Archive Page 2
What Crash?
After buying the dips for the last 2 weeks, I unloaded all the calls Thursday for profitable gains. Perhaps early, but I wanted to secure profits after a healthy run up. I expect markets to test new highs soon and the recent sell-off will be nothing more then a blip on the screen. It truly seems that we keep seeing many non-believers but every time I check my stock scans, I see new leaders or new momentum stocks appearing. As long as emerging countries continue to grow with low unemployment in US, low yields, tame inflation, and high liquidity, we should continue to see a stock pickers environment.
I’m now cash heavy and will be looking for an opportunity to reload calls. I’m starting to see a few call opportunities with techs. Volatility remains lower on those going into earnings. If we see any signs of a tech recovery, then the flood gates should open on the entire sector. I mentioned KLAC a while back and now technically it’s breaking out to new 52 week highs. Last week, I loaded INTC calls for a volatility play into earnings (April 17). I hate to hold for earnings, so likely I’ll unload them before. I also have others in various sectors on my radar and will be watching for dips to enter calls.
Account increased to 145k from 30k starting in 2007… $1mil on target!
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La Pamplona!
Although Pamplona is 5,753 miles away, I was sure as hell participating in Wednesday’s running of the bulls! Mainly, just making sure that a bull horn wasn’t stuck up my ass! On Wednesday, we saw Bernanke’s dovish/confusing comments unleash the bulls and trampede the baby bears…. and by week’s end the markets had their best weekly performance since 2003. The facts are that markets love Bernanke and going forward you’d be a fool to be shorting into any time he’s speaking. Obviously, there’ll be a day this ends but for now shorts be aware.
This week, I managed to make some change on the calls side. As I previously discussed last week, I was dabbling with calls when SPX was around 1400. I sold my KLAC calls a bit early, but managed to reload them again on Thursday’s dip. I also traded calls on a few steel and retail names going into the FOMC announcement. Going forward, I’m slightly leaning on the cautious side until we can manage to consolidate more above 1430 SPX. The main fact I remain cautious is based on a few cautious TA (technical analysis) comments/charts passed my way. One being the chart and pattern similarities to pre 1987 crash and the other Andrew pitchfork resistance points.
If i’m going to get to a million by years end, then I have to manage my downside and be ready to hit a homer when the opportunity arises. From my calculations now, I can go for 40-50% a month and still get there. For now, I’d rather sit tight and wait for slightly calmer waters. I still like stocks for longer term, but for options, TIMING IS EVERYTHING!
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March Madness
The markets are outperforming the NCAA tourney this year as far as wild action. All the #1 teams remain contenders and looking great, and there have been only 2 major upsets… btw, I don’t consider the Duke loss an upset, VCU was the better team!
As far as the markets, there’s a lot more of the madness! We continue to see wild action with investors uncertain over where the markets are going. During times like these, it’s best to stay cash heavy or to take quicker trades until a clear trend forms. Although markets may seem to be in chaos, I still think it’s a good time to find longer term investments as overall stocks are historically cheap while rates remain low. As far as options, it’s a great time with volatility finally in the mid teens.
Trading this week was another profitable one. After a “suckers” rally up to SPX 1410, we had a nice drop of 46 points, 3.3%, to 1364. By Thursday we managed to bounce, but closed Friday on a weaker note at 1386. This week I was a bit early with my March puts, but managed to suck it up before making decent gains by closing them on Wednesdays drop. Our 30k account now sits at a comfortable 100k. I’m starting to think with a long bias, but I’ll cautiously trade calls on dips and look to enter stocks with strong buy backs and high growth potential. Just an example, I started to dabble with KLAC April calls for now.
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Managing Your Bankroll
This weekend I spent some time playing poker at a local parlor and an underground tourney. I’m not a pro by any means, but I manage to do well by using my trading methodologies and applying it to poker. Not to mention, it feeds my addictions when markets are closed!
Trading, like poker, teaches a few important lessons:
First, it teaches you to calculate your odds and knowing when to muck(fold) a hand or when to increase the stakes. Basically, knowing how much to bet and when. Second, and I believe most important, is managing your bankroll. Similar to trading, professional poker players believe that you should never play with more then 10% of your bankroll. This prevents you from losing everything and making sure you’re still in the game. Every trader/player has a bad day, the goal is to make sure you’re around for the next. It’s all about RISK MANAGEMENT.
Personally, I’m still learning these aspects of trading. My issue is that I tend to overly trust my signals. In the past, that’s how I lost my account. I was betting the farm on a certain direction without any measure of “if I was wrong” scenarios. Sure, that’s how you can win the lotto, but that’s not the way to make sure you survive in the long term. As the most of you know the markets are made to make you crazy. As traders, we’re not always 100% right, and that’s why we must implement risk management techniques.
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In the Eye of the Storm
This week was a wild week for sure, the worst week in four years, but it’s just another “crash” that goes down in the markets history books. For me, it was an extremely profitable week. It started Monday night. For the last few weeks, for some odd reason, I’ve been waking up at 2 or 3am(PST) to use the restroom. And whenever I do, I happen to cross my desk to check what the overseas markets are doing …usually the currency markets. This time, I knew markets had been on edge and for the last few days I could sense there was some doom and gloom looming. As I skimmed through Bloomberg.com, I saw the headlines that China markets were down 4% by mid-day and US S&P futures were down 5 ticks based on comments from the China that 1, they might raise rates and 2.. blah blah blah. Few days before I shorted 100 contracts of SPY, just based on the fact that the daily spread was diminishing and open interest was continually climbing.
I also saw that an old leader, the financials, remained weak while overall markets remained near highs. Monday’s Greenspan hawkish “recession” comments and last week’s rate hike in Japan curbed buying interest also. The bottom line is that there was just too much complacency and VIX (volatility index) was flat-lined around 10. With emerging markets leading US markets, I knew that any hiccup would trigger the panic button.
Anyhow, I happend to be betting that markets had potential to fall, and with Shanghai Composite down 8% by morning, my bets looked good. I was long 100 SPY Mar Puts @ 0.75 cents. Tuesday morning they opened at 1.55 and I knew these were looking great. The golden rule for traders is to let winners run and cut loser short. Most great traders also tend to add to winning positions. But since I was also short futures the night before I didn’t want to press the bets. As you know, these markets have been notorious for screwing shorts, so I’d rather not press my luck. Instead, I decided to liquidate long term accounts and positions, i.e. IRAs. All day, there seemed to be mass liquidation. By day end, 30 out of the 30 Dow stocks and 498 of 500 S&P were in the red… this was a crash. My puts closed at 5.1, a 580% gainer! 
On Wednesday, I knew this was a market breakdown and any rally should be shorted. Bernanke was speaking and although his words sent a calming bias to US markets, this was a sucker’s rally. Near days end, I add IWM March 80 puts @ 1.70 and BIDU 105 puts @ 3. I was 100% short, locked and loaded. If China stocks were weak, BIDU will crack…and if this was a crash, money rotates to larger caps.. and smaller stocks suffer relatively more. On Friday, we gapped down 100 on DOW and in the first our panic set in and we quickly dropped to 12,059, -587 from Monday’s open. I had to cover, too much profits at stake… I slowly covered half (
), then as markets seemed to have a floor, I quickly covered the rest… Let’s just say it was a good week. 
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This blog was created as a supplement to TheOptionsReport.com. It is a blog for straight up comments from a true options trader without the fluff and redundant comments as from other sites and shows.
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