Thursday, January 31, 2008

I'm glad to say January 2008 is behind me.

What a wild ride. Well, I did not make any of my goals for this month. I did make a few of my daily goals, where I quit trading early because I had already made $500.00 profits in trades. I believe that this was a mistake. All that this accomplished was that on days that I was timing the market well, I quit trading. Days when I was not timing the market well, I traded all day. I can not find any logical way to say that makes sense. The whole point of making this work is running what is working right.

So, as for my realized gains, I ended up making about 1/3 of my first goal. I could look at this as a failure in many ways, when I look back on my January goals. However, this performance is a huge improvement over my performance in November and December. Actually looking back over the past few months, I am seeing a marked improvement. In November, I had realized losses of a large amount, we will call it X. In December my losses were 1/3 of X, and in January I realized a small gain. I'm really glad that I keep that monthly tracking scorecard. It shows a definite upward trend in realized results as I move my way up the learning curve. Having a tangible goal to strive for has helped me improve my performance, despite the fact that I haven't yet successfully achieved one.

That being said, I am going to keep a similar goal structure for February.

Goal 1: Realized gains = monthly withdrawal.

I have a set amount of money that I need to withdraw from my trading account each month for my share of the household contributions. Goal one is to achieve realized gains equal to that amount.

Goal 2: Realized gains = monthly withdrawal plus 10% of account balance as of Jan. 31.

If Goal 2 is achieved, a percentage of realized gains will be contributed to my IRA.

Goal 3: Realized gains = $500.00 per trading day.

There are 20 trading days in February. February 18th the market is closed. This is my most challenging goal. If I am successful, I will make 10,000 in one month.

2/1 - 500.00
2/4 - 2/8 - 2500.00
2/11 - 2/15 - 2500.00 [option expiration]
2/19 - 2/22 - 2000.00 (Market closed the 18th)
2/25 - 2/29 2500.00

Always perform your own due diligence before making any investment.

Tuesday, January 29, 2008


Heard on CNBC that 30% of the world's gold is consumed by the women of India, and they aren't buying at these prices. They are investing their money in diamonds, and the markets are watching.

Gonna add ABX to my watchlist.

Always perform your own due diligence before making any investment.

Sunday, January 27, 2008


I feel to a certain extent that I am at a crossroads right now. The world market crash on 1/22 ends up being precipitated by a rogue trader that circumvented the bank he works for trading checks. Some of the damage done to me personally was permanent, though partly my own fault.

I went into the weekend holding out of the money GOOG calls, that I could have sold that Friday for a small net gain of .10 or .20. Instead, I started the week with 90% loss on those calls. I ended up with some liquidity issues due to the decrease in my portfolio value, and ended up selling a few shares of MVO that I had bought for the dividend at a loss, just so I would have enough money to trade. I didn't do it right away, the first couple of days I waited to see what would happen, but soon enough it became evident that taking a small hit on those few shares (about 15% of my MVO holding) gave me enough working capital to begin recouping my losses.

The prior week I had quit trading early 3 times. I still believe that eliminating fear and greed in this uncertain market is key to getting ahead in this market, however after last week I'm not convinced that my approach is going to work.

The problem with options trading is that it all occurs during trading hours, while the stock trading can occur during off hours. Therefore, a stop loss on a stock will trigger as the market falls, however in my case, since the stock fell in off hours, the option bid ask gapped down before option trading began, therefore the stop loss on my options did not trigger. I rode it down farther than I had to, definitely, I could have taken a 35% loss, at one point that first day. However, since I had already broken my round trip rule, and the options were good for another few weeks, I decided to ride it out.

In the mean time, I have made a few dollars on the puts since I'm watching the stock anyway. My issue now is, as a trader, what is the right thing for me to do?

By limiting the amount of money that I am making in a day, I felt at first that I was limiting my chances of giving back what I gained. That may be true, however in this volatile market, I see that there are ways beyond my control for me to lose money that is exposed, without it being my fault. Losing electricity, watchlist and level two's not updating properly, rogue traders in Paris all can take a bite out of me when I'm not looking. So, now I am at this crossroads. Part of me feels that I need to continue to put those limits on my trading, however the other part of me tells me that by doing that, I am not taking full advantage of the days that I am trading well. Because, lets face it, that is what my style of trading comes down to. If I am jumping on and off stocks well, that means they are moving in the direction that I am expecting them to move, and I am executing my trades profitably. Since I don't know if I will be able to do that tomorrow, shouldn't I keep trading throughout the day?

