Another red day! Well it was hedge fund redemption day and a Friday. Two things in favor of selling off. As option traders, we would always want to be out of the market on the last weekend before expiration. Not sure, if that would affect the underlying security’s price or not.
Sweet rally! Wow nice on an unexpected day. I was expecting that either tomorrow (Friday) or Monday next week but mostly Tuesday. In my real trading account, the funds are frozen in a bad call with being all in. So can’t do anything until that frees up. There was a standing sell order set to sell my calls at .05. The day’s range shows to be 0.01 – 0.05. However, those calls didn’t sell. Don’t know what to say about that.
In a practice account, I’m up $2,000 dollars. From an initial capital of $5,000. Bought some AAPL Nov 95 calls, Some MSFT Nov 20 calls, and 1 GOOG Nov 300 call. Those all made good money today.
Market analysis is a weird thing. Most online traders are predicting an green tomorrow. It would seem to be likely.
This market is just getting more and more volatile. In reality, I keep hoping for an upturn soon. Mainly because of the MSFT calls I’m holding, but it hasn’t happened yet. On the other hand, it was over two weeks ago that I was hoping that MSFT would be way up by now. I was confident that these calls would not only be profitable but might even be doubling the investment. But I hadn’t ever seen the time value corrode in realtime before. So here we are and the time value is dropping fast. My sell to close order hasn’t executed in days despite constantly being lowered. An idea occurs to me. Given time, I could send more money to the brokerage and buy crap load of calls at .01 and then my .44 average would really be down to .1. Then I could get out at .05 and it would still save me half my original investment. However, while buying 200 contracts is not a problem at .01 (it’s only 200 dollars), the per-contract commission per trade will be is $100 (at .50 per contract). So there’s a big loss on that front. It would seem to be better to just leave it alone.
DOW closed lower on higher volume. Scary. I could have played some DXD calls or something like that and it would actually had made money. However, with each pullback in the downturn, it seems as if the bears have beat down enough and a rally is starting. Then the fear of losing money kicks in. Then it falls again. Only showing how much money could have been made. Since the market has been down for so long, it seems as if a good rally will take place soon enough. Simply because it has been down long enough and lot of investors and traders would be eager to get back to work. However, that’s what I thought two weeks ago and a rally took place but the markets fell right back.
The one comforting thought in this is that the DOW still made a higher low than the previous low. RSI headed down, Buying pressure turned into big selling pressure. Still less selling pressure than before. This candle was almost a black marubozu. Which is strong down candle. So it would seem a little pullback tomorrow should be in order. But again, some numbers are to be released tomorrow. Those might have already been priced in today’s fall or might still affect securities when released.
What are these UltraShorts? Are these some kind of stocks, bonds, derivatives, etc? Or are these just regular shorts made out of jeans?
Well, the Ultrashorts are sort of a fund that go in the opposite direction of the underlying Index. I will give a brief explanation below, however, you shoudl read ProShares site to get more details.
In short, the ProShares are ETFs that are designed to be traded like any stock using any brokerage. These are funds that go in the opposite direction of the underlying index. There are Short ProShares and then Ultra Short ProShares. Short ProShares are designed to go up when the index goes down and vice versa. Ultra Shorts are designed to give double yield. Hence, the Ultra part.
Examples:
Short Dow30SM
This will go against the DOW movement. So on down days, you buy this and expect it to go higher.
UltraShort Dow30SM
Others shorts/ultrashorts: QID (Nasdag 100 UltraShort), PSQ (Nasdag 100 Short).
So these shorts provide for a generic way to trade the market/index itself as opposed to trading a given stock which may or may not be trading along with your index.
Well, the market went up in the morning but couldn’t just take all the bad news. Circuit City is doing under financially. It is not known yet, if the company will make it out of bankruptcy. Most companies do not make it out. Then there is GM. They are asking for money. They are almost as good as bankrupt. Not quite, but almost. They’re saying that they do not have operating funds for the next year. Some one said, this is the best time to buy GM. Nope! Why would you spend your money when:
Then some investors fear the China deal for their financial package is not good enough and will let the Chinese economy crash as well as the rest of the ones that are crashing. Lot of red numbers!
