Posted on November 26th, 2008 by
Mojo
The market maker for AIG decided not to open Dec options taking away my ability to sell time against my long stock position. I never knew that he (I’m assuming) would have that option but apparently under $3 he does. So…..
I closed my AIG long stock position today. I purchased this stock on Oct 28th for 1.64 (actually 1.63888). After a brief runup I sold the Nov 3 calls against my long stock position for +.16. These expired worthless. Today I sold to close (STC) my AIG stock at 1.87. That gives me a profit of +.23 on the stock and +.16 on the Nov 3 calls. Total profit of +.39 over a risk of 1.64 = 23.8% profit in one month. I’ll take it!
Mojo
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Posted on November 25th, 2008 by
Mojo
I was asked this question again yesterday and here’s the answer:
1) Political Will - The will to do what’s best for the economy in the long run and not give in to the today’s pressures and special interest. The courage to make bold and decisive changes.
2) Bulldozer - At it’s most fundamental level the housing crisis is a function of supply (too much) and demand (too little). If a bank hasn’t sold a property it foreclosed on in 12 months then the municipality may flatten it to lower inventory and reduce crime. Yes, yes I know that this will lead to more aggresive prices and lower home values in the short term. But aren’t we headed there already? At least if we do this we will be properly positioned for a speedy (ie. 3 to 5 years) recovery.
3) Formally Couple Mortgage Lending Rates - Right now there is no formal connection between the Fed rates and the mortgage rates and Joe Homeowner can receive. Even after 4 years my 7 year ARM at 5.25% still looks great compared to the rates out there today. So, have the Fed step in a say “Hey Bankers - You can add 2% to our rates (or the LIBOR, etc.) for your A borrowers, 2.5% for B borrowers, etc. but if you want money from us, you must lend. ” No more of this increasing the spread (the difference between the cost of funds and the rates they lend at) to overcompensate for past mistakes. This will lower borrowing costs and push up the demand for homes.
4) Recognize Human Nature - Ultimately it was our human nature that got us here. Human nature that the govt strong armed the lenders to loosen standards in order to increase home ownership (and therefor bring in more votes for their party). Human nature that the lenders quickly recognize the profit potential to originate billions of dollars of loans that they could sell to the govt. Human nature that Wall Street, in order to fill the unending demand for yield and “low risk”, wrapped up these notes into pools threw in a little spreadsheet / MBA magic and POOF! ‘AAA’ ratings fell out. Human nature that anytime you disconnect the folks making the decision to buy or lend from the responsibility of its performance you get crap.
What are your thoughts?
Mojo
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Posted on November 24th, 2008 by
Mojo
The Fed is promising another $20 billion in cash and 90% coverage against losses for Citigroup. This is on top of the previous billions. I think this is the right move for Citi and the govt.
Even though Asia didn’t seem too upbeat be prepared for a little follow thru to the upside today. A couple of months ago (in the trade team) we went long Citi and have written short calls against it. Our positions are now paid for (or almost depending on when you got in) so this will work out nicely!
Mojo
PS - If you are serious about upgrading your option skills you should think about joining us. Here’s the link: JOIN the TEAM
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Posted on November 19th, 2008 by
Mojo
A new member of our forum posted a great question:
“If I had to learn options all over again what would I do differently?”
Boy, that’s the million dollar question isn’t it? Here are my thoughts:
First off, I would have to say that I should have been more patient. In my life I’ve done well being aggressive, tenacious and smart. In trading, those very traits that have made me successful conspire against me. Being aggressive got me real money trading *way* too soon. Being tenacious meant I hung onto my losers long after I should have closed them. Being smart gave me too much confidence, I traded too large and I lost hundreds of thousands of dollars. So, yeah… I should have been more patient. Becoming a great trader is the hardest thing I’ve ever done (and continue to do). Learning the mechanics of options, my broker, and the market is just the beginning. Even with a great mentor (::cough::cough:: MOJO <smile>) I would still plan on it taking two to four years of insanely hard work before it just becomes normal hard work. 
