I’m looking to close my USO calendars prior to the FOMC announcement. I’m not sure what the reaction could be but I’ve got a good, quick profit that I want to protect.
Mojo
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I’m pretty disappointed in April. Not because of the market. But because I broke two trading rules. I was having a great month and up 6.7% on expiration Thursday. I broke my first trading rule by getting into a short out-of-the-money strangle on GOOG with 80 points of safety (I’m not allowed to trade GOOG over earnings).
On Friday, GOOG gapped up and I took the max loss of 2% of my portfolio. To top that off I was holding short calls on USO and looking very profitable on the morning of expiration Friday. I could closed those out for +.20 but thought “Ah, just let them expire…” and went off to battle GOOG (breaking my second rule to close out specs trades once 80% profitable). Within two hours, a group of Nigerian rebels blew up a pipeline and OIL and USO went to the moon. Another max loss of 1%.
Don’t get me wrong, 2.9% is still good but not as good as it could have been had I stuck to my rules. Rules are developed for a reason and the market is hard enough to trade against without taking money out of my own pocket! DOH!
Trade Record
37 trades, 28 wins, 9 losses = 3-to-1 win / loss ratio
avg $ per win: +858 avg $ per loss: -1,496
avg % per win: +12.3% avg % per loss: -3.7%
I’ve usually done a good job of maintaining a good win / loss ratio and a good win % to loss %. I still felt like my results were lagging those metrics. So I added the avg $ per win and avg $ per loss and uncovered a problem. Even though the other two metrics were fine, I was losing a lot more money per trade than winning. A HAH!
Update on Goals for 2008
Health - I’m down 16 pounds and in the zone to lose more. Vitamins, water in take, doctor visits, etc are doing well. I’ve been running a bit with a my daughter and really enjoying that. When I come home in the evenings I set to either doing yard work, a couple of errands, or reading to occupy myself before dinner. I should probably join my buddy in the gym a few times a week as well.
Give $25,000 to charity - We have given away $7,000 given so far this year.
Produce $250,000 in personal income (outside of my business and retirement) - We are ahead of schedule here and building up some cash reserves.
Pay off $125,000 of personal debt - So far we have paid down $41,000 in personal debt.
Study for and receive my Series 65 (Investment Advisor) license - Fail. I haven’t touched the material and now I’ve probably forgotten most of what I’ve already learned.
Insanemoney.com - I’m still a bit behind in emails and post and working to catch up. The forums section ( http://www.insanemoney.com/forums/ ) is alive and kicking with over 160 members and lots of great traders. We managed to move servers again and our traffic is growing quickly. We added a few new members to our trading team and we are really enjoying their enthusiasm and input.
Raise $1,000,000 of investor funds - Haven’t started yet. I need to complete my license first.
Make 3% a month in options - I didn’t quite make it this month.
Lessons learned:
1) I’m slowly putting iron condors on the RUT back into my portfolio. I need to better construct my rules and chat with other ICs traders.
2) Calendars did OK but our volatility crush plays did great (even including the GOOG mess).
3) I’m starting to use butterflies for vol crush but I’m still not clear how to manage them.
4) I did well managing my deltas on adverse moves. I need to be quicker to take those trades off once the price is moving back in my direction.
5) When I’m putting additional capital into the my portfolio I need to make sure that I’m still sizing for the previous portfolio until I’ve been through an expiration. Otherwise its too easy for a new (larger) trade to wipe several gains from smaller trades.
Plans for May
I’m planning on doubling my capital and using iron condors to produce a little more returns and consistency to my monthly results. I’m also using some futures to hedge and will likely work to improve that system to produce a small cash flow each week. I need to stay focused on good setup, good management and lots of accountability.
All the best,
Mojo
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There is a FOMC announcement tomorrow at 2:15. Most folks are guessing that they are going to cut rates by 25 basis points. Whatever happens I expect the market to react violently post announcement. Are you ready?
Do you have your stop losses in? Are you delta neutral? Have your halved or closed out any profitable trades that you want to protect? Do you have cash sitting on the sidelines waiting for opportunity?
If not, you might want to consider it. Remember our job is first to protect our capital. As they say on Hills Street Blues “Be careful out there…”. 
Mojo
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I’ve been trading pretty hard all week and watching the multiple reversals, whipsaws, and other big nasties. Frankly, I don’t know how any stock traders are making any money at all.
Even if you can guess the earnings correctly its still almost impossible to guess the market reaction. One day good news is great and the next day good news is terrible!
With all of the swings in prices and volatility its been a very good week for InsaneMoney traders. In my personal account I’m up +18,210 for the week!
Here’s a snapshot of my portfolio performance:
That’s rockin! Now the trick is to hold onto those profits!
Have a great weekend,
Mojo
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The market trending slightly higher, volatilities are low, and a lot of critical earnings are already out. So what am I thinking??
I am thinking that with volatilities this low you might be thinking about putting on some iron condors and verticals but you are waiting for the vols to rise. I know I am…
How about this? What if you used some the daily price movements to buy some June or June quaterlies long positions? If the market continues in your direction you gain profits on delta. If the vols start to head up you make money on vega. If the market reverses (likely causing vols to rise as well) you can sell front months against your long positions.
What do you think?
