2007 year end report card. Happy 2008! (Part 1)

After a year of hard working trading and experimenting, I couldn't wait for my yearly statement to come out, so I went ahead and calculated my gains...

This year was a tremendous success compared to previous years. At least I have posted some gains! LOL. This year's gain is like 1.3+ months worth of pay cheque hahaha. Sad to say it's not enough to switch my day job yet.




At least the experience gain from experimenting with options, and training myself to think differently was priceless. My goal for the upcoming year is to be more patient, more disciplined, and double my earnings from 2007 (despite a really bad 2008 start).

Later on I will reviewing the rest of my 2007 resolutions and set my 2008 goals.

Another new site that I started is my trading blog - StupidTrader.com. Hope that it will "break even" in 2008 :).

Have a prosper 2008 my friends!

Stupidtrader.com

Just spent an hour and set up my new blog - Stupidtrader.com

Why "Stupid" trader you ask? I wanted this blog to not just document my profitable trades experience, but more importantly, my stupid mistakes as well. How many articles and blogs just bragged about their winnings and good picks?

"A fool learns from his own mistakes, a wise man learns from other's mistakes." I want my reader to be the wise men and women :)

straddle (but not for earnings)

I really want to start another blog just dedelicated to document my stupid trades... so before I get my blog going, let me share my experience from today :)


Background and reason for this trade:
I was playing GRMN recently downturn when they started bidding war with TomTom. Shares were down from $110 to $85 quickly, so I bought a straddle at $85.

Starting with:

On Nov 8, I bought this

I was stupid and bought one more put during tech downturn, hoping for a quicker spread if GRMN goes down more

And, yesterday I added one extra straddle, just in time!! That put my straddle to 2 Calls and 3 Puts.

Ended with:
This morning GRMN popped +24% premarket because it had abandon bidding war with TomTom. During the morning session, it went down to only +13% and to +12% during the morning, whee my straddle was going under again:

Sold off pretty much breaking even... oh well. At least I learned something from this experience. GRMN ended today+16.6%. Right around where I sold.

My lesson learned:
1. Don't be greedy. Try to have equal #'s of call and puts. Unless you are very sure.
2. During a pop, especially premarket, options become very expensive around 9:30 to 10:00. If you sell out a straddle, act quick and you can collect some premiums there. The volume and violatility seems to die down a bit during the day and the straddle value went down, even thought the stock price is still holding up.
3. Bidding war news means violatility. It might be as good as earnings.

Straddle for earnings, part 7

I am still researching on how to get more success on straddles and I came across this article.

Four Steps To Trading Success

If you are serious about treating your trading like a business -- and you should be because it is -- here are four steps to trading success and how I approach them:

1. Select a stock with opportunity

Use volatility indicators to select a stock that is likely to break out. We are looking for a stock where we can make money in the options regardless of the direction that the stock takes.

Look for stocks that go flat temporarily for no apparent fundamental reason. Within two or three months after an active stock goes flat, the share price typically starts to fluctuate again.
Use software that allows you to analyze volatility history and options prices, along with free Internet news sources to find stocks where opportunity exists.
There are low volatility exceptions. For example, do not use this technique on stocks whose price is less than $10 because the edge you get is too small when the price is that low. The value of an option whose stock is less than $10 will not change that much, even if the volatility changes dramatically.

2. Select the right strategy

You want a simple strategy to exploit the opportunity that exists in the stock you select. The strategies in my arsenal include call and put purchases (directional), call and put debit spreads (directional), call and put credit spreads (directional/volatility) and straddle and strangle purchases (volatility). Strategies more complex than these are poor choices for individuals. For every option you buy or sell, there are margin considerations, bid/ask spreads and commissions.

Pick three-month to five-month options.
Keep your straddle simple -- use straddles and strangles. If the asset price is in the middle of two strikes, choose the strangle; otherwise, choose the straddle.

3. Select the right entry price

Determine an appropriate price to pay for a strategy that will exploit a stock with opportunity.

Use a mathematical method to balance risk, reward and probability properly. Use the Chicago Board Options Exchange option calculator to determine the right price to pay for a straddle.

4. Select the right exit strategy

Look at what prompted you to get into the trade. If you're right and you haven't hit your target, stay in. If you do reach your objective, don't get greedy, get out. If you're wrong, get out!!! Remember, getting out of a trade is what makes you money. This is, by far, the most overlooked aspect of option trading, but it is the difference between success and failure for most traders.

Have an action plan and a contingency plan.
If things go wrong and a straddle value declines by 50%, exit the trade.
If things go right, you can smash a home run:
If one of the options hits the purchase price of the whole position, sell half of the profitable options.
Use support and resistance to exit the balance of the position.

