Posted on June 30th, 2008 by
Mojo
My very nice Sunday was rudely interrupted by this article in the Washington Post:
http://www.washingtonpost.com/wp-dyn/content/article/2008/06/28/AR2008062800223.html
If you don’t want to read it let me summarize….
1) Big surprise…. The market is not turning around and playing nice with others. <see an article we posted back in May predicting the downward market 1,200 points ago>
2) If you are holding stock that is falling you should continue to hold said stock (with a few exceptions of wisdom). Especially if you’ve read and enjoyed the annual report.
3) You should find comfort in the fact that over time (ok a lot of time) the market will generally rebound. Sort of like how the markets are working on a 7 year rebound now…
4) If you are really brave (note they didn’t say smart) look for large, multinational companies that don’t completely stink to high heaven.
ARE YOU KIDDING ME?? Why would you want to hold a stock to the downside? How about you sell now and go buy a couple of books on technical analysis while you wait for the market to recover? Heck you could sell your crappy stock today and if it returns to these prices or gives you a solid technical entry you could purchase long shares again…. Wouldn’t that be better than arranging deck chairs on the Titanic?
I know, I know. These have people wear nice suits, drive to nice offices, and have lots of education and letters after their names. I don’t. What I do have is an ability to make money month after month, calling my trades ahead of time, and living with the (usually) profitable results.
SHEEZ!!
Mojo
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Posted on June 27th, 2008 by
Mojo
One of the indicators I’m learning to use in trading futures in the $TRIN (pronounced like “TRIM” but with an ‘N’ instead of an ‘M’). The TRIN short for TRaders INdex measures the ratio of volume flowing into the decliners and the advancers. A TRIN level of 1.0 is considered nominal. A high TRIN is bearish (more volume flowing to decliners) and low TRIN is bullish (more volume flowing to advancers).
Historically, when the TRIN closes at or above 2.0 on a day (very bearish) the following day has an 80% likelihood of retracement. Yesterday, the TRIN closed at 1.98 so I’m expecting some retracement and will use that to make a little money in futures and to adjust some of my trades.
No guarantees here. Just another piece of the puzzle…. As always, trade what you see.
Mojo
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Posted on June 25th, 2008 by
Mojo
Well even a blind squirrel occasionally finds a nut. I finally broke my goal of 10% a month. Ultimately this is where I want to be as a goal so I’m really happy to finally make my first month. 
This month started off well with long term iron condors and short term calendars and butterflies. I continued to milk money out of the OIL cow and be irritated by all of those folks complaining about sky high prices but not willing to get off of their butts to do something about it.
The Insane Money trading team did fantastic turning in a great month in a difficult market and the new folks are having lots of ‘AH HAH’ moments and turning profitable. If you are interested in joining please click here. Its $100 a month (alls funds go back into InsaneMoney.com and used to support the hosting, software, weekly online meetings, new traders, and the message board) and you can expect to get 10 to 20 new trades a month with open discussions on adjustments, techniques, and how to improve. Skill levels range from serious beginners to experts trading big size.
Trade Record
34 trades, 27 wins, 7 losses = 4-to-1 win / loss ratio
avg $ per win: +2,491 avg $ per loss: -2,007
avg % per win: +22.8% avg % per loss: -36.1%
Excellent win / loss ratio, good average win dollar to average loss dollar. My average percent loss was much higher than my average percent gained so I’m a little concerned about that and will be watching it closely.
Summertime is coming and the already the tougher low volume markets are taking a toll on me. If it continues I will likely size down and prepare for the summer vacations.
Update on Goals for 2008
Health - I get the “FAT BASTARD” award for gaining weight during the month. Started playing softball and feel like I’m crippled for three days afterward. My wrists are about the same after going to a neurologists for some fun tests and the doctors want to cut me open. That just doesn’t sound like fun to me!
Give $25,000 to charity - We have given away $8,000 given so far this year.
Produce $250,000 in personal income (outside of my business and retirement) - Soon to exceed our target.
Pay off $125,000 of personal debt - So far we have paid down $42,000 in personal debt.
Study for and receive my Series 65 (Investment Advisor) license - Fail. I know, I know I have to stop trading long enough to get my license. Sheez!!
