold level in the markets so I am reluctant to take more risk to the long side right here and am more likely to take some profits or add some hedges. The dilemma I face is I have July dated options and I could just let them go but it is generally beneficial to roll them as they get deep in the money to lock in profit and have less delta in case of a pull back. I was unable to break the 100% barrier today but hopefully if things work well next week I can. That will be a nice mile stone but I still have a long way to go to recover from before but I'm definitely on the right track.
Total Return for 2009: 99%
Thursday, April 2, 2009
The Party Continues
Stocks rallied on the G20 comments and the change in FASB mark to market rules but somewhat less so as some financials were down on the day. We nearly reached the target of 850 today like I had thought may happen.
I am kicking myself on two fronts. One, I didn't take any of the day trades, I wanted to just buy the open which would have done nicely. I was scared to pull the trigger because I have done that before and taken away the profits of my longer term positions and just felt like I set myself back. Two, I didn't get into RIMM back at 42 when I had looked at it, because it will likely open up near 60 tomorrow gapping 10 dollars after hours off earnings. Oh well, I'll look to buy on a pull back. Patience is key.
My positions did well today, outperforming the index however I am slightly concerned about my ACH position. It was up 8% but came well off its highs to finish near the lows at the end of the day and didn't hold on to its new high above 17.30 which was essentially rejected. At the highs of the day I took on two put positions to basically make myself 3:2 long biased and have some downside protection after such a large run. The execution was perfect in terms of timing but the relative weakness plays weren't as weak as I had hoped so the hedges didn't work like I wanted. The important thing is that I have the hedges in place and have some downside protection because in reality we have moved very far and very fast.
Depending on what happens tomorrow I'll position myself accordingly ahead of the weekend.
Total Return for 2009: 92%
I am kicking myself on two fronts. One, I didn't take any of the day trades, I wanted to just buy the open which would have done nicely. I was scared to pull the trigger because I have done that before and taken away the profits of my longer term positions and just felt like I set myself back. Two, I didn't get into RIMM back at 42 when I had looked at it, because it will likely open up near 60 tomorrow gapping 10 dollars after hours off earnings. Oh well, I'll look to buy on a pull back. Patience is key.
My positions did well today, outperforming the index however I am slightly concerned about my ACH position. It was up 8% but came well off its highs to finish near the lows at the end of the day and didn't hold on to its new high above 17.30 which was essentially rejected. At the highs of the day I took on two put positions to basically make myself 3:2 long biased and have some downside protection after such a large run. The execution was perfect in terms of timing but the relative weakness plays weren't as weak as I had hoped so the hedges didn't work like I wanted. The important thing is that I have the hedges in place and have some downside protection because in reality we have moved very far and very fast.
Depending on what happens tomorrow I'll position myself accordingly ahead of the weekend.
Total Return for 2009: 92%
Wednesday, April 1, 2009
Trade Analysis
So, for any of this to matter or teach me anything I need to figure out my statistics and how I am doing and what I can learn so I can improve or continue doing what is working.
These are the statistics YTD:
Wins:11
Losses:13
Average Profit: 1,606
Average Loss:525
Win Ratio: 45.8%
Loss Ratio: 54.2%
Expectancy: .458(1606)+.542(-525)=451.5
So we can see so far this year I have been pretty good about keeping a risk to reward of 1:3. I learned something interesting that could be very telling and will likely need to be adjusted. Of my wins, 9 of them have been long positions, either stock or long calls, or short puts. Only 2 were short positions(long puts). My losses are also mainly long positions with 10 being long and 3 being short.
This is obviously fine during an uptrend and bull market which is likely the reason for the recent success of March since it has essentially been all upward. This also generally works with the general bias of the market since there is a general upward drift when we aren't in such an extreme environment. I obviously like to be long rather than short, and take my losses when they don't work but I may get better and more consistent results if I am more flexible. This is likely the main reason for severe losses last year, I was trading counter trend. This seems stupid but you'd be surprised how you sometimes forget the simple rule of trading with the trend.
I have a positive expectancy which is what you ultimately need to have to be a successful trader(investor) and have positive returns in the long run. Theoretically if I keep a 1:3 risk reward ratio I need to be correct only 30% of the time to have a positive expectancy. Obviously the higher the win ratio the better the returns so I'd like to at least hold it at 45% or improve if possible as an average over the long run but even if I have a bad month of taking positions I know I can be wrong 70% of the time and still be profitable. It seems counter intuitive and is but the statistics and probabilities must be embraced to have any chance of succeeding otherwise you will always second guess yourself.
This analysis has exposed the fact that in bearish markets I need to embrace the trend to keep up performance or have less volatility in my returns. I clearly prefer a long bias and so far patience and scaling out of positions has served well to lock in gains and reduce volatility but I need to be able to do it the opposite direction when necessary.
The only thing that I can't do much about now is the fact that my trade commissions have eaten up 6% of my profits, however I can say that patience has helped that greatly. I will look to summarize results again at the end of April.