It's difficult to know which is best. Part of the quiting work early has to do with lifestyle as well though. Every day that I can quit early, is a day that I can put those hours to use elsewhere in my life. At this point, however, I am starting to feel that I need to continue trading on the days that I am making good trades. I'm not going to make a decision yet. I'm going to play next week by ear.

Starting out next week I have some POT calls that are free and clear (I sold half the position last week for a 140% gain) and the notorious GOOGLE calls. I have 3 weeks to find an out the contracts. GOOGLE announces their earnings on January 31 (this Thursday). This could be a huge gain for me, or a huge loss. My plan is to get rid of at least 2/3 of my position for a gain before the announcement. Hard to know what will happen in this bear market. Wish me luck!

Always perform your own due diligence before making any investment.

1/22/2008 - 1/25/2008 Round Trip Options

Most of you have probably heard about the world market crash and high volatility that occurred during this week.

Despite two of my rules, no more google options, and only round trip option trades, I ended up with a bunch of google calls over the weekend, and by the time market opened on Tuesday they had lost about 90% of their value. This in addition to the lower pricing of the dividend paying stocks in my account put in a position of low liquidity. I spent most of the week just watching the market. I did purchase some POT calls which also ended up not being a round trip. The only round trip option trades I made this week were on Friday.

Goog Puts gain 1.00
GS Puts gain 1.00
Goog puts lose .80
Goog puts gain .10
Goog Puts gain .90

Always perform your own due diligence before making any investment.

1/14/2008 - 1/18/2008 Round Trip Options

Since this was option expiration week, I was supposed to avoid trading options as much as possible, but I did make a couple of round trips, as well as buying some Goog calls, which I am still holding, so they will not be listed on my round trip trades. I will discuss these more in another post.

GS Puts gain .15
FSLR calls gain .60

FSLR puts gain 1.70

Quit working early three days this week due to making daily trading goal.

Always perform your own due diligence before making any investment.

Sunday, January 13, 2008

Notes for week ending 1/11/08

Well, overall I was happy with my performance this past week. I was able to close down trading before 10:30 am once this week, and by 8:30 am twice! I made some changes to the list of blue chips that I track daily for option trading. I decided to remove GOOG from my list. I still believe that GOOG is going to be key to my future trading. Once you get that stocks rhythm down, it makes huge intraday swings, and should be a money maker. However, I had to reconcile recognizing its potential with the reality of my ability to trade it. My last 6 GOOG trades have been loses, and that's wrong way enough times that I removed it from my list.

I saw a posting of a 1 year RIG chart, and saw an easy channel to follow over the past year. I have added that to my list.

Last, I decided to switch the solar that I watch. I was not attached to the stock, I never really found it's rhythm, and many times when the other sector stocks would take off, SPWR would move sideways. I decided to replace it with FSLR. It has bigger intraday moves, since the price is higher. I haven't traded it yet, and probably wont until at least after option expiration next Friday, unless the trade appears to me completely zipless.

Technical issues abound for me this week. Ameritrade is in the process of changing their system for updating option prices. 4 days this week I was not getting option price updates. Thank goodness for my friends on the Options Wonderland board at IHub. I would post a message asking for current buy / ask on my particular option, and was getting responses within just a few minutes. I don't talk about it much, but I really couldn't be doing this without the support of so very many people. There are the people in my life that know me that support me, my friends, my family, but there is this whole extended network of friends in cyberspace that help and support me as well.

Anyway, this made me realize that if this is going to be my business, I am going to have to come up with a back up plan for getting real time option prices. If anyone has any ideas or suggestions, feel free to leave a comment on this post. Currently, I am considering opening a second account with optionshouse.

Next week is option expiration. The Friday of January option expiration week is historically down with big losses 8 of the last 9 years. I may try to find a put play for that day, if I am still trading at the end of the week.

My goal for the week is $2500, which again is a $500 gain per day average. Any day that I make trades over $500, I quit trading for the day. I quit trading for the week after I have made a $2500 gain.

