Well the week has been eventful for me, more so outside of the markets which is the reason for the lack of blogging the past few days. Weds I saw more rebound getting back a couple percent lost on monday. Thursday I gave that back then a little more and Friday I ended up back where I started on Tuesday.
Outside of the markets I got my wisdom teeth out which is highly annoying to deal with and I would rank it up there with having a sprained ankle. I am sure it will be glorious to eat whatever I want again just like it is glorious to be able to walk around and run with no limp after a sprain but for now it is simply a pain in the ass(or mouth rather).
Turning my attention back to the markets I am thinking that it may be time to get back into FOREX because it seems to be where all the action is these days. With the Euro hitting 1.40 recently that is a huge move. One I was looking to happen but obviously didn't know when it would so going long the euro may have tested my patience and stopped me out. Now that it has moved however I could go long on a pull back but may look at other currencies instead.
The odd thing with the market is the fact that we broke down on the $VIX yet the market is trading fairly poorly like it could also break down on the next wave of bad news. I guess this is good for option buyers either way but makes it hard to look for clues of the next move. The drop in the VIX along with the rise in 10 year treasuries seems to be fairly bullish for stocks. Agriculture stocks are on fire and IPI(which I got stopped out of) would have likely been a better trade than FCX was had I stock with it. It would be nice to get a larger pull back to get into those names to better manage risk. Besides the first 2 days of the week the moves in my account have been fairly boring which is fine for the next 2 weeks until I am done with my CFA test. I would like to get some type of conviction soon, buyers show up at 880 and sell at 900 for the moment.
I see more and more commercial real estate for sale signs around me yet the IYR continues to hold up much better than I would expect. I am thinking we could digest some bad news over the course of June then look to rally in July/August especially if earnings stay decent and last quarter "improvements" aren't a blip up in a downtrend. Bad news we likely need to discount still is GM Bankruptcy, continuing job losses and rising unemployment over projections, commercial real estate deterioration. I still feel that materials and Ag will be the out performers as we can already see inflation expectations taking its toll on the 10 year rates. With more bad news discounted and a larger pull back in stocks I would be fairly comfortable going long again for the longer term. I have seen an increase in job postings locally but that will only offset some of the other job losses occuring but is a positive step.
Total Return for 2009: 157%
Friday, May 22, 2009
Tuesday, May 19, 2009
Flat Day Rebound
Today helped bring my account back up nicely but not completely. Commodity and materials related stocks were flying high today which is where most of my positions are to the long side. My puts had smaller losses and my puts on the IYR had a gain. Partially due to frustration and partially due to the fact that I am taking the CFA Level 1 exam in a couple weeks I decided to cut back on my positions so I didn't feel inclined to check it as often.
I actually for the time being exited the two long positions at very good prices. ANR and 5 of my 8 contracts on DSX I exited near the highs and they pulled back significantly into the close. Obviously as the market pulled back I wished I had all my SPY puts still on but I sold a majority of those as well and only kept 3 so I am still long biased. I will stay long biased until we break back below 900 which may happen soon. Today had a worse than expected housing starts like I had wanted but it was much worse and I was surprised to see the materials and stocks in general up after news like that. If we hold 900 tomorrow I think that will be bullish for stocks and set us up for another leg higher as long as jobless claims stay in check. I doubt my projected worse than expected jobless claims numbers will hit until later in June as more people hit the job market unable to find jobs. If that doesn't happen we could see this rally gain some momentum.
I am willing to play the market either way obviously I just wish it would pick a direction that is consistent like before but I doubt that will happen. I feel like since the market psychology is that overall thing will get better people are optimistic making a bearish bias a little bit harder than being long, but right now the longs lack the catalyst to make it worth it.
Total Return for 2009: 157%
I actually for the time being exited the two long positions at very good prices. ANR and 5 of my 8 contracts on DSX I exited near the highs and they pulled back significantly into the close. Obviously as the market pulled back I wished I had all my SPY puts still on but I sold a majority of those as well and only kept 3 so I am still long biased. I will stay long biased until we break back below 900 which may happen soon. Today had a worse than expected housing starts like I had wanted but it was much worse and I was surprised to see the materials and stocks in general up after news like that. If we hold 900 tomorrow I think that will be bullish for stocks and set us up for another leg higher as long as jobless claims stay in check. I doubt my projected worse than expected jobless claims numbers will hit until later in June as more people hit the job market unable to find jobs. If that doesn't happen we could see this rally gain some momentum.