Tomorrow, seems to be set to go up a little. However, someone said the job reports and other numbers come out tomorrow. If those aren’t nice, it might be Wednesday before we see a green day.
OK, the market is still not liking any given direction. Just trying to make up it’s mind.
One day, red the next green. This looks promissing however, on a Friday green doesn’t happen often. Don’t know what to think at this point.
MSFT is still not looking all that great.
P.S. This post is backdated to 7th. The notes are from the 7th, the post is made on the 10th.
It is a good idea to stop and make a rule review. There has been so many good plays the last few days. Yesterday alone was a guaranteed to be a money maker on down stocks. OK, there’s no guarantees in the market so the previous statement is not accurate. It maybe just hindsight. However, in general there have been many opportunities the last few days that I couldn’t take advantage of because I made one stupid mistake: I went all in on my previous trade. That trade has lost me most of the account (95.43% at the time of this entry), and has kept me away from the market in the last couple of weeks. The market has been volatile and that is a great thing for option traders because it causes premiums to really rise.
With high volatility comes high risk or capital loss. So to ensure capital safety, one must exercise great caution in:
I hope that in the next trade, I will use better judgement and not use most of my emotions but rather most of my money management plan.
Well, lot of money was made by someone! Big moves always mean someone is making money. When there is someone selling, there’s always someone buying. Not necessarily an individual investor. It might be a fund that buy at a lower since they’ll hold for longer term and might be buying dividend paying stocks. Might also be that the market makers or specialists on exchange floor are buying. But when the market makers and the specialists buy, they will make sure they get a good price. They provide liquidity. Also probably volatility.
Anyway, the MSFT calls are at this point 100% guaranteed to not be profitable. However, what is the minimal loss that I can get out with. I have almost wiped my original investment. That was one of the rules to not lose the original capital. Now, I will have to attempt to guage and estimate a correct price that is possible and attempt exit around that. I will most probably also have to fund the account again.
Never, go all in!
And then there’s the MSFT.
Aside, from the overall market direction, the selling pressure on MSFT seems to be cooling off. So hopefully, it will make a move up in the near future. I also have some MSFT share in a different account. Those are just for holding.
P.S. This post is made on Nov. 7th morning but backdated for continuity.
So Yahoo says that Microsoft should buy it? Why? They were too good for the original 33/share price. Then they would do anything to avoid being bought over by the “bad” Microsoft and went begging to Google. Google also tried to unnecessarily “save” Yahoo from Microsoft. For what perverse purpose? What is the big problem? Yahoo acquires news technologies and their userbase for the purpose of making money. Google acquires new technologies (some really just a teen social phenomenon) and their userbase for the purpose of making money. So what is so bad here about Microsoft buying Yahoo and it’s userbase for the purpose of making money?
The article that reports the new “request for offer” is at: http://www.bizjournals.com/sanjose/stories/2008/11/03/daily57.html
This might be reflecting the new Microsoft price of 21.69 currently. Which is really bad for the calls I’m holding.
Yesterday MSFT fell below MA 20 and gapped down today. Also continues to go down today. This may be a simple following the market thing or another expectation from shareholders of MSFT that they’ll do something crazy like buy Yahoo.
Personally, I think that MSFT will benefit from the added userbase of Yahoo and if MSFT revamps the really big and overly flash based ads on Yahoo that take 50% of the screen, then it will be a good money maker for MSFT. Even as is, it might be a good money maker. But it has a slightly cheesy look. But on the other hand, if paying a premium and having the share price nosedive is gonna be a longer term thing, then I don’t want MSFT to buy and get involved in rebuilding a search engine company that long since stopped being a search engine and has become more of a web portal. Not insulting Yahoo search capabilities, but just saying that even people who use Yahoo as their main search engine, use the word “google” to mean search. When they search on Yahoo, they say they just “googled” it!
So the post election market was a down day. It’s probably not due to the election result or anything. Might be that the pre-election gains were on an optimistic note and this was the market giving those back. Still holding above the 9K mark. Only tomorrow will tell which way the focus is.
Also MSFT continued with it’s dismal performance. So those options are worth even less.
