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List,
Well, what a trade! Even though we were long, we never seemed to get our
stock portfolio above water. After that big technology breakdown the other
day, I was down a ton (to put it mildly).
Anyway, about 12:15PM today (PDT) I closed out all of my stock positions and
went to cash! I'm just too nervous with this market to hold this much over
the weekend, and we had a Sell Signal on our Intermediate Term System. I
haven't checked our short-term system yet to see if we have a sell there or
not. With the Dow up 190 and the NASDAQ up 90 I couldn't type these sells
in fast enough (and a lot of people must have had the same thought because
the system was sooo slooooow). Took me forever to enter my 30 positions to
close them out.
After all is said and done, I was up $1,800 on the trade when I started
keying my sells into the system. I'm not sure what the final number will
turn out to be, but my guess is that it'll be +/- $1,800 and I'm happy to
take it. When you consider the size of the investment, I call that
breakeven! When you consider that I was down $50k three days ago, I'm
overjoyed and ready to go celebrate. :) It's a good thing I don't provide
my better half with interim results. When I tried to explain to her we were
in cash this afternoon, she got this funny look on her face and told me not
to tell her anything. :(
In terms of my option experiment, I have determined that I'm going to go
with volume. With the OEX at 790, or so, I bought 780 Jul Calls for $26.50
and 790 Jul Calls for $19.50. So the lesson from the school of hard knocks
is as follows:
Go with the volume!
I paid $7,000 extra for those 780s and made an extra $750, or less than 10%.
In addition, since I bought them market on the open, I got a substantially
better fill on the 790s than I did on the 780s. I guess if I had put a
price on my 780 calls, I could have made $2,000 more, but our trading system
is predicated on executing on the open, so I'm not sure if that's a viable
option.
On my next foray into the world of options (for our next sell signal) I plan
on doing the following:
1. Buy 10 OEX Puts In the Money (whichever has the biggest volume)
2. Buy 10 SPX Puts In the Money (again with the biggest volume). I'm not
real sure about this yet as it seems that the SPX premium is substantially
greater than the OEX premium.
3. Sell about 3 OEX or SPX Calls (again going with the higher volume and
biggest premium). These will be naked Calls, so we'll be treading very
lightly as we start this learning process.
4. Sell 500 each QQQ, SPY and DIA
I think my brother will be doing the same except for #2. This will provide
some initial short positions, another learning experience in options (so
far, since we started trading them, we're way ahead) and our first time
selling naked Calls. It should be fun.
On the futures side, we're still up and today was a big day. Counting our
full size S&P contracts as 5 e-minis, we're currently long the equivalent of
17 e-minis. Whenever we get our sell signal, we will be adding a few more
based upon our rules of money management.
Anyway, that's the news from the trading front. I wish everyone profitable
trades and the enjoyment of a quiet weekend.
Guy
Paranoia...you only have to be right once to make it all worthwhile!
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