I think I’m starting to fall prey to letting my emotions enter my trading decisions. I’ve been far too underinvested ever since I said it was time to buy. After not listening to my own advice and getting deeper into the markets I’ve come up with too many excuses to get in too fast on any day since then. My DIA call spread is very close to the money, which I expected to be the case for a while, but it still scares me since I have so much cash on the sideline and am waiting on a bearish bet. It’s not much money, but as every trade goes I’m pulling for a full profit. It’s always a weird feeling hoping the Dow drops while I hope the economy improves and my other investments gain.
I’m long and nearly fully invested in my IRA and my wife’s IRA with only a couple of covered calls in each. So if the markets continue to climb, I’ll continue to do well there. I’ll update my end of the month summary tonight and post it by tomorrow morning. I’m doing well for the year, but my lead over the indices is shrinking since I’m so light in investments. My emotional investing is coming from my fear that we’ve rallied this far this quickly. Logic to me says that it’s too soon. I think that I could be making a mistake with that thought process, but will remain cautious either way. I see a lot of the data being released as positive and offering reasons to rally, but continue to think about how our friends (and our household) continue to fear job cuts and the difficulty in finding new employment if our jobs are cut and how it has caused us to slow most of our spending. The good news is that we both remain employed and our savings continues to grow. Once more solid employment comes around Atlanta I can easily see how our spending will soar. The trick is how far away that is.
As a recruiter I see our competition laying-off staff every week and I don’t see us hiring new candidates. Last year we averaged one-two hires per recruiter per week. Now we have seven recruiters and some weeks don’t hire anyone and on a good week hire two-three. I have a hard time imagining the economy truly recovering without a more solid consumer base coming in to help drive it.
On top of that, check out this picture of the x-ray I had this morning of my neck. I’ve whined on these pages a few times about my neck and my surgery two years ago (btw – that post operative drug induced state is what got me to start this blog). This morning I found out that my surgery failed on one disc. You can see where the screw broke on the upper vertebra. I’m getting an MRI sometime soon and expect to be back on the operating table this summer. The good news is it should help my pain (and maybe my investments if I slow down the pain meds during the trading day), but the bad news is I could miss the summer of playing at the pool with my five year old son since I’ll have a few months of limited mobility. Again, mixed emotions are hitting me today.
We are at decision point in the market, focus on the volatility & option volume for max premium in the ETF’s. If you look at the market fundamentals, the data is horrific. I “specialize” in only two pairs of ETF’s (FAS, FAZ, SRS, URE) and dabble in CHK. This way, I can play the market in either direction. I just have to get the overall market direction correct to really do well. When the market is going in one direction, I am selling covered calls, When it is going the other direction, I am accumulating the “opposite” ETF pair of stocks with naked puts to get them cheaper. If you can get good at just a couple of stocks you can make huge $$$. When I tried to play the whole market with a million scanning programs, I went nuts. Right now I am accumulating FAZ with Naked Puts in anticipation of a correction, my cost basis is in the 5’s.
By the way, have a look at GM Puts. I sold some May 10 Puts for $.60 two days ago (from my Vegas $$$ account). I am up 25% already in two days. That is a $600 premium for a maximum $2000 exposure should my Puts get exercised and GM blows up (I LIKE IT), I am making money on the time decay and will sell at about %50 profit. The options premiums are still high. Don’t buy the June options. June 1 is a big decision day for GM (possible bankruptcy)
Joe, You sound like you’re working some trades similar to Mule65 by working both sides and then sellign covered calls on the loser until it turns profitable. Keep updating us with some of your trade details so we can all learn.
IMHO, the leveraged ETF’s are destructive to the market and destined to fail. If the DOW goes 8,000->7,900->8,000 DXD will be lower. If the DOW goes 8,000->8,100->8,000 DXD will be lower. The crazy 3x funds will fail faster. But, the option premiums are juicy and if you can avoid holding the ETF very long there are opportunities.
Here’s a very worthy read on leveraged ETF’s. I apologize for going off topic but it’s important information.
http://news.morningstar.com/articlenet/article.aspx?id=271892&t1=1241098060
Wow, that’s a great article and makes it embarrassing I didn’t catch on sooner. I’ve charted DIG and DUG in the past and never could figure out why they came up the way they did. Now I get it. I’m sure there’s a way to play their faults on a long term basis that could work nicely for us, for example if you are bullish you could short a 2x or 3x inverse fund and even if you are wrong, in the long term you could “win” based on negative compounding.
For those short on time, this quote sums up the article pretty much “…anytime you compound a negative return, its impact is always more pronounced than a positive compounding of the same magnitude.” To get the full impact, find the time to read it. Thanks Mule65 for sharing it.
FAS, FAZ, SRS, & URE are my best option trading friends. 10 – 20% per month is no problem. YMMV A couple of my latest trades:
4/20/2009 B 100 31.31 -$3,131.00 -$3,131.00 SRS BUY
4/20/2009 S 1 May 32 Call 5.2 $519.00 -$2,612.00 SAK EZ
4/29/2009 B 1 May 32 Call 1.3 -$139.00 -$2,751.00 PC SAK EZ 75% profit
4/30/2009 S 2 MAY 20 Put 1.4 $278.00 -$2,473.00
still long 100 SRS
4/20/2009 B 500 10.06 -$5,030.00 -$5,030.00 FAZ BUY
4/20/2009 S 5 MAY 11 Call 2.05 $1,020.00 -$4,010.00 FAY EK
4/24/2009 S 5 MAY 7.5 Put 1.1 $545.00 -$3,465.00 FAY QU PF = 19.95
4/29/2009 B 5 MAY 11 Call 0.6 -$305.00 -$3,770.00 CC FAY EK 75% Profit
still long 500 FAZ
4/18/2009 S 10 MAY 3 Put 0.45 $440.00 $440.00 C QV
4/20/2009 S 10 MAY 2 Put 0.2 $190.00 $630.00 C QU
4/29/2009 B 10 MAY 2 Put 0.05 -$60.00 $570.00 PC C QU 75% profit close
5/1/2009 B 10 MAY 3 Put 0.35 -$360.00 $210.00 PC C QV Closed due to bad news for C
PROFIT $210
4/30/2009 S 5 MAY 7.5 Put 0.85 $420.00 $425.00 LJJ QU PF = 14.51
5/1/2009 B 5 MAY 7.5 Put 0.7 -$355.00 $70.00 PC CLOSED DUE TO WEAK MARKET
PROFIT $70
4/20/2009 S 10 MAY 5 Put 0.55 $550.00 $540.00 FAS QA
5/1/2009 B 10 MAY 5 Put 0.15 -$155.00 $385.00 PC 72% PROFIT CLOSED
PROFIT $385
FAY QU Open + $250
SAK QD Open + $180