The bears have a pretty strong hold on the market right now. This does not just mean that the market is going down, it means that the market is highly unpredictable, and there is a lot of sideways movement. The downward movements come swiftly, crashing 150-200 points in a matter of what, a half hour? Just a glance at this chart shows at least 3 time in the last 10 days that there has been a crash in that range, closer inspection may find more.

You can see the market whipsawing all over the place in that graph. Playing this market in my style right now, is akin to trying to jump on a moving train that you can see the direction of, but don't know where it turns around at. First, you have to make sure you don't hurt yourself trying to jump on (overpay for an option). Then you have to make sure you jump back off before it reverses.

In fact, here is a copy of a post I made on Ihub regarding what daytrading options means to me in more explicit terms.

I have a spread sheet that I fill out each night. I like to option trade blue chips. I have a list of stocks from various sectors that I follow, that have a history of making good size intraday moves. I pick stocks from different sectors, current list is

FSLR (just replaced SPWR)
RIG (just added)

On my spread sheet each night I put the last price of the day, the $ up or down, two levels of support (from stock consultant)and two levels of resistance. I look for stocks that are near one of these levels, and those are the ones that I pay particular close attention to each day. Stock consultant is nice, because they have the channel drawn there for you, so you can also see at a glance where in the trading channel the stock ended the day. Also, by watching a few stocks every day, you will find your own rhythm. PCU was trading between 100 to 110 for quite a while fairly predictably. It broke out of that channel, and now seems to be trading from 95 to 100, but it hasn't quite been in that channel long enough for me to feel I can count on it.

Next I check for new news on the stock, and sometimes if I am not totally wiped out for the day, I'll pull up a candlestick chart on each one, and see if I can see any patterns developing (I'm new to candlestick charting, so I'm not great at this).

This will usually give me a few general ideas to watch for the next day. I will pick out some calls or puts, and add them to my watch list under the stock. One of my rules is not to trade options before 10am market time (7am here in Cali). Option prices tend to be inflated the first half hour of the day.

So, now it is past 10am, the market is either up or down, and the stocks I'm watching are either moving or they aren't. Once I notice a stock start to move, if it is moving away from a support or resistance, I buy the appropriate put or call. I immediately set a target sell, which can always be changed. I then watch the stock. If it bounces off a resistance point a couple of times, and I am in the green, I will sell all or some of my contracts.

My goal is to make at least $500 a day. With the intraday mood swings in this volatile market, I prefer to take a .20 to .50 gain within an hour, than hope I get a couple of bucks by the end of the day. I never worry about money I left on the table, there is always more to find tomorrow. Therefore, I make the best quick trade that I think I can. I don't limit the trade to $500, but if it ends up over that mark, I quit for the day. If it is under that mark, I keep watching, and look for another trade. This last week, I quit trading before the market closed 3 times.
I really need to close this post out, but here are a couple of more things that I picked up this week. First of all, you actually can watch level two activity on options themselves. I haven't been watching the depth on the bid ask. I think th is is going to give me a huge advantage, and help me to stop chasing asks when I do my buys. Secondly, I am going to add CNBC to my background noise next week. The last couple of months I have been involved in learning the mechanics of trading options, setting up tracking systems, and in general trying to learn my business. While trading, my attention is focused as much as possible just on that. Distractions were costly from time to time. This week, however, while I was going back to refresh my trading platform home page to see if there was any news, and then checking out at Ihub, I realized that in this news driven market it, real time news is just as important to me as real time quotes. Starting Monday morning, I am going to have CNBC going in the background while I'm trading.

Making these simple realizations is very grounding for me, and makes me start to understand how far it is that I have to go.

Always perform your own due diligence before making any investment.

1/7/2008 -1/11/2008 Round Trip Options

This week I was able to execute trades netting over $500.00 three times before the market closed, and shut down shop early for the day. I was surprised (but not much) at how difficult it was to actually stop working. However, in this volatile market right now, there is too much risk of making a bad trade, and turning around and giving back the gains of the day, because the market decides to switch directions in mid stride.

Anyway, I would be extremely pleased if I was able to maintain this type of training record. Probably half of my trades that helped me make those goals where equity trades. I trade less options the closer that we get to option expiration. However, this post is a list of the round trip options that I made, so only those will be listed here. Enough of this talk though, here is the down low...

