Bought 1 DRE Mar08 30 put for $6.80

This stock has been in a downtrend since last February, and it has been on a steeper decline since October, as seen in the graph below.  The new downward trendline was tested a couple of times in December, and the stock has again come back up to it and turned down.  This time the stock did poke above the trendline briefly, but it’s still within about 3%, which I don’t consider to have yet broken the line (all of my sell stops are set 3% past the trendline).  MACD and stochastics are also high and turning down right now.

Most of the options that I buy tend to have a spread of $0.05 to $0.20 between the bid and ask.  This one had a $0.60 spread, which I don’t really like because it just adds to the amount that you have to gain just to break even.  However, I tried putting in a limit order at the midpoint and it was accepted.  I was actually pretty surprised, because I’ve never had an order at the midpoint be accepted.  The best I’d seen before was $0.10 below the ask on a $0.30 spread.  Anyway, with that entry price, I’m less worried about the spread being so large.

The stock is currently at $23.58.  Resistance is around $24.50, and support is around $20.00.

My exit orders are:

• Market order to exit if the stock trades above $25.25
• Trailing stop loss if the stock trades below $20.60
• Stop loss on the option at $3.40

Analysis of Q1 FY08 (10/1/2007 - 12/31/2007)

Results

This post should have been written a couple of weeks ago, but better late than never.  This is for the period from 10/1/2007 to 12/31/2007.

First the raw numbers.  I started with $10,000 on 10/1, and ended with $10,769.55 on 12/31.  I gained $467.46 in October, gained $637.17 in November, and lost $329.08 in December.

Overall, I’m very pleased with my trading right now.  Since starting this website, I have been able to keep my emotions in check when trading, and haven’t made a single trade that was not justified by my trading plan.  Perhaps the only mistake I have made is that I didn’t take a few trades that I should have, and would have actually made quite a bit more money if I had taken all of those trades.  The current quarter is also off to a strong start, and I’m hoping to be able to continue to show consistent results.

To be honest, I wouldn’t have expected such a strong performance so quickly.  Looking back on my trading before starting this website, though, I see that the biggest difference is that I am now controlling my emotions.  My two biggest mistakes were getting into trades before they showed a complete entry signal in hopes of getting a better entry price, and holding on to losers in hopes that they would recover.  Even worse, I would often add to my losing positions hoping that the price would come up just a little bit so I could get back to break even more quickly.

With my new focus on being objective and systematic in my trading, I have been able to eliminate all of those emotional mistakes and I am already seeing the results.  I still feel excited when my trades do well and get anxious when they go against me, but I haven’t let that influence my trading.  I think that level of emotional involvement is potentially even necessary, in order to keep me motivated and excited to keep trading.

I am definitely looking forward to continuing this website because it has been a great help to me in my trading.

Goals

These were my 90-day goals when I started the website:

• Get this website up and running
• Develop a routine of constantly keeping the website up-to-date
• Start making trades and recording my results
• Begin experimenting with new techniques

I am pleased to say that I have achieved all of those goals.  I am also making good progress on most of my 12-month goals:

• Establish a consistent routine of trading based on this plan
• Develop a consistent methodology for testing and analyzing new techniques
• Eliminate emotional trades
• Show consistent profits
• Develop this website into a good resource for people interested in becoming better traders

Time for some new goals for the current quarter.  Aside from addressing the mistake mentioned above, I have a few other things I’d like to work on:

• Take every trade that fits my entry criteria
• Come up with a plan for how to trade during earnings season
• Evaluate results of recent trades and analyze alternative exit strategies
• Continue updating this website on a regular basis

Bought 1 MER Apr08 65 put for $9.40

This stock has been in a downtrend since last May.  It had been using a trendline as downtrending support until November, when it broke below the line and started hitting it as resistance.  It has now come back up to the old support level for a second time and is bouncing down, with MACD and stochastics also coming down off recent highs.

The stock was actually down about $0.25 when I bought this option, but it ended $0.14 up for the day.  The MACD and stochastics were also lower when I entered.  Not the best way to close the first day, but I have my exit orders in place in case the trade doesn’t work out.