Mojo
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WOW! I feel really good about this trade. Last week I put on an iron butterfly on Google just prior to earnings. I had 90 pts of safety put of course still got run over on Friday earnings for -10.4% loss.
Through some good delta management and a bit of luck I was able to reduce the losses in this trade down to -3.9%. SWEET!
Mojo
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I just got the phone with a good friend of mine and I’m pretty bummed out.
She recently attended a trading event and was approached by several upset traders asking questions about InsaneMoney. These traders and their questions left her with the deliberate sense that there was something very shady going on with InsaneMoney so she called me to talk about it. I asked her what everyone’s questions were and they seem to come down to this:
1) What’s the connection between the liability associated with posting live trades and joining the trading team for $99? Other than timing, none. They are two separate issues. The legal issue I’ve been battling with for several weeks. Over that time we have added disclosures, disclaiming, footers, headers, EULAs, etc. only to come to the final conclusion that without signed mutual releases I’m still not sufficiently protected. That meant that we would have to protect all live updates and content from anyone that hadn’t signed. So, we created a special section of the forum just for those people. Since most my trading team see the same content we had them also sign and combined the two forums.
The next issue was an ongoing conversation about adding additional capabilities to InsaneMoney. Specifically, we wanted to add real time chat, record our weekly meetings, add more training videos, better support for remote members, trade alerts, custom software, webex, backup, and a faster server. In order to do that we looked at advertising and partnerships to offset current and future costs. What we found was that we didn’t generate sufficient traffic to make Google work and that there was concern that if we partnered we would have to use and tout their particular products over others. We wanted to be free to discuss, debate, and support whatever we wanted. Finally, right or wrong, we settled on a monthly fee of $99.
2) What if I can’t afford $99 a month, can I still join the trading team? Yes. If you have a genuine economic need and you can prove that you are a serious and dedicated option trader who will contribute to the team we would be happy to have you. We take all requests along with their applications and discuss them at our weekly meeting to get consensus. We have never nor will we ever turn anyone down for membership onto the trading team simply because they can’t pay.
3) Is this just a front for Mojo to make money? No. I don’t receive a stipend or salary from InsaneMoney. Any funds raised from team members or training go right back into InsaneMoney to continue to provide free support for the community as a whole.
4) Why are you only now starting to charge fees? When I started InsaneMoney eight months ago I never imagined it would get this big or this expensive. This was started with the goal of improving my trading by creating accountability. Today, we have grown well past that to become a community of over 100 great traders ranging from newbies to veterans trading everything from paper to multi-millions of dollars. We’ve simply reached a point where a handful of the folks that are benefiting from this site and its content are willing to pay a little to support everyone else.
5) How can you charge $99 a month when IncomeTrader is only $30 a month? Incometrader is a fantastic site run by several amazing traders including a few Investools instructors. I’ve have been and will always be a long term subscriber to IncomeTrader and will continue to recommend it to others. That being true, how can we charge more? Simply because we offer something completely different to a much smaller group of members. Not better, just different. We are offering an interactive peer-to-peer learning environment where team members support one another as we work to master options trading. We have weekly meetings, we go over each others trades, we help one another manage our current trades, and we discuss future ideas. We have a mix of traders with different backgrounds from Investools, to Optionetics, to Dan Sheridan, to Random Walk, to TMTT, to self taught, etc. Imagine if IncomeTrader offered the same thing what would you be willing to pay? For me, I would easily pay $1000 a month or more!
6) Is InsaneMoney closing down? Absolutely not. We are adding additional features and functions as well as moving around some of the real time content. We will still have trades, techniques, trade ideas, and general market commentary on the public side. The only difference will be that the posted trades will be from the recent past instead of in real time. Everything else will stay the same.
7) Is InsaneMoney going to become a competitor to Investools? Absolutely not. The fine folks at Investools are a big reason why I’m here and why I’m successful. Without Investools I would have never even have begun to learn options trading. I have many, many dear friends at Investools and I would never do anything to harm them or their company.
Its weird, I have a lot of interest in teaching others and zero interest in becoming a training company. Strange huh? Nobody ever said I made any sense!
8) Who is this Mojo guy? Is he legit? I’m a 39 year old, father of 2, option trader living in Warrenton, VA. I was a PhD Investools student three years ago. Over the past eight months, instead of watching TV and eating (I’m still 35 pounds overweight), I have spent thousands of dollars and hundreds of hours building InsaneMoney. I’ve been answering questions, making tutorial videos, posting all of my trades, calculating results, developing trade rules, improving my trading and working each day to help others do the same. In that time I’ve never taken a dime or turned down a request for help. Maybe foolishly but I’m proud of InsaneMoney. I’m proud of the improvements I’ve made in my trading while also realizing that I have a long way to go. More important than all of that I’m proud of the community that we’ve built, the level of traders we have attracted, the vast diversity of backgrounds we have and the help we provide to others.
Yes, I think I’m legit but that’s for you to decide.
I feel better now. I think when I first heard this I was hurt and feeling a bit like I was a fool for having wasted my time. After answering these questions I see that these are good, legitimate questions with no hurt intended. So thank you for asking.
As always, feel free to post any further comments or questions you have. You can log into the forum at http://www.insanemoney.com/forums/ and post anonymously so ask away!!
All the best,
Mojo
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