Update: NDX Double Calendar

I started an NDX double calendar from a thread I was reading in a yahoo group.  The conversation was about when to use calendars and why using calendars right now made a lot of sense with the volatility so low.

Anyway, I legged in to this one first on the bottom side (puts) and then on the top side (calls) a few days later.  That allowed me to get good fills and almost immediate profit.  Take a look at this graph:

The vertical red line on the left is the lowest break even point at 1310.24.  The vertical red line on the right is the highest break even point at 1493.90.  The line in the middle is the ‘live line’ or current price.

Right now, we are sitting at a profit of close to +15%.  This is inline with my profit target so I will be really sensitive to any losses from here.  I will likely close this down or pare down my position if my profits starts to decrease.  (It’s tough to do this when you consider that I could hold closer to expiration and possible reach 30% or better!)

Important Note: Remember that our TOS analyzer is only showing the profit at expiration assuming volatility stays the same.  If vols go down it will be a lot less (if any).  If vols go up it could be much more. Don’t be fooled! The price could stay exactly where it is and I could still lose money.

Mojo

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Dow Heading for 8250

We have a nice strong open gap sitting below us from Friday.  After yesterday’s weak up move and quick reversal I’m expecting to see us reach 8250 on the Dow by the end of the day.

Mojo

Popularity: 26% [?]

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Regular Team Meeting Tonight (Wed)

Since its the week after expiration we are going to take a break from our Options 101 class and hold a regular team meeting this evening.  7:30 ET start time.

Please bring your questions, trades (good and bad), and ideas for the upcoming Jun cycle.  With volatilities low, we will spend at least a little bit of time looking at calendars and their use as a defense on Iron Condors.

Mojo

PS – If you aren’t a member of our trade team and would like to join just send an email to ‘mojo’ at insanemoney.com .

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Portfolio up +11.4% YTD

I’ve changed my view for tracking results and have finally been able to catch up with my overdue excel paperwork.  Putting in all of those trades and adjustments was a fair bit of work but I’m done and happy with the results.

Even though I was fairly conservative in the cash I put at risk I was able to generate a cumulative return of +11.4% year to date.  I was down in January and part of Feb then I removed most of my capital from the market to buy another house.  The deal fell through and I re-entered in early March racking up some solid gains.

In order to take a more patient and long term view of my trades (”win the war not the battle”) I’m going to be measuring my trailing 90 days of performance.  This will smooth out my returns and allow for a little predictability (I hope!).  I will figure out some way of updating my quarterly results in a new format.

Thanks to Mr. Haley for the suggestion!

Mojo

Popularity: 24% [?]

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Don’t Get Sucked In by Realtors Euphoria

OK, first a confession to make.  I have very little respect for most Realtors and even less respect for the National Board of Realtors.  Its not to say there aren’t good people that are Realtors (some of my closest friends are Realtors).  I’m just saying that is such an aberration that it almost proves my point exclusively. 

Most realtors (capitilization removed) have little practical knowledge of real estate and even less about real estate investing and yet they are held up as ‘experts’ in these fields.  I’m not talking about investors that become realtors. I’m talking about those realtors that come along in herds when the market is good and make ooddles of money for typing property details into a MLS and never provide any real marketing or guidance.

To paraphrase Churchhill – ‘Never in the history of man, have so few contributed so little’.

A little history – In June 2005 I called the top of the housing market and sold more than 30 properties in under 45 days.  I was met with mass skepticism, “you’re too young”, “the market always turns down in June”, ugliness, etc.  It was only after 2 years that the rhetoric and constant stream of BS coming from the National Board of Realtors was finally conquered by the facts that it emerge that I was grossly mistaken.  The top of the market was actually July 2005 and not June 2005.  DOH!

Shortly after that I predicted that the banking and finance industry were going to be in a huge downslide.  I took that knowledge and started an investment partnership and raised $700 million.

Why is all of this important?  Yes, its partly a ‘nay nay’ to the realtors but its also to get your attention so that you will listen to the following…. Ready?