I am willing to play the market either way obviously I just wish it would pick a direction that is consistent like before but I doubt that will happen. I feel like since the market psychology is that overall thing will get better people are optimistic making a bearish bias a little bit harder than being long, but right now the longs lack the catalyst to make it worth it.
Total Return for 2009: 157%
Rally=Undesirable Losses
Yesterday made me very irritated because insteading of gapping down and allowing me to cover my puts we gapped up and ran. This just puts me in kind of a no man's land position because we weren't over 900 yet and technically nothing would be confirmed till the end of day so do I sell my puts assuming we don't reverse? In hind sight that would have been the less costly thing to do as I sit here with a large loss on my SPY puts. I of course have more calls than puts but clearly my put position on the SPY was too concentrated so it made it act like I was much more bearish.
The whole point of staying partially balanced is to limit losses at any given time. My goal was to keep losses below 5-7% but today I gave back 12% which is unacceptable. This puts a large kink in the movement upward but the even worse effect is the mental one it has seeing my account drop close to levels I want to stay above which makes me less inclined to take risk. The even worse thing is if I let these losses continue and don't just follow what the market is telling me, which is that it wants to go higher. The other problem I had today raises the question of hard stop losses. It would have saved me over a third of the losses but again I am not sure if it would have been at a level really confirming a break of trend. I guess the thing to do would be to have it in place and hop back in if we failed to hold 900 instead of not having it there at all. I am generally fine with selling to limit my own losses but I will admit in this scenario I felt a little unsure. My idea now is technically we are supposed to test 900 before continuing upwards so I'd like to get out at those more favorable prices on my puts but I have to be willing to admit that may not happen and just cut the loss. That could be determined by tomorrow's Housing Starts number if it comes in better than expected. If by the end of the first hour we haven't broken below the gap up(if we do) then I will exit. I become concerned that once I exit of course I am much more exposed to the downside.
Right now futures are trading slightly higher. If housing starts are worse than expected we may give up most of yesterday's rally but I think it would have to be severely worse than thought for that to happen. What I hope for is that it is simply in line or slightly worse, so we sell off and hold 900 so the uptrend stays in tact and I can re-gain my losses to the upside.
Total Return for 2009: 149%
The whole point of staying partially balanced is to limit losses at any given time. My goal was to keep losses below 5-7% but today I gave back 12% which is unacceptable. This puts a large kink in the movement upward but the even worse effect is the mental one it has seeing my account drop close to levels I want to stay above which makes me less inclined to take risk. The even worse thing is if I let these losses continue and don't just follow what the market is telling me, which is that it wants to go higher. The other problem I had today raises the question of hard stop losses. It would have saved me over a third of the losses but again I am not sure if it would have been at a level really confirming a break of trend. I guess the thing to do would be to have it in place and hop back in if we failed to hold 900 instead of not having it there at all. I am generally fine with selling to limit my own losses but I will admit in this scenario I felt a little unsure. My idea now is technically we are supposed to test 900 before continuing upwards so I'd like to get out at those more favorable prices on my puts but I have to be willing to admit that may not happen and just cut the loss. That could be determined by tomorrow's Housing Starts number if it comes in better than expected. If by the end of the first hour we haven't broken below the gap up(if we do) then I will exit. I become concerned that once I exit of course I am much more exposed to the downside.
Right now futures are trading slightly higher. If housing starts are worse than expected we may give up most of yesterday's rally but I think it would have to be severely worse than thought for that to happen. What I hope for is that it is simply in line or slightly worse, so we sell off and hold 900 so the uptrend stays in tact and I can re-gain my losses to the upside.
Total Return for 2009: 149%
Monday, May 18, 2009
Which Way?
So Friday showed me a small gain. All my short positions expired worthless minus the one June position I have in NVAX which will almost certainly expire worthless being a 200% move away from the strike but I am almost tempted to just close it and not care about the remaining 50 bucks. The good thing about having things expire is that you get the rest of the premium if there is any and you don't have to pay a commission on the closing side of the trade.
