Acting in my own best interests! The diverse life of Dave

Long overdue update

It's been a long time since my last post. Won't dwell too much on why, but moving house, country and a new job can impact your spare time a little.

As for my trading, I have been continuing with condor options as an autotrade service. Assume my continued use means I am happy enough with the performance on the whole. That said, I got stung pretty bad with a couple of the trades back in Feb when the markets melted down. I am still keeping an eye on my trading but don't have sufficient interest or time to devote to it still. It's amazing how a huge drawn down can dent your enthusiasm!

I do however have a permanent internet connection which will make future ramblings more frequent.

In an attempt to provide balance I have joined a bush walking club and plan on doing a bit of hiking in the beautiful Victorian national parks and forests although I am sure I wont get out as much as I would like. I have also joined a tennis club and am cycling to work.

Sentiment

 I mentioned in my last post that I had a strong conviction that a stock was going to move. What I really meant was, I was reading sentiment. Market sentiment is a very vague topic, driven largely (in the instances I am referring to) by the greater fool theory.

For more details, I recommend reading more about market sentiment on Teresa Lo's blog: http://invivoanalytics.com/2007/12/07/the-sentiment-cycle/

Taking action

I have started 2008 by taking action. To put this in context, last year I watched a number of stocks that made significant moves, of which I observed but did not actively participate in. One example that springs to mind is AAPL  - when it was at the $165-$170 level I had a gut feel it would get to $200, and it did. This is one example, but you get my point.The action I speak of is as follows:

I am currently short Citigoup "C". I entered on Monday at $29.03, and I plan to hold for ~6 months, or until it gets to around $18.50. My stop is $35 and I have risked a very small % of my account.

Why? I am certain that Subprime provisions made until now won't be sufficient in a deteriorating economy, along with the general risk appetite amongst commercial banks means total lending has dropped significantly, therefore so should profits.  I have to admit, I was spurred on by the following articles:

Until risk appetite increases, housing prices start levelling out (rather than falling) I will remain short provided I am not stopped out.

The next action is around Gold. I have bought LEAPS Call options on GDX. This is a pure gold price play. One thing I have learnt is that sentiment drives a lot of this. If enough people this gold price will break $1000, it probably will.

I am also looking at a time bomb butterfly in NEM, along with some NEM LEAPS calls.

Again, all done with a small % of my account until I build more confidence in my abilities but all of these are expected to be longer term holds, as such I have got the benefit of time diversification to allow a greater chance of profit (with sufficiently wide stops).

On top of all this, I am still auto-trading with http://www.condoroptions.com/ and so far so good.

My goal this year is to back myself. Have confidence in my abilities to predict trends and balls to stick with them. To help me I am considering subscribing to the following services:

http://www.biresearch.com/index.html#index

http://invivoanalytics.com/   - Teresa is so smart and this may be her last year online.

I hope you all have a prosperous 2008.

Dave.

Which way is up?

Well I am back in Australia but am only just now getting over my dazed and conufsed state for the last 3 weeks. As a result, I have not been trading and I still haven't organised a permanent internet connection.

While I was in Singapore I caught up with Manoj (aka Option Pundit). It's always great to meet traders, especially those at the top of their game! Thank you Manoj for your inspiration. Here is a photo of us.

As for my trading this month, I left my butterfly's on and low and behold my XLF one turned into a profit! As I have been assigned the stock, I will not know if I made a profit until the market opens this morning. My IYR trade expired worthless.

Where have all the income trades gone?

 Really, what I am saying is where have all the IC's gone? Where is the balance of yeild given the risk in this current market? Although I can go wide, it just doesn't seem worth it for, say 8%.

These are turbulent times. Although I am happy with my call credit spread on the RUT, I am not able to find any other income trades that seem the warrant the risk.

I am considering just adding to RUT position if I we get some strong upside movement.

Although some butterflies are tempting, they are really meant to be used in consolidating stocks - Which stocks are consolidating in this market?

RIMM and CROX look like they are ready to bust higher, but I don't want to be writing Put credit spreads. Bank & financial stocks look like going lower yet the yield on any call credit spreads is very poor even given the volatility.

The ANF 85/90 Call Credit spread looks promising on the charts, but according to the 1SD band, still represent a big risk.

GOOG is at an IV low for the year, but I don't want to bracket a stock like that with an IC in this market.

OIH maybe a candidate for and IC? I am also looking at the XAU, and TLT but with interest rate changes likely, I may steer aware from TLT.

Given the recent volatility, those 1SD bands in general look too close for my liking.

Is anyone else having any luck with income trades this month?

I don't think I am alone either: What to do

Maybe I'm looking in the wrong places? Trades that worked (or at least looked promising) last month are not there and I need to look elsewhere. I am simultaneously starting to think I should not be pushing it, trading is a business and risk management is important.