Straddle for earnings, Part 6 - YHOO and ETFC reported

A week ago, I wrote about getting straddles in YHOO and ETFC. However, I only managed to get a small straddle in YHOO. Here are my results for my YHOO straddle:



Yes... although YHOO regained shareholders' trusts and shot up 10% to around $29 after reporting, the straddle actually lost $200 right away. After a few days at Oct expiration day, I just got out breaking even. Here are the chart and value from today's end:




ETFC stocks dropped more than 15% after it reported this week. If you compared to chart last week, if I bought at Jan $14 straddle at $3, today the value is $4. Could've made a quick $1. :)

Next week, I am waiting for AMZN, which is reporting Tuesday night.

Should I get some CROX as well? :)

Toronto housing prices?

Like many buyers / sellers, I am worry about the never ending housing price increase, and if a bubble is forming. I was listening to bnn.ca and this commentator came on the show. I visited his website and found the following:

Is it a buyer's market lately? I heard there are still some bidding wars going on during middle of summer before all the subprime warnings in US. But I don't think the prices have flatten in 2007 yet. I will try to find more info.

Buy Infrastructure, oil, and gold on pullbacks

See comments in this video:

http://link.brightcove.com/services/link/bcpid1155328549/bclid1111449338/bctid1243636005

Take a look at YRI.to, XGD.to. Gold is a good hedge for lowering USD, and you can hedge with CAD. :)

Straddle for earnings, part 5

Wow quite a violatile today. Dow was way up the morning, my EMC option actually hit a double today! Woo hoo. Too bad it's down a bit at the end of the day.

click to enlarge - EMC 5 days:

click to enlarge - EMC 1 year:


I just got in during Aug down week and Thursday before VMWare IPO'd. Quite a lucky timing I guess. The options didn't go below the level i bought at ever since.

click to enlarge - VMW after few months:


Anyway, to see if my straddle strategy will work, I bought 1 straddle of AMZN $95 January straddle today for around $19.57 after commission. AMZN was down $5 today alone. So we'll see what happens after earnings.

click to enlarge - amzn straddle:


As for my YHOO that I bought last week, both Call and Put premium increased today. Even though YHOO swinged downwards today, My profit winged from CALL's side inthe morning to PUT's, but both were gaining. I know this is greedy, but earnings is next week. Hope it will move the stock.

click to enlarge - yhoo straddle:

Straddle for earnings Part 4

I am still getting used to my new blog engine... I was hoping I can set different categories of posts like I did in my old blog...


Anyway, continuing my trading/investing journey... On last earnings, I experimented straddles with real and paper money. My paper trades did extremely well (on AMZN, CROX, PCLN, BZH), especially longer term straddles.


Real trades on CROX did well as well and the stock has gotten much pricier and less short selling. I imagine a short squeeze this season won't be as explosive as the last. My shorter frame JPM, NVDA ended up losing $. (Although greed and time were the main factors, it was positives at a few points)





This earnings, I am going to check out YHOO, ETFC, CROX, AMZN, and PCLN.

YHOO has a really low Beta, but earnings is coming up and tech sector is quite hot right now because subprime issues, I think it *might* get violatle again. And the premium on both calls and puts are not extremely high.. if the stock swings 10% either way, given a months time, I think there's a chance of making $. I will bet some money on this one. Note the recent increasing width of Bollinger Band as well...

Click on each image for larger view:

ETFC sank a lot recently, due to subprime concern. The premium is not overly high on this either. Although short and beta ratio are low, this one might be worth a risky bet at for a longer timeframe out. Look at the recent huge width of the Bollinger bands, ths is becoming a violatile stock.




CROX was a violatile one. Probably because their shoes are ugly but kids love them. There were a lot more short sellers before. Now only 24% of the float. With beta = 2.48. I think this might be a good candidate for straddle again.





PCLN is my favourite hotel booking site!! Last earnings I only did paper trade, whereas my friend did a real trade and earned some $. Congrats!! Sometimes this stock explodes after earnings! I have been booking with PCLN since the stock was at $17 back in 2004 Asia trip. Now it's wayyyy up! The beta is small, but I think this stock can be violatile, especially if there's a short squeeze. There is 20% short float last month. Look at the huge width of Bollinger bands around earning times in the past two earnings.





AMZN is a violatile one at every earnings season. I lost lot's of $ betting against this stock when it exploded up the 2nd time this year. Who knows what will happen this season. Last season was 15% short on the float. This time around it's 12.4%. The beta is large at 3.53. I think this is probably a good candidate too.






My disclaimer: I am not a pro trader, I don't have fancy tools to do any analysis. These are all my personal opinions. If you lose money replying on the info here, I take no responsibility. If you make a few bucks with my info here, you can treat me a coffee (or just click on some ads witll do)! Good luck!