Second, I wished I had listened more and followed more closely the advice of my teachers, partners, and other great traders. Specifically I wished I had stayed in paper trading for at least 6 months of profitable results. I wished I had journaled every trade much sooner than my two year anniversary. I wished I had gotten a single mentor or two, paid my 20K to 30K and really learned the craft. That would have been a bargain compared to the money and time I’ve wasted.
Third, I would have master one or two strategies first and only added additional strategies after I was consistently profitable.
Fourth, I would have been more open to different styles and backgrounds instead of assuming that I was given some sort of “secret” formula that would always work (NOT).
Fifth, I would have asked more questions, paused more presentations, and been more willing to embarrass myself in front of others so that I understood completely what was being said.Sixth, I would have taken advantage of all of the free content that exists on the internet. Not the “come to my 30 minute sales pitch”, but the really great, open, and honest conversations between traders that you can find here and in some of the earlier Yahoo groups.
Seventh, I would have started my public blog and our forum a long time ago. The different styles, open exchanges, mixed experiences, world class caliber traders, and accountability of this community are really fantastic!
I hope this helps and I would love to hear everyone’s comments.
Mojo
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Posted on November 17th, 2008 by
Mojo
We are really at a very important time in the market…. truly a make it or break it moment. Looking at the weekly chart on the DOW you can see that we are in a bear flag pattern with the pole forming from 11500 to 8000 and our flag sitting at 9500 to 8000.
This is a very normal and consistent pattern. This provides a potential (although not likely) support and reversal area for the bulls. If they are going to make a stand it will need to be this week. If they aren’t able to rally and we break below 8000 then I would expect to see us continue to sell down to 5000. It won’t be lightning fast but we will get there.
Are there any asset classes out there that aren’t declining? OK, other than ammo?
Mojo
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Posted on November 14th, 2008 by
Mojo
I’m having to rebuild my computer so I’ve lost my access to email, capture programs, logs, links, etc. I’m retrieving and re-installing but its going to take another day or so.
I finally got my link and login for this blog so at least I can fix all of the errors on my monthly report. I’m bad, but not that bad!
Thanks for your patience,
Mojo
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Posted on November 12th, 2008 by
Mojo
Man O’ Man did I shoot myself in the foot this month! On the second day of trading for October I was up 10% for the month. I made the right choice and went ahead and exited all of my positions. Historically, October isn’t a great month for me (with last year being the exception) so I thought it was prudent to close out at +10%. I concentrated on working on the site, doing my taxes, finishing some paperwork from closing a business etc. Of course I’m still watching the market during all of this and guess what!?! I was 100% in sync with the market; calling tops and bottoms at will.
So what did I do???? Yep, I went back into the market. I did very well for the next week and reached +20% for the month. So I’m thinking SWEET!!! I start spending way too much time talking about the market, sharing my euphoria and specifically bragging about what a great trader I am. Can you guess what happened next? You got it. WHAM! BAM! NO THANK YOU MAM! I got zapped by the 12% one day up move in the market. What makes it even worse was that I called the reversal (albeit not that large) and should have been prepared. DOH!!
So from here on in, I begin a vicious emotional spiral. I make two adjustments at exactly the wrong times and blow away all of my gains. So now I’m really mad at myself and continue to trade until I’m down 10% for the month. CRAP!
I exited in a pissy huff and penalize myself 30 days - no trading. I’ve only got a week and half left and feel much better.
I’ve continued to trade in my smaller Roth accounts but I have suspended my income account for now. I’ve really struggled with forgiving myself for being such a bonehead and I know that until I do I won’t be the best trader I can be.