Insanemoney.com - Is completely rockin and thriving with lots of subscribers and over 300 members in the forums section ( http://www.insanemoney.com/forums/ ). If you haven’t joined and you’re interested in option trading you should do so. Its free and there are lots of great traders sharing their knowledge there. MdrNate completed the final move to a new server and everything went smoothly. Thanks MdrNate!
Raise $1,000,000 of investor funds - Haven’t started yet. I need to complete my license first.
Make 3% a month in options - Check. I’m thinking about moving this up to 5% a month.
Lessons learned:
1) Iron Condors in the RUT (low prob and high prob) did well. Adjustments were minimal and I liked trading the July contracts starting in May. Very smooth with little margin required.
2) ThinkorSwim granted me portfolio margining and I spent a good part of this month learning that system and understanding the implications of adjustments. Its very cool and well worth the paperwork. I’m especially impressed by the fact that they incentive me to reduce my delta risk through adjustments and release additional capital to me to trade.
3) I had a bullish technical outlook on JRCC and sold the 40 naked puts against the position. Did well for awhile and then the stock reversed on me. In order to neutralize my deltas I went ahead and sold the 50 naked calls doubling the use of my margins and increasing my capital. Of course you know what happened next right!?! Yep, JRCC shot up again. The lesson to learn here that I should be careful about adjusting to neutralize my deltas when I have such a strong price direction opinion. JRCC ended up working out for me but not without a lot of management and two very busy days.
4) Be careful trading options that are thin and know that as you approach option expiration the market makers see you coming and will extract tons of premium for their service and your late arrival. Do whatever you can to not be trading front month options on expiration day. DOH!
Plans for July
I will take most of July to sharpen my futures trading skills and hopefully travel a bit to meet with some other traders. I will be gone for two weeks with a whole week without internet! Scary!
All the best,
Mojo
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Posted on June 17th, 2008 by
Mojo
In our trading group there has been a lot of conversation regarding iron condors and the NDX. On May 15th I put on an iron condor on the NDX. Here’s the chart:
We were well away from Jun expiration, volatility was low (which I didn’t like for iron condors), trend was a bit bullish (which I also didn’t like). I purchased the 2200 calls and sold the 2150 calls to build my bear call spread. Then I purchased the 1800 puts and sold the 1850 puts to build my bull put spread. My total credit was 8.55 on a spread of 41.45 ($50 difference in strikes - initial credit of 8.55). My total maximum potential ROI was 20.6%.
So if I didn’t like the trend and didn’t like the vol why did I take it? Really to see if I could manage the trade by using some of credit premium to reduce delta risk and herd this one through the gates of profitability. Lucky for me I only made a couple of adjustments and the market cooperated. Here’s the chart today:
Today, with expiration right here I closed down the trade for an actual ROI of +16.9% in a little over 1 month. I’m surprised the time decay was able to overcome the adverse volatility movement. Sweet!
Mojo
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Posted on June 13th, 2008 by
Mojo
I’ve been a little frustrated again with friends and family complaining about the price of gas and oil. In particular the very folks that are complaining are the same people that aren’t willing to spend a bit of time and effort to learn how to trade so that they can make their own money on the rising price of OIL.
My family spends about $500 a month on gas (neither my wife or commute) so I wanted to make gas money for the summer. Sort of like ’stick it back to the man’ if you will.
On of our trading team members was talking about an option trade USO, the US OIL index fund. I took the trade, did some management and just closed for a profit of +70.1% in just a few weeks. SWEET!
That will pay for all of our gas and treaties to boot. Cool!
Mojo
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Posted on June 12th, 2008 by
Mojo
With the announcement of the executives departing Lehman and its subsequent price dropping a bit (its 0907) I would pay close attention to the price action here. Anything stable or even rising would indicate a good possible bullish reversal for GS in the short term.
Mojo
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Posted on June 9th, 2008 by
Mojo
I’m looking for some good papertrades and came across Priceline. Take a look at this chart:
With calendars we are looking for two ways to make money. Time decay (theta) and an increase in volatility (vega).
This stock is moving slightly up to sideways, vols are in the lower range and turning up, we are post earnings, MACD is down today.
I’m thinking about selling the Jun 125 puts and buying the Jul 125 puts for a total debit of -3.25. What do you guys think?
Mojo
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