I was actually pretty excited that futures were down last night doing exactly like I wanted. I had wanted a gap down to 875 and then I would sell my puts and either buy futures or just hold my long options. However, Lowe's came out with really nice earnings and that made futures rebound and now turn positive by 1% so we are going to have a gap up instead which I think I am less positioned for. I am overall long but so far the moves in my long positions pre market will not out pace the move in the SPY and IYR so my losses should be greater than profit. Since this is fairly positive data and we may get more with Home Depot later on, this could push us back above 900 but we will see when we get there.
Overall Return for 2009: 161%
I was actually pretty excited that futures were down last night doing exactly like I wanted. I had wanted a gap down to 875 and then I would sell my puts and either buy futures or just hold my long options. However, Lowe's came out with really nice earnings and that made futures rebound and now turn positive by 1% so we are going to have a gap up instead which I think I am less positioned for. I am overall long but so far the moves in my long positions pre market will not out pace the move in the SPY and IYR so my losses should be greater than profit. Since this is fairly positive data and we may get more with Home Depot later on, this could push us back above 900 but we will see when we get there.
Overall Return for 2009: 161%
Friday, May 15, 2009
Direction Needed
Yesterday WMT is basically inline with expectations, reaffirms guidance but falls. Jobless claims are worse than expected, both things I didn't want, yet we rallied anyways. Seems like the market wanted to test 900 as well. I got back into puts on the SPY slightly early since we had that weaker data come out but I was able to get into IYR puts at near the high yesterday.
Now we need to either break 900 again or 875. We have yet to test 875 but I suspect once we do it will hold at least the first time. People on tv seem to think we will be in the range of 875 to 900 for a bit which could be and could give the opportunity to trade that channel. Ultimately I'd like to have a break down and retest 850 and possibly 800. After retail sales dropped I started to think about the upcoming scenario even for the summer and it didn't seem promising. We have new graduates coming out so potentially even more jobless pushing unemployment higher quicker than forecast. This continues to cut consumer spending and makes a more quick recovery nearly impossible. This could in fact lead to the credit card defaults and eventually bad commercial real estate loans causing issues as Meredith Whitney and others have claimed(as much as I don't like her).
I had actually been surprised by the more positive data as of recent even though I was long it was good but now seems more like an uptick in a downward trend. Do I think we re-test the lows or go lower? Very doubtful in my opinion but we could see a decent retracement now farther than I thought before. I am still long biased since we technically have not broken 875 yet but if that happens I'll look to get bearish.
All of my short option positions are currently sitting OTM, AAPL shook me out which is annoying because that would have been another one that worked out. This is a subjective analysis but I want to say out of 10 times I have had short options it only hasn't worked once, i've had to buy them back for a loss. The win percentage is great but the risk/reward will still never match a good directional play but can definitely be used to lower cost basis or generate a more steady profit stream. We could see some volatility today as stocks get pinned to certain strikes for expiration. Monday will be the day to start paying attention again.
Total Return for 2009: 159%
Now we need to either break 900 again or 875. We have yet to test 875 but I suspect once we do it will hold at least the first time. People on tv seem to think we will be in the range of 875 to 900 for a bit which could be and could give the opportunity to trade that channel. Ultimately I'd like to have a break down and retest 850 and possibly 800. After retail sales dropped I started to think about the upcoming scenario even for the summer and it didn't seem promising. We have new graduates coming out so potentially even more jobless pushing unemployment higher quicker than forecast. This continues to cut consumer spending and makes a more quick recovery nearly impossible. This could in fact lead to the credit card defaults and eventually bad commercial real estate loans causing issues as Meredith Whitney and others have claimed(as much as I don't like her).
I had actually been surprised by the more positive data as of recent even though I was long it was good but now seems more like an uptick in a downward trend. Do I think we re-test the lows or go lower? Very doubtful in my opinion but we could see a decent retracement now farther than I thought before. I am still long biased since we technically have not broken 875 yet but if that happens I'll look to get bearish.
All of my short option positions are currently sitting OTM, AAPL shook me out which is annoying because that would have been another one that worked out. This is a subjective analysis but I want to say out of 10 times I have had short options it only hasn't worked once, i've had to buy them back for a loss. The win percentage is great but the risk/reward will still never match a good directional play but can definitely be used to lower cost basis or generate a more steady profit stream. We could see some volatility today as stocks get pinned to certain strikes for expiration. Monday will be the day to start paying attention again.