Its nice out (ok other than raining for a week in DC).  Its Spring time.  Three years of delayed consumer demand, low interest rates, and a feeling of ‘I might miss out’ are pushing up home sales.  Yes, Virginia, homes are being sold.

The National Board of Realtors will completely overlook the facts that housing inventory is still massive, that without 20% down and 720 credit you aren’t buying anything, and that house prices are still going down…. to come out and tell you “BUY NOW —-  THE BOTTOM IS IN!! —- HURRY BEFORE YOUR NEIGHBOR BUYS UP ALL OF THE GOOD DEALS!!!”

Don’t get sucked in.  There is still plenty of time and plenty of houses.  Summer will end, houses will be sold a slower pace and the realtors will continue to shovel the shirt into our open heads.  BE CAREFUL!

Mojo

Popularity: 24% [?]

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Media Empires Built on Fear and Ignorance

OK, OK, OK!  I give.  I just can’t bear to have another conversation, hear another announcement, or see another headline about the Swine Flu (which is a misnomer to begin with).  So listen up America.

How many thousands of people have died so far from H1N1 (Swine Flu)?  Based on the media output, “breaking news”, and hours of coverage an outside observer might guess what?? 1,000,00? No? OK, how about 500,000? Or heck let’s even cut that in half and half again…. that gives us 125,000.  How close are we??  Not very.To date there have only been 29 confirmed deaths from H1N1 worldwide.  Considering there are 6 billion people worldwide and some 500,000 people die a year from influenza normally, this is ridiculously low.  Frankly you are talking about .0000048% of the population.  Even if we just focus on the number of people that actually contracted and died influenza then we are looking at .0058%.  Your chances of being hit by lightning, killed by a vending machine, or ravaged by a French speaking bulldog have got to be higher!

WHY ARE WE EVEN TALKING ABOUT THIS?

Two Reasons:

1.  Most people aren’t critically thinking enough to see through the BS.
2. The media drives hype and promotes fear in order to increase consumption.  Ultimately it teaches us to fear what we shouldn’t and not fear what we should.

So do yourself, your family, and me a favor.  Turn off your TV, put down that glossy newspaper, and pick up a short book on statistics.   We haven’t allowed the news to be on or in our house since 9-11.  Evil, villainy, and fear can’t come into your home unless you invite it.  If something is really important someone will tell you.  Trust me, your life will be much better for it.

Mojo

Popularity: 22% [?]

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Tighter Focus Pushes My Account to New High

A few months ago I took the advice of a good friend and excellent trader.  He said that I should concentrate my trading and efforts on defining one (maybe two at the most) trading strategy and really mastering it.  He wanted me to trade that strategy over a long period of time in different markets and define rules that are battle tested that I really believe in.  Get to the point that, “No matter what, I can make money with this strategy over the long run.”

Once I had done that, then I use that as my ‘go to’ cash machine and have it pay for some of the more minor adventures in trading.   I thought that was a good idea and certainly couldn’t argue with his results.  I sat down and went over my past year’s trade to identify my strongest strategy both by percentage and dollars returned.   I would have guessed that my most profitable and consistent stratgey was calendars, turns out I was wrong.  In first place were iron condors, second place were long calls & puts, and third place were calendars.

After turning in a couple of week months in Jan & Feb (-3.2% altogether) I really took this on.  I closed out all of my trades, set a limit on no more than 2 positions a month, and re-initiated new positions.  Here are some of things I found:

1. It really helped me to have a clear mindset on my positions.
2. In just a couple of seconds I could track my positions and understand my risks.
3. My adjustments took very little time.
4. I was able to relax more.
5. I was able to do more reading and research with my extra time.
6. My smaller at risk capital allowed me to be less emotional and more consistent in my trading.

My returns increased, while working less, and being more relaxed.  (Hmmm…. Is anyone else seeing a pattern here?)

In the end, even though I’m using a lot less cash I’ve been able to allow my account to reach a new high.  SWEET!

Mojo

Popularity: 23% [?]

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