Monday, September 28, 2009

28/09: A one-way day: broad advance

Markets rallied in today's opening hour and then moved little for the rest of the session. The S&P500 opened one point ahead, which would be the day's low, at 1045; the high was 1065 and the close, 1063. Here's the customary 10-day chart, courtesy of

I am still in my trade of GS-based derivatives, which is admittedly becoming a rather stale position. The culprit for this stance, however, is my past weekend's overly ambitious travel schedule. I was exhausted yesterday for virtually the entire day, and my body required an above-average length of sleep during the last night to recover. Not that I didn't try to wake at a normal hour; to the contrary, however, I was not able to actually extricate myself from bed until the late morning, well into the market session. Dear reader, before you become too critical, take note that I'd slept less than five hours on each of the past three nights, and only one of those was in an actual bed.

In any event, I did miss out on the morning action in GS. And too bad, because I'd probably have had enough sense to sell my puts during a morning pull-back to below $179 around 10a CDT, given the background of a sharply higher overall market amid a flow of M&A announcements. As it stands, I made no transactions today and remain long in 185 Oct calls and 180 Oct puts. Unfortunately, GS closed today at $182.50, which is the theoretical nadir of value for my particular concoction of contracts.

Here's a 10-day of GS, and notice that today's intra-day high and low are, respectively, $182.78 and $178.66:

To re-emphasize, it's interesting that GS began the day weaker vis-a-vis the broader market. As the day wore on, however, the S&P stalled, while GS only strengthened. My near-term outlook is thus bullish, particularly in the presence of market strength.

My forward strategy, therefore, might be to wait for a capitulation rally and take a short position at that time. Yet, given that I foresee much stronger probability of near-term price appreciation than depreciation, it's rather clear that my present holding of both puts and calls is a mistake. (Be kind, reader; I wasn't in top form during today's session, as outlined above.) I should have taken a chance in having an all-calls position overnight. Yet there remains hope if I still believe, tomorrow morning, that the rally has room to run; I could sell my puts for 180 or 190 Oct calls (avoiding 185 calls to retain the option of selling my current holding of them during tomorrow's session, if the market should show signs of turning).

Friday, September 25, 2009

25/09: Volatile end to the market week; working and writing from the East Coast

Spring St, New York City -- Writing towards the tired end of an ambitious day, I find myself in New York. Markets continued their slide today, although with less certainty than in the prior session, though my zeitgeist, errr... chief stock of interest, -- GS -- fell with force.

First, the S&P500 closed at 1044 after climbing as high as 1053 and plumbing down as far as 1041. The usual 10-day'er appears next, excited chartist-cum-reader:

To tie my micro-level experience into the above macro-picture, I appeared at a Rosslyn (Virginia) Starbucks (known hereafter as Buckies) about a dozen minutes before the market open and was actively monitoring movements through about 11:30a (EDT today!), when I decided to sell my GS puts as the stock was touching (for the fourth time; should have known better) its 2-day sloping support level. It was the wrong move, which became apparent mere minutes after my sale, when GS proceeded to break through the support instead of bouncing convincingly upward. GS's bearish move was mirrored by selling pressure in the broader S&P500. To my credit, I spotted the danger right away, and despite the pressure of needing to make an exit for a lunch event at the K-Street-domiciled Center for Strategic and International Studies, I had enough level-headedness to purchase the puts anew, suffering a loss of $.15 per contract, or about 2.5%. I can live with that kind of punishment.

Now, dear reader, a visualization of GS's vicissitudes:

I did not return to market-tracking activity during the afternoon, as after my CSIS engagement, I had a meeting and some run-ins on the Georgetown University campus; and after all this, had no choice but to hustle back to DCA for a 5pm departure for LGA aboard the US Shuttle, US 2180 in my case.


Dear reader, Yes I did proceed to have a wonderful flight, with an overwing exit row window seat (10a, with no 9a and, hence, "unlimited" legroom) and making deliberate use of the Shuttles' complimentary alcohol priviledges. I even managed to peruse the day's NYT (always a treat), complete the KenKen puzzles therein (the 6x6 iteration, as it is the week's end, was rather challenging; but I was pleased to be done before wheels-up), and mentally rock-out to some European dance hits, reproduced in high fidelity by Bose' wonderful QC2 headset model (and thanks are due here to Poland's hippest DJs at Radiozet and their banker compilations).