Trade Record
15 trades, 10 wins, 5 losses = 2-to-1 win / loss ratio
avg $ per win: +1,907.63 avg $ per loss: -9,011.13
avg % per win: +24.1% avg % per loss: -22.7%
Notice how many more dollars I lost on the losing trades than I won on the winning trades! These numbers seem worst than what it was but the portfolio loss and percentages are on target. Either way, I shot myself by going from being up $20K to down $20K. That is not a 20K loss that’s a 40K loss which is a HUGE loss.
Update on Goals for 2008
Health- My radial tunnel is better (mostly because I’ve been away from the keyboard, on the phone, and working on Halloween) and I’m starting to feel a little better. Mentally I’m a wreck (with the self loathing) so I need to find someway to get over that or at least shut up about it. 
Give $25,000 to charity - We have given away $11,000 given so far this year.
Produce $250,000 in personal income (outside of my business and retirement) - I have taken on a consulting gig to provide my income and to use my trading income as “extra”. Since I have some pretty scary views of what’s going to happen to the world and US economies in the next few years I am building a war chest as well as positioning myself in one of the few industries that will do well (medical, gov’t, military). This should also release some of the psychological pressure I’m putting on myself.
Pay off $125,000 of personal debt - So far I’ve have paid down $44,000 in personal debt this year. I would like to finish off my second mortgage and then start working on my first mortgage. That’s the only debt I have. Once that’s done there are a couple of rental properties that I would like to pay off next.
Study for and receive my Series 65 (Investment Advisor) license - Fail. I’m going to shelf this effort for awhile (not that anyone would notice). I want to concentrate on my consulting work and get that rockin!
Insanemoney.com - Things are going ok. I’ve done a poor job updating this blog but the forums and trade team are doing well. I plan on updating the blog side to include a welcome video, a highlight tab showing some of the favorite posts, and will add some of the trade entries I’m doing without updates.
Raise $1,000,000 of investor funds - Haven’t started yet. I need to complete my license first.
Make 3% a month in options - Fail. Lost 10.7% this month.
Teaching - I’ve mostly finished my search of opportunities to teach options. Almost every one requires enormous travel and usually puts you on the road 3 weeks a month. Not a good deal for my family. Several companies I talked to were NOT interested in my trading results at all. They wanted headshots, video tapes of my sales seminars, and conversion rates. Sad really.
On the community college level I’m only allowed to teach in the area of my specific degree (which happens to be computer science) regardless of life experience. On the local teaching level I have a good friend who teaches Civics in middle school and loves it! He’s an ex-finance guy, very good, very smart who has chosen a non-commuting, support the community and his family, career. I applaud him for it! Once I get my mortgages down this is a more likely choice for me.
I’m still trying to figure out the best way for me to teach through InsaneMoney. Webinars look good if you can get a large enough group. They are cheap, no travel, and recordable. Personal one-on-one mentoring and a “trade along with Mojo” option are also possibilities. Feel free to email me and tell me your thoughts.
Lessons learned:
1) I should have scaled out when I hit 10% for the month. That’s a fantastic return and I should have been happier with it. (**** This is actually a repeat from Sept. I guess I need to follow my own advice.)
2) I allowed my emotions to get the better of me here. I did a good job of closing out and shutting down but it was difficult to do.
3) I should have just paid off my house two years ago when I had the chance. The whole “Why am I paying off a 5% debt when I can make real money with that” is an arrogant and flawed argument from the beginning.
4) I really turned my part time hobby of option trading into a full time job. No kidding, I was working 50 to 60 hours a week on this stuff and exhausting myself. If done correctly it shouldn’t take that kind of time. More like 20 hours (since I’m not a fundamentalist).
Plans for November
Stay in cash, keep trades small, focus on the craft. Make sure to stay on top of daily blog posts. My discretionary futures and automated futures trading are getting better and better. Tightly focusing on a few of these strategies will help to reduce the time and increase the results. Do myself proud on my consulting work.
All the best,
Mojo
PS - Sorry for the poor first draft. With my notebook down I didn’t get a chance to clean it up before it was sent out to everyone.
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