Blygh's Trading Journal

[blygh]

Whenever these sector trends becomes apparent it seems they end - my latest strategy is to buy puts and calls on an apparent trend - railroads are todays target

[blygh]

Select retailers retailers have been steady growers - I prefer steady growers in this market = high flyers are just too volitile

[blygh]

One of my Fidelity baskets (a basket of stocks I can buy or sell with one click) is "Steadygrowers" Given the volitility I am putting more into it

[blygh]

I have been noticing a couple of things that are worth keeping in mind. A lot of stocks sell off on good earings (better than expected) - I think the reason may be that people who have access to extensive research have an advantage but once good news becomes public, their advantage disappears and they sell off. Is it a good idea to take profits just before earnings announcements (of course there are exceptions WDC sold off on good earning this week - AAPL did not).



The other thing I noticed is that when a stock is up but bumps along just below a strike price on an expiring option, as soon as the option does expire - it jumps up. (I had an Oct 30 on CCL). It looks as if there is an active effort to hold the price down to keep the option out of the money. I am going to try a strategy of buying stocks/ options which exhibit this behavior - buy the stock on approaching call expiration or buy an option for the NEXT month? Comments?
Blygh

[blygh]

Interesting Chart of the Day - www.chartoftheday.com/20100122.htm?T- S&P Reit index is at a crossroads - UP trend since 2009 is crossing down trend since 2007. I am considering buying both puts and calls 6 months out. Comments

[sd]

Hi Blygh,
For all the time I've traded stocks, I never tried options-
How would you make a determination at this time as to buying both put/call options 6 months out?
While the Chart says that Reits are down 50% from the prior highs, they are also up approx 100% from the lows.
The prior highs were based on periods of what is now viewed as excess valuations. Therefore, the prior highs were "bubble highs" and shouldn't be viewed as something soon to be repeated.
Confirming this reduced value is the unfortunate ongoing-rate of foreclosures, and rising unemployment. This week I saw an interview with a bank CEO -Said that only 10% of mortgages that received new financing terms ultimately survive falling into fore-closure-
Unfortunately, this is the result of excess mortgage payments on inflated valuations and lax fiscal policy, , increased unemployment, wage deflation, and a recession that is exceeding most in terms of putting people back to work.

Here in NC, the registered unemployment is 11.2%. That does not include those that have been long termed unemployed and have given up. If employment is not improving, it stands to reason that continued mortgage failures will continue, and demand for housing will continue to struggle.

While 1 chart may be a tell, it is related to the rest of the economy. Are we about to sustain the long expected correction retest? I really have no idea. And no concept of what may be in store 6 months from now.

Again, How would you use options 6 months out?
With the news this week, I'd expect China and the US market to both retreat in the near term. I hope 6 months ahead, we will see improvements in our economy-But I also missed believing we would come back this far.
SD

[blygh]

My current basket of steady growers - I have shortened the time span to 3 month. Any stock that has been growing for more than 3 months is suspect.

[blygh]

Retrply to SD
Sorry to be so long in replying sd - I have not been into my trading journal in a while - trying to settle a complex estate all summer.
Option prices are rationally set according to the Black-Scholes formula - but the factors are backwards looking - and 70% of options are never exercised - they finish out of the money.

My strategies are 1) If I make a profit on a stock and can afford an option with the profits - sell the stock and buy the option - usually $5-10 out of the money. I did this with Toyoyota at 133 (in 2007or 8) and was glad I did. I pocketed the profits and the option finished way out of the money so it was lost (\

2) Buy a stock (eg DNDN @ 35) sell a call (Jan 40 at 4.60) - - DNDN hit 40 this week so I bought another call Jan 45 and sold the stock - (your broker may not let you do this) - so I made 1000 on (the stock + the call money) . The Jan 45 call limits my potential liability to $500 + the cost of the call (260). I will be surprised if it hits 45.

3) If I am making a bundle on a stock (like GMCR) and I think it has upside potential - I buy a protective put (especially in April given the number of people who "Go away in May " So if Green Mountain runs out of steam, I can put it at 30 and lock in profits.

I usually only go out about 4 months on options - they get expensive beyond that.

If I like a stock but do not want to risk money in it - I just buy a call on it - this has not worked out - losing on Dow Oct 30 and HP on Oct 40 - I only do this with Vegas money

[blygh]

I am getting more bullish on South America - low inflation- reasonable profits - here are some banks on a very recent upswing

[blygh]

Auto companies and their suppliers are looking good. If you ignore Toyota and Honda it looks like a pretty good trend

[blygh]

Looked at all the auto parts makers I could find - I am sure there are more but th picture tells the story

[blygh]

I am loading up on aqricultural stocks now

[blygh]

Looking at the Global Dow- there is a saw tooth pattern of decline - lower highs bouncing off lower lows in a general decline - this would encourage a "buy the dips and sell the rallies strategy - Oct 6 showed a lower hugh peak (in comparison with the saw tops of the last two months ) I am holding mainly short positions against some broad market calls. Will post a graph when I figure out how to do this on my new macbook

[blygh]

Well I missed the bull run of the January effect - still can't figure what is driving the market - I have taken 6 positions of 5 or 10 shares of high priced stocks ISRG GOOG AAPL TNH AZO CMG - these tend to have a lower volatility and slower swings - they are all growing but I think I can get out faster at a better price if there is a rush for the exits. The problem? I can't write a covered call on them.

[blygh]

The -high priced stock strategy is doing OK - not great but OK - making money on CMG AAPL AZO TNH - flat on ISRG GOOG- I plan to dump GOOG next week unless it shows some life
I added IBM CME
Oil drillers seem to be making a comeback I play HP 58-64 frequently
Returning to investing best of breed in rising sectors - Shipping is hot I have OSG NAT
Automotive is looking good - I have ETF VROM