Some final thoughts. A day like today, in which I'm exhausted from frenetic activity and taunted by missed opportunity on the markets, releases a cold shower on the flames of my ambition. Yet, so long as I remain diligent and thoughtful, these days are surely no more than light chop on a productive and enjoyable jetting experience. To paraphrase my captain of UA 600 earlier today, who brilliantly remarked on our flight time as "1h20m of pure aviation bliss", there surely awaits market bliss of my own -- and not just from realizing profitability, but also from acting intelligently, working tirelessly and learning, learning, learning.

Enjoy the weekend flights (JFK-SFO-PDX-SEA-ORD are on the docket for tomorrow) and city visits (Portland and Seattle on the morrow), and good luck with the markets come Monday!

Thursday, September 24, 2009

24/09: Markets continue march downward

Markets, after spending the first few minutes of the session in positive territory, continued the downward trajectory that began in the final hour of Wednesday's session. After yesterday's close of approximately 1061, today's vital numbers for the S&P500 were: 1063 (high), 1046 (low) and 1051 (close). A 10-day chart follows: (and note that I'll be using 10-day charts from here on out, as the bigger picture significantly aids interpretation)

My own trading centered on GS. I held Oct $185 puts that I purchased late into yesterday's session (and reader, recall how frustrated I was at my poor timing), and I was looking to unload them this morning, as I feared a reversal.

In poor form at the market open, I was acting rather impulsively and did not cultivate a necessary big-picture approach to the decision. Thankfully, I did not -- at least -- sell in the few minutes during which I'd have lost money on the trade, but I did little better, selling for a paltry 5% gain on each contract. In doing so, I went against my own analysis, which was predicting a re-test of Wednesday's low, at the very least. Instead, I acted with the impulse to book a gain, however slight, rather than waiting to watch it slip into the red, perhaps deeply.

I cannot fault myself entirely for having such an impulse, to take money off the table while in the green; nor can I even fault myself for acting upon it. Yet I must make a more concerted effort to cultivate methodological, big-picture, level-headed thinking, and with practice and time, my decision-making will naturally be driven more by these elements.

Here's a 10-day of GS, before I go any further:

Upset with my decision-making, I proceeded to spend the midday on the bike trails through Chicago's near-northern suburbs, putting in an invigorating 34 miles on the bike. Back at my desk for the final hour of trading, I entered a strangle of sorts on GS, buying Oct $185 calls and Oct $180 puts while GS was at about the same price. Of course, I was trying to enter the calls position while GS was low and, conversely, the puts position while GS was high. Yet with only a quarter hour to play with before market close, I did not manage to fulfill these criteria.

I will be looking to sell both types of options contract tomorrow, preferably early in the trading day when volatility is greatest, and naturally I will want to stagger the sales so as to make some money. If GS spikes up, I'll sell the calls and then, in the pullback down, I'll sell the puts. If GS spikes down, then vice-versa (I don't mean to be tedious here!, but I anticipate that, perhaps, someday some reader might not be fully informed about how financial products are traded).


Tomorrow morning, UA 600 awaits, my favourite flight in the universe of airline flights. ORD-DCA, at the crisp time of 6am, in a 757 no less. I'm looking forward to it, and to the rest of my ambitious travel weekend. Of course, I'll be trading tomorrow from Washington. Good luck!

Wednesday, September 23, 2009

23/09: FOMC communication sends shares down

U.S. markets spent today in a tight range of slight gains, until the 1:15p CDT release of the FOMC communique, at least. Post-release saw a push higher, but the last hour of the trading day witnessed an intensifying -- and very significant, I believe -- sell-off. Here's a one-day'er of the S&P500:

The day's open, high, low and close were, respectively: 1073, 1080, 1060 and 1061.

I am inclined to believe that the late-afternoon sell-off will continue into the open of trading tomorrow. Such is often the case with intense late-day action. Furthermore, many leading stocks witnessed their own dramatic, high-volume sell-offs in the 2p (CDT) hour, further supporting the hypothesis of a weakened market at tomorrow's open. The biggest question right now is whether the sell-off intensifies into a downtrend of several days, one that would take the S&P500 to 1050 or below, say to the region of 1020-30.

I held positions in Oct $6 LCC puts and was also long LCC shares throughout the day (both were overnight positions from at least yesterday) and sold both at approximately 2p, just before the downturn in the markets. Fortunately, I sold the puts at a respectable gain ($1.40, versus a $1.20 purchase price last week), while the position in long shares was a wash (sold for $4.68 versus an average purchase price of about $4.73). It's essential to explain that I entered the long equities position during yesterday's AH market, after which LCC dropped suddenly from a close of $5.23 to the region of $4.75, spawned by a news release of forchcoming fresh share issuance by the company. I took the long position, of course, because I wanted to secure the handsome AH profit (as I could not sell the puts in the AH market).