The stock is currently at $57.47, with support around $49.15 and resistance around $59.85.  I like this trade because the profit potential is quite a big bigger than the loss potential.

My exit orders are:

• Market order to exit if the stock trades above $60.25.
• Trailing stop loss if the stock trades below $50.50.
• Stop loss on the option at $4.60.

Week ending 1/25/2008

I’m not sure whether to be happy or upset that I was on the sidelines again this week.  There was a ridiculous amount of movement in the markets, which means there was lots of opportunity for profit, as well as lots of opportunity for big losses.  I think I’d rather miss a big move than have a big loss, though.

Anyway, yet another week where all of the buy signals I saw were on stocks that have earnings coming up.  This is getting a bit repetitive, but I need to find some way to deal with this earnings problem.  Hopefully I’ll have some ideas by next earnings season.

My portfolio was unchanged again this week.

Week ending 1/18/2007

I’m still on the sidelines, so there was no change in my portfolio value this week.  It definitely would have been nice to participate in the large moves in the market this week, though I guess there’s no guarantee that I would have been on the right side of those moves.

I saw several buy signals this week on calls and puts, but as I’ve been repeating the last couple of weeks, I could not get in because of an upcoming earnings release.  Earnings season is winding down, so hopefully I’ll be able to find some more trades soon.

Week ending 1/11/2008

This was my strongest week yet.  My portfolio was up $490.46 to $11,487.12.  All three of the trades that I entered in the last couple of weeks closed profitably this week, although the AET position was not handled totally correctly. 

Unfortunately, I’m back to having no positions since earnings season makes it hard to find tradeable signals.  It’s always hard being out of the market completely, because you have to fight both the urge to trade when the signals might not be quite right, and the apathy that comes from knowing anything that happens in the market doesn’t really affect you.

There are a couple of stocks that might show a complete buy signal soon, so hopefully those will complete their patterns next week and I can enter some positions.

I’m going to start linking the portfolio graphs in these weekly posts for anyone that subscribes to the RSS feed but doesn’t visit the home page that often.

Sold 1 AET Apr08 50 call for $10.20

I bought this call on 1/3 for $8.80.

My target price on the stock was set to $60.00, but I got out today after the stock reached $59.40 and started to head back down.  I finally got out when the stock was at $59.00.

This was not a very well-executed trade.  The reason I got out manually today rather than wait for the exit orders to trigger is that I noticed that earnings is due to come out in less than a month.  I should have been more aware that earnings was due to be released soon when I bought the option, but the green symbal that represents the earnings release date wasn’t on my chart yet, so I guess I didn’t think too much about it. 

Since the stock had already made most of the move to my target price, I didn’t want to get stuck in a situation where it draws back down for a while and then I get forced to sell because of earnings, so I decided to just take the profits that were available today and get out.  As it turns out, the stock fell down to $58.41 by the end of the day, so I did alright on the price, but it was not a good way to exit a trade.

Sold 1 KO May08 57.5 call for $7.70

I bought this call on 1/3 for $6.10.

I had an exit order to get out if the stock crossed above $64.00, which it did today and sold the option at a profit.  Not much else to say. This was another well-executed trade.

Sold 1 CTV Apr08 55 put for $12.20

I bought this put on 12/26 for $8.60.

At the time, one of my exit orders was to get out with a trailing stop loss if the stock crossed below $43.25.  I later increased that to $43.50, and today the stock dropped below that and the option was sold at a nice profit.  This is now my most profitable trade so far both in dollar and percentage terms.

This was a well-executed trade.  I got in according to the plan, set a profit target, and got out profitably.

Week ending 1/4/2008

This post is a little late because I was travelling this week.

This was a good way to start the year.  My account is up $222.11 this week, with my portfolio sitting at $10,996.66.  I wasn’t very focused on my trades this week but did find a couple of entries for calls.  Both are down at the moment after the big downward movement in the market on Friday, but my put is doing quite well.

As usual, my biggest mistake this week was a couple of missed trade opportunities.  This time the trouble was that I was a bit unfocused, so I just missed the entries as I was scanning through my watchlists until it was too late.