Yong-Long Lai

US market did well, DJIA & NASDAQ broke above the triple top. When the Australian market opened the same thing happened. ANZ is trading at a very low level and I believe it will be relatively stable in the next 2-3 weeks. This is a short trade because I’ve been waiting for the market to pick a direction, also banking stocks are usually stable, low volatility. Opened this one close to the money to get the premium, I wanted to be long in something after the breakout today!

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

Reason
This is a 7 month breakout on a weekly chart! Its been treading down for the past 7 months and it has broken past its support level this week. This is a speculative trade, its a good idea to have a portion of your portfolio put into these trades because if you’re right you’ll make some good money. Obviously, if you’re wrong you need to know when to cut your losses.

The annoucement on FXR is that it discovered some Iron Ore prospect on their land. They will be doing more test and survey on the land to see if there is any magnetic disturbances. (hopefully there are) Apprently they fly helicopters with some magnetic reader and see if the readings goes crazy. Lets see how it pans out, I don’t intend to be in this trade for a long time unless the find more ore prospect in the weeks to come!

The Trade (4th July 2007)
Buy 10,000 FXR @ $1.0452 ($10,452)
Margin Required: $1,045.2 (10%)

QBE is trading at the support level, its been trending sideway for the past 4 months so its trading at the support and should bounce back. That said, the market is quite volatile last month so I’ve done a $1 spread to reduce the risk (ie. breakeven is lower).

The Trade (QBE) – Traded on 4th July2007
Sell Jul $30.50 Puts @ $0.385
Buy Jul $29.50 Puts @ $0.185

Expiry = 26/07/2007
Share/Contract = 1000
Max Profit = 0.20 (0.385-0.185)
Max Risk = 0.8 [(30.5-29.5) - (0.385-0.185)]
Return on Risk = 25%
Breakeven = $30.30

I opened 5 contracts:
Reward for trade (excluding fees) $1,000.0
Reward for trade (including fees) $801.80
Value At Risk $4,000.0

This month was not such a good month… the market pulled back right before option expiry and forced donations. Usually if the market falls during the early part of the period, we would not have worried.

Anyways, here’s the summary
ANZ – profit $832.60
ZFX – profit $890.60 (put spread)
ZFX – profit $455.38 (naked put)
OSH – profit $2,425.5 (CFD position)
LHG – donated $2,053.60
CSR – donated $315.33
WDC – donated $3,468.80
NWS – donated $6,712.17 (From May)

This month donated $7,945.82

Effectively donated all of May & April’s profit back to the market. Three months and zero return, lucky I have a big equity buffer for time like these. Never use money you cannot afford to donate. We are in the business of making a profit, that said we need to master the art of money management.

On 19th April 2007, I opened 5,500 OSH CFD @ 3.688
Few days ago I was stopped out (25th June 2007), I sold 5,500 OSH CFD @ 4.129
In total: 5,500 x $0.441 = $2,425.5
Period: 67 days (around $300 of interest)

If you are wondering why I didn’t post it 2 days ago is because I didn’t realise… I haven’t been checking my CFD positions so this one slipped my mind. I set up a trailing stop at the beginning to let my profits run and cut my losses. When I logged on today I saw a trade confirmation.

Good thing for this trade, cause it will buffer most majority of my spread donation.

Closed out most of my trades today, usually i would roll them out but there hasn’t been any good news on the market for a while, also there was a near 2% drop in the All Ord today. Look at the double top and what I believe is a breakout of the support line (looking at the 3months XAO chart) Better be safe than sorry, so i’m taking my money out of the market and waiting for an signal before re-entering. If tomorrow is a down there, I am pretty sure the XAO will drop to 6000 points, ie another 3-4% drop.

