With the crazy market volatility I managed to get some lead way back on my last trade. Decided to close out for the month and call it even with a small donation.

LGL (opened on the 13 July 2007)
Buy 4,000 x 3.186 ($12,744.00)
Sell 4,000 x 3.134 ($12,536.00)
Donation: $208

Like they say, when in doubt stay out. Today there is mention of subprime again near coming out from China causing the market to pull back the entire days gain in a few hours. Interesting how the mention of subprime causes the market to retreat in a heart beat!

Take care!

Today was an up-day in the Market followed by a weak up-day on the US market and UK market over night. I have no confidence in the market for the next few months. In 1987, the market corrected 25% in 4 weeks, currently we have corrected about 10-15% in 2 weeks. Usually after a correct, the market consolidate for a couple of months before returning to the ‘high’.

In my opinion, if you want 2 weeks the market will either bottom out by falling another 10-15% or stay exactly where it is, ie consolidating. If the market falls in the next 2 weeks, it will consolidate for 2-3 months by trading sideway before making a very aggressive run (ie. i’ll be bullish in the market) If the market stays at these levels in the next 2 weeks, I’ll still wait until there is a clear trend change (higher high & higher lows – a.k.a. xyz or abc)

Initial Trade  13th July 2007
Received 0.115

Roll Out Trade 25 July 2007
Close out initial trade for 0.135 and
Opened another trade for next month for 0.135

Close out Trade 21 August 2007
Close out trade for 0.22

Total donation: 0.105 per option ($1,896 including brokerage)

The heavy selloff in the world financial market has made me cut losses in my CFD portfolio. Although I didn’t open any new spread position for the month due to the market volatility I also didn’t sell my existing CFD portfolio (my intention was more for the long term, but I think it’s cheaper to get out now and get back in later when the market finds some support.

The Trade
23rd July 2007: Buy 400 HAL @ $37.547 ($15,018.80)
15th August 2007: Sell 400 HAL @ $32.51 ($13.002.80)
Donation: $2,016.00 ($2,470.80 AUD)

13th July 2007: Buy 500 CTX @ $24.924 ($12,462)
16th August 2007: Sell 500 CTX @ $21.35 ($10,674.50)
Donation: $1,787.50

20th June 2007: Buy 1,500 ZFX @ $19.095 ($28,642.5)
15th August 2007: Sell 1,500 ZFX @ 16.23 ($24,342.00)
Donation: $4,300.50

Total Donation: $8,558,80

It was quite interesting to see myself react during this period – clearly not the way I liked. I saw the break in resistance on the All Ords on the 27 July 2007. It was a technical failure after several double tops which spanned 2-3 months. I told myself I should buy a put (insurance) and sell my long positions, I didn’t listen to myself and let many of my profits errode and my losses compound. For all my readers, I hope you learn a lesson from this failure.

Lesson to be learnt:

• General: Read old post - I drew that same lines on 27th June 2007 – Check it Out
• General: When there is a technical change in the index close out all positions as soon as possible (especially if it is a winner)
• General: When the taxi drivers or random people on the streets talk about buying shares, reduce your exposures
• CFD: When your position is up 100% buy insurance or get out
• CFD: set your stop loss, trailing stop and profit target before you turn off your computer
• General: Follow your own rules
• General: Respect the double/triple tops – i obviously didn’t

Not a fantastic month, at least i know next month is going to be a better one!

Anyways, here’s the summary
JBM- profit $790.6 (put spread)
QBE – profit $801.8 (put spread)
OSH – profit $1,420.26 (naked put)
FXR – profit $1,836 (CFD)
NVDA – profit $879.82 (covered call) – AUD Equivalent ($1,002.99)

WPL – donated $4,863.3 (put spread)

This month profited $987.83

So far covered calls seem to be more profitable and much safer… something to think about

Looking at this trade more carefully, I clearly missed the double top warning signal. I will watch out for that next time!!

My Initial trade
The Trade (WPL) – Traded on 23rd July 2007
Sell Jul $45.5 Puts @ $0.31
Buy Jul $45.0 Puts @ $0.18

Expiry = 26/07/2007
Share/Contract = 1000

I closed this trade on 25th July 2007
Sell Jul $45.5 Puts @ $0.795
Buy Jul $45.0 Puts @ $0.445

All up this trade cost $0.22 – (20 x 1000 x 0.22) = $4,400
After brokerage: $4,863.60

I didn’t roll this trade out because the market is still a little unsteady at the moment.

ANZ was trading at the upper strike today, market has been very volatile again… and its one day before options expiry so i’m a bit cautious for this trade and decide to not take the chance and roll it out for the next month.

