What a difference a day/week makes...

The day after the last post, I was riding high.  The portfolio reached as high as $18,500. The market rocked and everything seemed to be rosy (which made me wonder if the end was near).  Anyway, since then, the portfolio value has retreated back to around $15,000, I am about 90% in cash.  And there appears to be no end to the misery.  My current positions are a debit spread on AOL (about a 50% loss), Sprint (20% down), PHM (about break even), GTI (closed 40% of the positions at 100%, looking at 100% loss on the rest, resulting in a slight overall loss unless it reverses before Feb expiration), SYY (looking at losing most of the secondary investment - the original returned several hundred percent), HD (Home Depot) - 90% loss, and DRYS (DryShips) is looking at around a 65% loss at the moment.  I regrouped and closed out my GroupOn positions yesterday, along with the remaining 1 AOL option (that was not part of the spread) in order to raise cash.  With a strong market day yesterday and a strong opening this morning, I was surprised to see the DOW down 200 points soon afterwards.  Now I am glad I raised some cash.

Looking at the market using DOW's Weekly Chart, we see that there is a possibility that we are in wave 4 in the long term trend.  This means that eventually this can turn out to be a bear trap resulting in an explosive move to the upside (Wave 5).  However, I don't wish to have all my eggs in that basket until I see evidence supporting it.  I like the economic news for the US.  The sell-offs in Asia have me baffled a bit.  However, if you have ever read Jesse Livermore's book, he used to say the market does what it does.  When people ask him why the market went up/down, he picked up the paper and just pointed to a story and said that's why.  My philosophy now is to let the market tell me what I should do.  After things being rosy and most of the trades being profitable, all of a sudden most of my long trades are losing money.  That tells me to lighten my exposure, step back and reevaluate.  Sometime that means going to cash and waiting to see which way the trend will go.  

And while you are waiting, enjoy yourself, take a break and enjoy the feeling of being in cash while the market whipsaws the bulls and the bears.

An apology and updates

Wow, I just realized that it has been over 2 years since my last update.  I knew I had been slacking, but this is ridiculous.  I will try to do more frequent updates (I am pretty sure that is what I was thinking last time as well).

I started this account with $3000 in the beginning of 2010 with the goal of turning it into $1 Million.  Let's see where we are with that goal.   As of yesterday, the account is around $16000 and I pulled out around $1400 to pay for my toys (XBox One, PS4, and some other electronics).  By the end of 2010, the account had a return of around 100%.  Then I lost track because I failed to download my statements.  But I had made it up to around $12,000.   At that point, I was introduced to the guys at Tasty Trade.  I listened to what Tom has to say and it made a lot of sense.  So I started following their style of investing, which is stay small, sell premium (instead of buying calls and puts, I was selling calls and puts trying for about an 8 to 10 percent return per month).  However, they were somewhat biased towards a market drop (bears).  To make a long story short, over the next year I managed to lose 50% of the portfolio and ended back around $6000.  I am not saying anything bad about their style but it didn't work for me in this market.  It will work much better in a sideways market (or a trending market if you pick the right side).

In Dec 2012, the portfolio was worth $8000.   And as I mentioned earlier, now the value is around $16,000 (so the 2013 return was around 100%).  Granted I have not pulled money out of this account to pay for taxes, which is probably something I should do in order to have a true representation of performance in an taxable account.  In 3 years, the portfolio has generated a return of approximately 450%+ on the original investment.

So now I am back to my old philosophy of "go with the market".  Regardless of how scary the market might look, if it is a bull market, the better odds are on the long side.  I am still mostly in calls.  However, at present, only about 20% of my portfolio is invested.  The rest is in cash.  For a portfolio that trades in options only, risk management requires me to stay largely in cash just so that if the market turns against me and I lose 100% of the invested capital (currently in options), I still have enough reserves to stage a comeback.  Remember, the market trend dictates the direction that 3 out of 4 stocks will follow.

Anyway, my current positions are in AOL (coming out of a flag pattern), SYY (my profit windfall for last year), MSFT (I think the pull back is done and the stock will perform over the next month or so, plus I like that Ballmer is leaving and the XBOX One platform is pretty nice, and the charts look good).  GTI, ZNGA, DANG, DRYS and CLF are some of the other currently held positions.

Here is to a great 2014, and may I have the time to continue to post more stock analysis that I have in the last 2 years.

Cheers.