Here are my trades for 27th June 2007
The Trade (WDC) – Traded on 29th May 2007
Sell Jun $21.0 Puts @ $0.445
Buy Jun $20.5 Puts @ $0.25

Closed out 27th Jun 2007
Buy Jun $21.0 Puts @ $1.05
Sell Jun $20.5 Puts @ $0.55

All up donated $3,468.80 to the market (including brokerage)

The Trade (CSR) – Traded on 26 May 2007
Sell Jun $3.47 Puts @ $0.10
Buy Jun $3.24 Puts @ $0.04

Closed out 27th Jun 2007
Buy Jun $3.47 Puts @ $0.0585
Sell Jun $3.24 Puts @ $0.00

All up donated $315.33 to the market (including brokerage) – this was more a donation to the broker

The Trade (LHG) – Traded on 28th May 2007
Sell Jun $3.07 Puts @ $0.105
Buy Jun $2.83 Puts @ $0.035

Closed out 27th Jun 2007
Sell Jun $3.07 Puts @ $0.16
Buy Jun $2.83 Puts @ $0.015

All up donated $2,053.60 to the market (including brokerage)

All up donated $5,837.73 to the market today, I still have 2 positions for tomorrow that should go through safely and buffer some of this donation.

The Trade (22nd June 2007)
Buy May $29.5 Puts @ $1.525
Sell May $29.0 Puts @ $1.03
Share/Contract = 500

It cost me $0.495 * 28 Contracts = $6,930

1. Initially I received $1,350.0
2. It cost me $3,900 to close the trade
3. I rolled out and received $3,710.0
4. Now i’m closing out for $6,930

This ended up being a donation of $5,770 (before brokerage)

After Brokerage this trade donated $6,712.17

I choose not to roll this position today, even though NWS is trading at its support levels and should bounce back. I am currently cautious of the All Ords as it is forming a potential double top pattern. Seems to be some resistance around 6,400 points.

Anyways, interesting to see how this strategy works… This strategy is better in a bullish/neutral market (preferably bullish) this way your written puts will always expire and you will make 20-30% return easily per month. If one of your position doesn’t perform good, you could potentially wipe out the profits for the month. i.e. no cashflow for the month. Will update on my wealth dynamic profile and how I may need to modify my strategy to get myself more into my flow

This is one of the best position i’ve opened for a bull put spread ever (Opened it almost 10% out of the money, ie. the stock can fall 10% over the next 30days and i’ll still be safe!!) Broker called me yesterday to put this one in… was trying to get me in at 16/15.5 for 10-11c (which was pretty good). That said, I didn’t get filled for it, today he gave me another call and said I migh be able to get in at 15.5/15 for 10c (thats 50c lower for approximately the same return!)

Check this out! I was the only guy today who managed to get the 15.5/15 bull put spread, the 10 contracts on the 15 exercise price volume was me!

Reason
Anyways, to the important bit. JBM has been channelling for the past 3-4 months and today just happen to be at the support. So firstly there’s strong support at $17, secondly there’s more support at $16, thirdly I managed to write the $15.5 puts which means i’m almost 10% out of the money! thats insane! I’ve never opened a position so far out of the money and received decent premiums.

The Trade (JBM) – Traded on 21st June 2007
Sell Jul $15.50 Puts @ $0.31
Buy Jul $15.00 Puts @ $0.21

Expiry = 26/07/2007
Share/Contract = 1000
Max Profit = 0.10 (0.31-0.21)
Max Risk = 0.40 [(15.5-15.0) – (0.32-0.21)

Return on Risk = 25%
Breakeven = $15.40

I opened 10 contracts:
Reward for trade (excluding fees) $1,000.0
Reward for trade (including fees) $790.6
Value At Risk: $4,000 (not including brokerage etc)

Looking for positions to open for my CFD account these pass few days. Bouncing between ZFX, BHP, PLF and a few others… decided to go back with ZFX, the PE ratio on this thing is still low and they have 1/4 of their asset value in CASH, which they will be buying lots mines and what not

Reason
BHP has runned quite a bit, looking at the weekly chart its trading 2 weeks outside the bollinger bands (ie, it should technically be pulling back soonish… unless it has a lot more steam. That said, i doubt it because BHP has move quite vertical.

similar to BHP, ZFX is on a breakout grade, today most of the resources had a pull back. ZFX has ample support at $18, $17 & $16 (ie. its going to be quite hard to fall without bouncing back) The plan is to set a trailing stop loss starting from around $18 – a set and forget strategy, similar to what i’m doing for OSH.

The Trade (20th June 2007)
Buy 1,500 ZFX @ $19.095 ($28,642.5)
Margin Required: $2,8642.5 (10%)