No Rest for the Idle

So there's $559.64 sitting idling since 10/07/2010. That's almost three weeks of no activity. Major weak-sauce. If there's anything worse then buying mutual funds, bonds and other fixed-income securities, it's sitting on idle cash. 

Looking at a couple of ideas:

-Another Silver Straddle [Still volatile, especially with much currency uncertainty]
-Straddling MCO (Moody's Corp) - their triple A ratings are garbage, the USA is gonna be IOUsa no matter how many golden stars anyone bestows
-Shorting the DOW - remember the dead cat bounce? it's going downnn
-Shorting Oil - no clue, there's so many different oil stocks... but like the DOW, I think prices are going down
-Shorting Natural Gas - oil/gas. tchyea
-Platinum ETFs? I think there's a few ETF's that trade platinum. I just hope there's an options chain to play with
-More physical gold and silver - can't go wrong there, just stacking up the physical gold and silver, ETF's is fool's good, they may or may not have the actual holdings, just read the prospectus and prepared to be freaked out

While I say I'd short many things, I'd still straddle my positions by buying options on both the call and put side in case I'm wrong. Essentially it costs twice as much, but I have two exit strategies in either direction. So long as something moves, I'm okay. If it moves a lot, I'd be very happy. If it idles too long, I'm willing to take up to a 20% loss and move on.

I gotta make a decision soon..

This sounds horrible, but I really want some serious volatility, something crazy.

9/11 crazy. World War 3 Crazy. Currency Melt-Down Crazy.
The stock markets goes freakin ape-shit and always overreacts to such bad news. They are hardly pleased with good news to begin with, nothing gets prices yo-yo'ing like bad news.

If nothing else, hell, I'll trade silver ETF's up and down till the U.S. empire falls apart.

As cool as straddles & strangles are, I need to learn some directional trades (bullish or bearish).

Cheers~

Trade #1 - DONE - Virginity Deflowered Profitably

Popping your cherry tends to have a consistent pattern:

      You have no idea what you're doing.

            And... it's always over way too soon. 

~ ~ ~ ~

So I sold my positions to finally conclude my first options trade. 

I'm thrilled cause the first step is often the hardest. Little logistic problems for setting up accounts, getting them funded, and learning the buttons on different brokerages actually stops so many people. It's amazing. Investing in general is awesome and everyone should absolutely just dig in. 

But hey, they don't and they let fear run their lives--which is ridiculous. 

My one and only stock trade from back in the day... uh... 2008.. May or April. I bought Starbucks shares cause I read "It Becomes with One Cup" or something, by Howard Schultz and I became enamored with the Starbucks model and story. I loved it. Schultz grew up in Brooklyn dirt-poor and saw his dad really suffer cause he got hurt at work which put the whole family in financial hell. Schultz never forgot it and when he turned to business as an adult, he looked at Starbucks as his vehicle to take care of his employees. He was the first retailer to offer benefits of like healthcare, dental, vision, insurance, etc etc for PART-TIMERS. His shareholders were NOT excited. 

So I was like wow and bought some 17 shares or something at 20 bucks a share I think. 

I proudly shared my new acquistion with a homie and he was like, hey, what's your exit strategy? My response? 

Thusly, you are probably already guessing what happened.

I didn't pay attention to fundamentals or technical indicators. I just read the book, loved the idea and was like, hell, I like it. You could almost call it a "Warren Buffett" move like how he bought the Clayton company from Jim Clayton after reading his autobio. But I was a fool to the game and wasn't in the long-term enough for the marketplace to catch up with the intrinsic value of the shares. 

Alas, no exit strategy. My comrade said I wasn't investing, I was speculating. I was gambling. 

I didn't employ safety nets such as stop orders. Let's say my $20 shares dipped to $15. You can set a stop order at $18 where your shares are instantly sold at $18 if the price goes that low. You can set built-in safety mechanisms that react to protect your position from castastrophe. (Wish you had that in your 401k/IRA huh??)

So my first trade with options though? 

I loved it. Newb as I am, as expensive as this turned out to be, I played to win no matter if the market went up or down. I would've only lost if it went no where and stayed sideways. I was willing to take that chance cause I knew shit was happening in the world with governments going berserk printing money left and right.

So the strategy was great, execution was poor. I butchered a gorgeous profit because I..

--held on to the losing side of the bet (it lost more and more value)

--didn't really have an exit strategy, I didn't set a goal in terms of a specific % gain or anything

--maybe I even sold too soon considering the options didn't expire for another 30 plus days

That said, the one sole thing that I did right that made compensated for everything else and still came out highly profitable was:

--I rode the winner! (most people strangely enough tend to cut their winners and ride the losers)

   Next time:

I definitely must draft up a written plan that specifics my strategy, goal, execution, breakeven points, maximum profits & losses, and EXIT strategy. 