I do have a regret with the LCC trade -- that I did not exit the puts when LCC spiked downward to $4.40, a definite resistance level, during the beginning of today's market day. I, foolishly, was waiting for $4.20 (greedy, greedy!). Here's a 10-day of LCC:

Finally, I entered a position of Oct $185 GS puts during the market's sharpening sell-off of the afternoon. In minutes of extreme frustration, I tried to first execute a trade in $190 puts, but the price kept racing away and I was unwilling to chase it. Unfortunately, the price just would not come back, and I lost about give percent of the price over the course of a few minutes, all without managing to make the trade. Extremely frustrating, to miss out on such profitability in such a short instance. I switched sights onto the $185 puts -- but I made the same mistake again, though to an even greater magnitude. I tried a $6.15 bid when the bid-ask spread was about a nickel or dime greater, and I kept chasing unsuccessfully as the price of the underlying GS shares accelerated towards the downside. $6.30. $6.50. $7.00! And finally I got the bastards, but only for that rich price, a full 15 percent over what I could have obtained but minutes earlier. I was nearly trembling at this point.

Fortunately for me, the puts closed the session at a spread of 7.25/7.40. But I'm under no illusions that I might want to sell early in tomorrow's session, perhaps even into the anticipated decline at open to 183.00, where I might be able to fetch 7.50-7.70. The risk of a rebound to the upside is significant, particularly because I entered so late today. I don't know whether I can stomach much loss, particularly as it's going to accrue awfully quickly. A 10-day of GS follows:

Good luck tomorrow!


As the reader can see, it's been another extended period since the last post (though, at least, now measured in days, not weeks). I hope to pull together a string of consecutive days, going forward; perhaps -- if the stars should align -- I might even not miss a day for a good, long while. Ah, that'd be grand!

Thursday, September 10, 2009

10/09: A return to blogging

I take up the task of blogging again, after a long absence. No one has missed me, as my readership is myself, and my chief task in these pages shall be to catalog my work and thoughts regarding the markets. I believe that such systematic writing, on these public pages, will be of significant help.

To re-commence, then, today has been a notable day on the markets. The S&P500 and NASDAQ have both hit intra-day and closing highs for the year. The DJIA narrowly missed an intra-day high for the year, coming only a quarter point short.

Leading sectors have put even in a more dizzying rally than the overall markets. Financials and materials stocks, in particular, have witnessed "parabolic rallies," a personal term that I use to denote price change that has a positive first and second derivative. Another way of characterizing this movement would be to say that the stock's RSI value is very high -- probably over 70. Such is the case with TIE, in which I took a short position in the last hour of the market's trading today (to be precise, I am long in short-dated, deeply out-of-the-money put options).

I also have an ongoing long position in BAC puts, a bet that has been a thorn in my side for the past few days. I have a nasty habit of extreme reluctance towards closing losing positions, preferring to instead let them run. This foolish stance must be revised. I must continually re-evaluate any position regardless of my P&L, and exit when I no longer feel strongly about direction or probability. So it must be with BAC. If I am no longer bearish on BAC and feel that a pullback is imminent, I should sell the puts, even if it is at a loss.

I must forgive future readers -- id est, mostly myself -- for the unedited nature of today's and subsequent blog entries. I intend for these entries to be more-or-less of "stream of consciousness" in nature, and as such, there will be requisite imperfections in flow, argumentation, and choice of words. A perfectionist by nature, I cringe, but I must try going ahead with it nonetheless.

Tomorrow brings more than a big day on the markets. I will also spend the day travelling, with an early morning rail journey to Milwaukee's Mitchell Field, a late morning Maddog flight to Atlanta, a day in this capital of the Southeast, and a late-night 767 voyage to the City on the Bay. I haven't much sightseeing for Atlanta planned at present, as I've been preoccupied with the markets today; but I am looking forward to the visit all the same. More dramatic is my lack of plans / accommodations in San Francisco -- this, meanwhile, caused by a dearth of liquidity. Thankfully, the opening of business tomorrow will bring in a trickle, but barely enough to book a hotel and have a tad of spending money. And I'll still probably have to spring for a rental car. Tough times...