RIMM calls +.40

RIG calls - .10

GOOG put -.80
FWLT calls +.70

GS calls +.50

Always perform your own due diligence before making any investment.

Friday, January 4, 2008

Notes for week ending 1/4/08

Well, I did not meet my level 3 goal for this week, which is ok. I'm focusing here on realized gains and losses, and not focusing on my portfolio gains. HTE has made a monster move this week, and since I am very heavy in it at bargain prices, I have seen a huge jump in not only my trading portfolio but also my IRA which I don't discuss here too often. I finally got it funded on December 19th, and in a couple of weeks I have seen it swell by 7.5% in just these couple of weeks. I was very lucky to get in near the 52 week low on that one, and I scooped up a whole lot of shares below 20.00. I can't wait for that first dividend to hit on the 15th!

A friend of mine mentioned his visit to the New York stock exchange again this week, and asked me if I have ever been. I have only been to NY once, for what amounted to a little more than a day, and the stock exchange was not on that whirlwind tour. Ever since then I've been dying to go back for a longer visit, so his comment has triggered a goal/reward for me. I have noted my account balance as of yesterday, and have decided that once I double that amount, I will plan a trip to New York for myself as a reward / vacation, and put visiting the stock exchange on my list of things to do while I'm there.

So, while I'm not pleased with the markets start for 2008, I am pretty pleased with my performance. I'm starting to find the balance between patience and speed that is necessary to making round trip options successful.

Have a great weekend, and thanks for popping in.

Always perform your own due diligence before making any investment.

12/31/2007-1/04/2008 Round Trip Options

Here's how my round trip options played out this week. Unfortunately it took me until the end of the week to get my rhythm down, but I finally did! I have to add that those Goog calls should have been green on the third. I had more than one opportunity to sell them green and missed it. Hindsight.

POT puts -.40

GS calls -.60
PCU calls +.80

GOOG calls -.80

RIMM calls +.55 (averaged)
PCU calls +.30

Always perform your own due diligence before making any investment.

Wednesday, January 2, 2008

January 2008 Goals and Rules

Well, I spent last night setting some goals and rules down for January. I could talk about how 2007 went for me, but lets just say that I made a very large initial investment in becoming a day trader the last two months of 2007, and leave it at that. The good news is that I am slowly seeing some of that ROI.

Anyway, lets start with the Goals for January. I have set three levels of goals for January. We'll see how it works out, and go from there.

Goal 1: Realized gains = monthly withdrawal.

I have a set amount of money that I need to withdraw from my trading account each month for my share of the household contributions. Goal one is to achieve realized gains equal to that amount. Since I purchased a large amount of HTE stock during the latest dip, 1/2 of that goal is covered through my monthly HTE dividend, so this is very attainable.

Goal 2: Realized gains = monthly withdrawal plus 10% of account balance as of Dec. 31.

This goal is a little more challenging, but I feel it is attainable if I stick to the rules I will outline further down this post.

Goal 3: Realized gains = $500.00 per trading day.

There are 21 trading days in January. January 1 and 21 the market is closed. This is my most challenging goal. I have had days that I have made much more than this trading options, and of course days when I've lost this much or more... For this goal, I break it down into weeks.

1/2-1/4 - 1500.00
1/7-1/11 - 2500.00
1/14 - 1/18 2500.00
1/22-1/25 2000.00 (Market closed the 18th)
1/28-1/31 2000.00 (31st is a Thursday)

Since this is already a very aggressive goal, I have decided that once I meet a weeks goal, I will take the rest of the week off. Each week will be looked at independent of the preceding weeks of the month. In other words, If I do not make my goal of $1500.00 this week, that does not mean I have to make up the difference next week. If I make $2,500 by say Wednesday the following week, I still take the rest of the week off.

Now for the rules...

1. No option purchases before 7 am.
2. Close out all January option plays by Thursday, 1/10/08.
3. Limit the number of option plays made on expiration week (1/11-1/18)
4. Any week that goal three is realized, stop trading for the rest of the week.
5. Update spreadsheets daily.
6. Update blog weekly at a minimum.
7. Transfer 10% of realized gains over 1500 to my IRA account.

Dow was down 220 points today. Oil over $100.00 per barrel for the first time in history. My Stock Traders Almanac says tomorrow should be a bull day. I hope so!

Always perform your own due diligence before making any investment.