On my last post where my SLV values were the highest they've ever been in the last 30 years, I was like wow, that's awesome. This is so cool, I'll let it it ride some more and I think I'll sell it in the morning. WRONG, when it's already PERFECTLY BREWING you need to cash out at the crest! I let greed take over rather than rational discipline. i was already making like 80 bucks on 200 dollars in 20 days. That's already freakin 200-300% return on investment in a year. 

Greed. 

So I let it "incubate." Hopped online before work and my 80-90 bucks shrunk to 40 bucks from a small pullback. I was like damn. I sold it anyway. 2 days later, the prices recovered and my profit would've been in the 75-80 range if I held.

Then again, market timing is super tricky to time perfectly.

I just feel like an idiot albeit a profitable one since I write this beautiful blog post of my all these awesome indicators telling me to sell sell sell at this beautiful beautiful profit margin and fat gain. Instead of putting in an order to sell RIGHT THERE, I post pretty pictures in my blog and go to sleep. 

~ ~ ~ ~

So I resolve to do better next time. A lot better. Disciplined better. 

All in all, I'm thrilled to just pop the cherry and still GIDDY that it's profitable. It's not about swinging home runs, but lots of singles, doubles and some triples will make you a fortune alone. As this first foray shows, if your winner is the right one, it'll really compensate for any shortcomings. 

Like all arts and sciences, it really goes back to philosophical truths that all disciplines ultimately seek truth and simplicity. 

As an investor, you need to see through the smoke and just play your strengths. 

It's like playing poker and you already have a full house on the flop. F'ing take down everyone that wants to play testosterone over rationality. Just play your strengths and ride that cowboy. 

~ ~ ~ ~

Looking forward to the next trade. My goal was to have 4 profitable trades completed last month. Ha, we'll shoot for it this month. 

Ah, and the cavalry arrives from the nearest hill:

Hells yea, stay diligent everybody

Perhaps it's time to sell Trade Numero Uno - Here's Why

A quick update on the status of today's bull run on my silver:

Continued uncertainty over the future of the dollar serves to buoy the safe haven amongst currencies aiming for bankruptcy. 

First came Portugal, Ireland, Greece, Spain.. [the PIGS] and there was Dubai. Hints of problems coming from Singapore, the UK, and the last house of cards to fall..? the USA..or as many know it infamously as, IOUSA.

So what is an options playa to do? 

Let's look at the recent chart for silver. 

If you examine the trend lines I drew out, silver has a nice upside down head and shoulders pattern previously. 

In this example of technical analysis where we look at the moods and attitudes of the marketplace rather than say, the fundamentals such as ratios, hard numbers and other financial data.

A head and shoulders pattern elaborated looks like:

Walah! 

Did I see this pattern when I made my initial trade (NO..), I got lucky.

"Damn Warren, you just got lucky." 

No, I knew the fundamentals anyway too but hell, being in position to be lucky is awesome too. 

Typically, the strength of the trend that follows a head and shoulders pattern is equal the distance of the "head" to the rest of the "body" in the pattern.

If you look at the trend lines I drew previously on the silver chart, it shows the vertical height that has been duplicated in the recent bullish trend of silver.

I've been waiting for an indicator to sell because, hey, it's great to see nice big fat green precentanges in my profit/loss column, but till I sell my options, the trend might reserve and suffer a pullback in a overheated market. 

Other awesome indicators are MACD and the RSI.

What Does Moving Average Convergence Divergence - MACD Mean?
A trend-following momentum indicator that shows the relationship between two moving averages of prices. The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the "signal line", is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.  
   With MACD, you're looking for a convergence of the slower moving average and the faster moving average. It'll converge at low points and re-converge at overheated points.

What Does Relative Strength Index - RSI Mean?
A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. It is calculated using the following formula:

   Just look at how a low RSI tends to correlate with a low price.

   Notice how high the RSI is currently...

~ ~ ~ ~

Um...

Yes. Selling in the morning. 

^^

Trade #1 - Continued

The beauty of a straddle play?

You take bets on both sides. Up or down, just go to town either way. =)

~ ~ ~ ~

Edit:

I just realized the profit gain is drastically understated. the almost 10% gain year to date is on the total value of the portfolio to net the $50.18.

Checking my figures, I only invested $203 to earn the $50.18. Plus commissions.

Dude, options. Where have you been all my life?