These are the statistics YTD:
Wins:11
Losses:13
Average Profit: 1,606
Average Loss:525
Win Ratio: 45.8%
Loss Ratio: 54.2%
Expectancy: .458(1606)+.542(-525)=451.5
So we can see so far this year I have been pretty good about keeping a risk to reward of 1:3. I learned something interesting that could be very telling and will likely need to be adjusted. Of my wins, 9 of them have been long positions, either stock or long calls, or short puts. Only 2 were short positions(long puts). My losses are also mainly long positions with 10 being long and 3 being short.
This is obviously fine during an uptrend and bull market which is likely the reason for the recent success of March since it has essentially been all upward. This also generally works with the general bias of the market since there is a general upward drift when we aren't in such an extreme environment. I obviously like to be long rather than short, and take my losses when they don't work but I may get better and more consistent results if I am more flexible. This is likely the main reason for severe losses last year, I was trading counter trend. This seems stupid but you'd be surprised how you sometimes forget the simple rule of trading with the trend.
I have a positive expectancy which is what you ultimately need to have to be a successful trader(investor) and have positive returns in the long run. Theoretically if I keep a 1:3 risk reward ratio I need to be correct only 30% of the time to have a positive expectancy. Obviously the higher the win ratio the better the returns so I'd like to at least hold it at 45% or improve if possible as an average over the long run but even if I have a bad month of taking positions I know I can be wrong 70% of the time and still be profitable. It seems counter intuitive and is but the statistics and probabilities must be embraced to have any chance of succeeding otherwise you will always second guess yourself.
This analysis has exposed the fact that in bearish markets I need to embrace the trend to keep up performance or have less volatility in my returns. I clearly prefer a long bias and so far patience and scaling out of positions has served well to lock in gains and reduce volatility but I need to be able to do it the opposite direction when necessary.
The only thing that I can't do much about now is the fact that my trade commissions have eaten up 6% of my profits, however I can say that patience has helped that greatly. I will look to summarize results again at the end of April.
April Fool's Gains No Joke
So the start of the month started off fairly decently after looking bleak to begin with. The futures were down significantly coming into the open. However once we opened we essentially rallied even despite ADP numbers of nearly 750,000 job losses.
I had a single put position on WYNN coming into the day and I assumed with its relative weakness it should do a decent job of limiting a gap down loss even with just that position. Oddly though I noticed that it didn't gap down at all, in fact it was break even and going positive right on the open. This concerned me so I cut the position loose right away at break even. This was a good move because it went on to rally 8% on the day on apparent good news out of MGM or LVS. The bank index was strong fromt he beginning and europe had basically rallied higher from the open as well so I was tempted to buy MS when it gapped down but didn't want to take anymore risk.
Had I taken that risk it would have played out well and likely will again tomorrow but oh well. I was thinking it was possible we broke down yesterday but the market seems to be fairly bullish. Futures are up 1.5% and Asia is trading 4.5% higher before the G20 meeting. If we get positive news out of G20 and there is a revision to mark to market accounting it is entirely possible that we see 850 tomorrow on the S&P. I only have 1/4 my capital at work so I may look to day trade futures tomorrow to take advantage of any possible rally.
I like the start to the month of April so far, it appears it will continue tomorrow and as we get higher I will scale out of my bullish positions. It is possible we get to 900 in short order but my theory is we don't go there is a straight line and I will look to add on pullbacks until something changes. If we have fairly positive earnings I think 900 is pretty much guaranteed, although the fact that the market keeps shrugging negative news off maybe it will go there anyways. We have to be aware of being too bullish though because that is when unexpected things can cause severe reversals.
I am thinking it may be good to just keep a rolling tally of return along with my blogs from now on to make things easier. :-)
Return for 2009: 82%
I had a single put position on WYNN coming into the day and I assumed with its relative weakness it should do a decent job of limiting a gap down loss even with just that position. Oddly though I noticed that it didn't gap down at all, in fact it was break even and going positive right on the open. This concerned me so I cut the position loose right away at break even. This was a good move because it went on to rally 8% on the day on apparent good news out of MGM or LVS. The bank index was strong fromt he beginning and europe had basically rallied higher from the open as well so I was tempted to buy MS when it gapped down but didn't want to take anymore risk.
Had I taken that risk it would have played out well and likely will again tomorrow but oh well. I was thinking it was possible we broke down yesterday but the market seems to be fairly bullish. Futures are up 1.5% and Asia is trading 4.5% higher before the G20 meeting. If we get positive news out of G20 and there is a revision to mark to market accounting it is entirely possible that we see 850 tomorrow on the S&P. I only have 1/4 my capital at work so I may look to day trade futures tomorrow to take advantage of any possible rally.
I like the start to the month of April so far, it appears it will continue tomorrow and as we get higher I will scale out of my bullish positions. It is possible we get to 900 in short order but my theory is we don't go there is a straight line and I will look to add on pullbacks until something changes. If we have fairly positive earnings I think 900 is pretty much guaranteed, although the fact that the market keeps shrugging negative news off maybe it will go there anyways. We have to be aware of being too bullish though because that is when unexpected things can cause severe reversals.
I am thinking it may be good to just keep a rolling tally of return along with my blogs from now on to make things easier. :-)
Return for 2009: 82%
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