Total Return for 2009: 159%
Wednesday, May 13, 2009
Premature Put Exit?
So at about 885 on the S&P I decided to sell 7 of my 10 puts expecting a bit more of a snapback short covering into the close. I wanted to shift my bias because this was a fairly significant sell off with the break of 900 and the reason we sold off somewhat changes the picture like I was thinking. In the short term i figured we went from overbought to oversold very fast so we could see some relief rally. The ideal scenario for me would be for Walmart to report better than expected earnings and guidance and we have a better than expected jobless claims and we have somewhat of a relief rally and then I would look to buy puts again at 900.
The problem is that we may continue down to 875 wihtout that happening and I am left with not much insurance left to the downside. I have watched my call positions go from large profits to break even, which is very annoying but at least my puts outpaced them overall. I saw a couple of low risk opportunities so I went long but it could be premature if things start to get worse.
JBLU continues to annoy with another 6% down day, and what do you know? The most open interest is at the 5 strike which is somewhat helpful to me but I'd rather be up at 6 with no worries of it breaking down with the market. I will watch it closely tomorrow along with the broad market and act as necessary. I feel like the next leg will be to the downside and create the best profit opportunities but I'd like to get a rally first to get better prices.
Total Return for 2009: 154%
The problem is that we may continue down to 875 wihtout that happening and I am left with not much insurance left to the downside. I have watched my call positions go from large profits to break even, which is very annoying but at least my puts outpaced them overall. I saw a couple of low risk opportunities so I went long but it could be premature if things start to get worse.
JBLU continues to annoy with another 6% down day, and what do you know? The most open interest is at the 5 strike which is somewhat helpful to me but I'd rather be up at 6 with no worries of it breaking down with the market. I will watch it closely tomorrow along with the broad market and act as necessary. I feel like the next leg will be to the downside and create the best profit opportunities but I'd like to get a rally first to get better prices.
Total Return for 2009: 154%
Tuesday, May 12, 2009
Bullish or BS?
So today we had what I would consider to be some market shenanigans as a result of options expiration week. Basically the scenario I just talked about happened. We started up, filled the gap then started to break down below 900 and as this was happening the VIX was lower on the day. At a time when you would assume panic is setting in and we are off more than 1% breaking critical support the VIX is down? I would consider it a bear trap, sucking in more shorts and shaking out weak longs before reversing to be flat on the day. JBLU was down nearly 10% on the day for what I think is no good reason. Oil was up but JBLU is specifically known for good hedging techniques and has been profitable. This ate up over half of my cushion in a day and the timing is obviously suspect.
I was positive or negative on the day depending on when I looked but ended up down on the day. I would need to be very active to try and squeeze out extra profits in this type of environment. Had I thought 900 was the ultimate short term low I would have exited my puts. As of right now it appears that people bought that dip again and we could move higher. I need to have my exit in mind for my puts becuase it has been very aggrevating to watch calls lose value, puts gain, then vice versa without any action. The market could have different ideas than I do so I need to be ready for that even as irrational I think more upside is, the saying is that "the market can stay irrational far longer than you can stay solvent."
If the market indeed wants to go higher I'll look to get some more long exposure but a lot of the easy money has already been made. I really want a pull back to 850 and I will buy with a lot more confidence but it could be a while before we get there and I have to look for opportunities in the mean time.
Total Return for 2009: 151%
I was positive or negative on the day depending on when I looked but ended up down on the day. I would need to be very active to try and squeeze out extra profits in this type of environment. Had I thought 900 was the ultimate short term low I would have exited my puts. As of right now it appears that people bought that dip again and we could move higher. I need to have my exit in mind for my puts becuase it has been very aggrevating to watch calls lose value, puts gain, then vice versa without any action. The market could have different ideas than I do so I need to be ready for that even as irrational I think more upside is, the saying is that "the market can stay irrational far longer than you can stay solvent."
If the market indeed wants to go higher I'll look to get some more long exposure but a lot of the easy money has already been made. I really want a pull back to 850 and I will buy with a lot more confidence but it could be a while before we get there and I have to look for opportunities in the mean time.
Total Return for 2009: 151%
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