The Trade (ANZ) – Traded on 13th July 2007
Sell Jul $29.26 Puts @ $0.195
Buy Jul $28.78 Puts @ $0.08

Expiry = 26/07/2007
Share/Contract = 1042
Max Profit = 0.115 (0.195-0.08)
Max Risk = 0.365 [(29.26 - 28.78 ) - (0.195-0.08)]
Return on Risk = 31.51%
Breakeven = $29.145

I opened 10 contracts:
Reward for trade (excluding fees) $1,198.3
Reward for trade (including fees) $988.90
Value At Risk $3,803.3

Closing the above trade – Traded on 25 July 2007
Buy Jul $29.26 Puts @ $0.14
Sell Jul $28.78 Puts @ $0.005

It cost me $0.135 x 10 contract = $1,406.7
Remember I received $0.115 x 10 contract = $1,198.3 at the beginning
So, net loss $208.4

All up ANZit cost me $627.2 to close my position – brokerage etc. inclusive (in short, I made a loss on this trade)

Open the same trade or a variation of the same trade for the next month (this is what I did)
Opening a trade for next month (ANZ) – Traded on 25 July 2007
Sell May $29.0 Puts @ $0.335
Buy May $28.5 Puts @ $0.20

Expiry = 30/08/2007
Share/Contract = 1000
Max Profit = 0.135 (0.335-0.20)
Max Risk = 0.365 [(29-28.5) - (0.335-0.20)]
Return on Risk = 37%
Breakeven = $28.865

I opened 10 contracts:
Reward for trade (excluding fees) $1,350.0
Reward for trade (including fees) $1,140.6
Value At Risk $3,650 + previous loss amount ($627.2) = $4,277.2

This trade is actually tied in to the previous trade which loss $627.2
If this trade is successful then the net profit is $1,140.6 – $627.2 = $513.4 i.e. I would make less money over a longer period of time. Keep in mind I did increase my risk from by opening more contracts…

Earning reports was up, pre market trade saw this stock move 4%. once the stock opened I was watching the minute chart for an hour… Thats 60 bars!!! anyways, I saw a triangle forming and on the 60th minute the breakout happened… I’m bullish on this stock because of the good earning report so i’m just waiting for a signal to enter this position. I missed out on a nearly 10% drop in TAM (the Brazilian airline that crashed last week… things like a plane crash causes fear and drive stock prices) I missed out because I haven’t been looking at my tricom trader and something screwed up and prevented me from trading… Anyways, I got it fixed immediately and i’m back.

This is a USD trasaction… I actually forgot it was in USD, otherwise I wouldn’t have opened such a large transaction. I try to keep my exposure to $10k AUD per exposure unless I think its a good trade.

The Trade (23rd July 2007)
Buy 400 HAL @ $37.547 ( $15,018.80)
Margin Required: $1,501.88 (10%)

WPL is trading at its support level, taking a chance on this one as I think it will bounce back in the next 3 days. A bit of a speculative trade, this is pretty safe though… was recommended on this trade and usually its successful trades.

The Trade (WPL) – Traded on 23rd July 2007
Sell Jul $45.5 Puts @ $0.31
Buy Jul $45.0 Puts @ $0.18

Expiry = 26/07/2007
Share/Contract = 1000
Max Profit = 0.13 (0.31-0.18)
Max Risk = 0.37 [(45.5 - 45.0 ) - (0.31-0.18)]
Return on Risk = 35.14%
Breakeven = $45.37

I opened 20 contracts:
Reward for trade (excluding fees) $2,600.0
Reward for trade (including fees) $2,368.2
Value At Risk $7,400

Reason
The US market did very well yesterday night and the Australian market followed, although the Australia market did not close on a high I believe due to the world market sentiment the Australia market will perform well for next week.

CTX (Caltex) – the price dropped heavily due to poor production performance reported a few weeks back. Nothing else really changed on the stock apart from the underperforming production reports. They still have the same number of employees and factories so they should fix up their problem and perform well for the future. I only see this stock going up, plus its trading at support levels

LGL (Lihir Gold) – Gold prices usually move together with Oil prices, the prices of oil has been running for a long time and the gold prices hasn’t followed. LGL is very exposed to the gold price and a good vehicle to use to be exposed to gold prices. LGL has been trending upwards (slowly) for the past year… more like side-way with a tilt towards the bullish side. There’s plenty of support on this stock and should perform well in my portfolio.

The Trade – 13th July 2007
Buy 500 CTX @ $24.924 ($12,462)
BUy 4,000 LGL @ 3.186 ($12,744)

Closed out my FXR today, had a good 2-3 day run and its trading outside the boolinger bands. During this time they had a production upgrade which caused the stock to rally. Currently they haven’t done the magnetic survey for iron ore yet. That said, since I was only going to be in and out for this one (short term for speculation) i better get out while its good.

The Trade
Buy 10,000 FXR @ $1.0452 ($10,452) – 4th July 2007
Sell 10,000 FXR @ $1.2288 ($12,288) – 13th July 2007
Profit $1,836.00 in 10 days.