optionman's Account Talk

[optionman]

TSP: YTD +7.84% Position/Allocation: 100% G fund as of 5 May 08.

Still don’t like stocks or bonds here so I remain 100% G fund.

STOCK/ETF: YTD +5.04% Position: No Position

For those monitoring my stock/ETF trading account activity:

I closed my UTIW short position for $21.95 for a small gain of +0.63%. I shorted IBM near the open for $125.84 with a stop at $126.33 and got stopped out for $126.32 for a small loss of -0.38%. I still believe IBM is overbought here and will soon pullback, but at $126.00 it is a little pricey so I’m planning to short another stock for less. I plan to short TZIX at or near the open today if the market opens slightly up/down or flat. I’ll try and get in at yesterday’s closing price of $21.35 and keep a tight stop of $21.77.

optionman

“Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.”

Ed Seykota

 

[optionman]

TSP: YTD +7.84% Position/Allocation: 100% G fund as of 5 May 08.

No change.

STOCK/ETF: YTD +5.42% Position: Short TZIX for $21.31

Shorted TZIX near the open for $21.31, stop = $21.73.

optionman

“Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.”

Ed Seykota

 

[Steadygain]

TSP: YTD +7.84% Position/Allocation: 100% G fund as of 5 May 08.

No change.

STOCK/ETF: YTD +5.42% Position: Short TZIX for $21.31

Shorted TZIX near the open for $21.31, stop = $21.73.

optionman

“Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.”

Ed Seykota

Wow - will definately have to let GGal know about you.

Very impressive - I like your style man - very cool

Will give you 5 Stars - good to have you on board

 

[optionman]

Wow - will definately have to let GGal know about you.

Very impressive - I like your style man - very cool

Will give you 5 Stars - good to have you on board

Steadygain---Thanks! I appreciate it.

optionman

 

[optionman]

TSP: YTD +7.84% Position/Allocation: 100% G fund as of 5 May 08.

I remain 100% G fund. With the market overbought and sentiment not supporting it I’m a bit more bearish than bullish and continue to short stocks in my trading account.

STOCK/ETF: YTD +5.28% Position: Short TZIX at $21.31

TZIX remains in a tight range but doesn’t seem to want to participate in my bearish stance against it so I plan to close it out and short ACTL Monday near the open if the market opens up, flat, or slightly down.

optionman

“Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.”

Ed Seykota

 

[optionman]

TSP: YTD +7.92% Position/Allocation: 100% G fund as of 5 May 08.

The battle is on! The bulls pushed the market above its 200 day ma yesterday but were not able to keep it there. The bears overpowered them and brought the market right back to its 200 so the battle lines are drawn. Unfortunately the market remains overbought and sentiment is not supporting it so I remain a bit more bearish than bullish. I remain 100% G fund.

I’m going back to trading option strategies rather than stocks and since many are not familiar with options plus they carry much more risk than stocks I will not post my option trades on this MB.

optionman

“Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.”

Ed Seykota

 

[tspgo_com]

I’m going back to trading option strategies rather than stocks and since many are not familiar with options plus they carry much more risk than stocks I will not post my option trades on this MB.

There are many individuals on this MB who are very familiar with options as well as experts in other areas. It seems they are not posting as much as they used to. However, the well of knowledge is still here. There are members on this MB who can teach us a few things about the market in general but their heart is in Real State, Technical Analysis, TSP, REIT, Retirement, swing trading, day trading, long term investment, etc. You name it and you can find it here.

I would suggest to continue posting your option trades along with the reasoning behind your selection. There will be quite a few that would find it interesting and a good learning experience.

Thank you for your contribution.

 

[Steadygain]

There are many individuals on this MB who are very familiar with options as well as experts in other areas. It seems they are not posting as much as they used to. However, the well of knowledge is still here. There are members on this MB who can teach us a few things about the market in general but their heart is in Real State, Technical Analysis, TSP, REIT, Retirement, swing trading, day trading, long term investment, etc. You name it and you can find it here.

I would suggest to continue posting your option trades along with the reasoning behind your selection. There will be quite a few that would find it interesting and a good learning experience.

Thank you for your contribution.

Amen !! Share your knowledge my friend and you'll probably find an abundence of additional insight from the rest of us. The more we know the larger picture (the numerous investment strategies that are little talked about and not widely known) the better off we are.

 

[optionman]

Weekly Update

TSP: YTD +7.92% Position/Allocation: 100% G fund as of 5 May 08.

TSPgo & Steadygain---Thanks for the comments, but when I first starting posting on this board I posted a few of my option positions and learned quickly with a little sarcasm that many folks that frequent this MB didn’t understand options hence my decision not to post my option trades. However, I will begin posting a weekend update (beginning with this post) and add a bit more depth to my analysis. Hope it helps.

Week in review:

Monday: We witnessed a bearish shooting star candle pattern on the SPX daily chart. This shooting star was significant in a two ways:

1) It broke above the 200 day simple moving average (from now on I’ll refer to a simple moving average as an ma and an exponential moving average as an ema) intraday but couldn’t hold it and closed below it. False breakouts whether up or down are one of the strongest signals in technical analysis.

2) The 200 day ma is a significant technical point for techies. In many cases (as happened in this case) it is the battle line between bulls and bears.

Tuesday: The shooting star pattern was confirmed and the SPX formed yet another bearish candle pattern known as an evening star.

Wednesday: The evening star pattern was confirmed by the sell off and another significant bearish milestone was achieved when two things happened:

1) The bearish wedge pattern Tom has talked about was broken to the downside.

2) The trend that began in March broke to the downside. This trend line should now serve as an overhead resistance point in any up-moves.

Thursday: We had a relief rally and the indices closed slightly up. I don’t believe it will hold. (I started writing this article before the market opened Friday and will finish it and post it sometime this weekend).

Friday: Selling resumed as expected and the weekly trend was broken to the downside.

Week Ahead:

Sentiment continues to deteriorate, momentum has shifted to bearish, several SPX support levels have been taken out and IMO we will likely see more downward pressure. There is a potential for an upward bounce at the beginning of next week, but if we get one it will likely be short lived and then SPX will continue to take out lower support levels and establish a new down trend. If a new down trend begins as expected it’s hard to tell if it will move down slowly or capitulate. A strong capitulation at this point may lead to a panic driven sell off that could drive the markets lower and faster than anyone believes it can. In any case, I expect to see lower lows before we begin seeing higher highs and believe we will see this year’s lows taken out soon, perhaps in a few weeks. Obviously, I could be wrong, time will tell.

Note: For those not familiar with technical analysis markets fall much faster than they rise (take a look at any chart of the major indices and you will see this) so when momentum picks up in a downward move it can take out in days what it took months to gain and if you are long (in stock funds in this case) it can be very painful. See my next post for an article I was working on earlier this year for this MB but decided to shelve. Now may be an appropriate time to dust it off and take a look and at least review what it takes to make up losses incurred.

Opinion:

On oil---luv2read posted an excellent article on his/her? thread that I totally agree with, with regards to oil. I just don’t buy that demand is outpacing supply to the extent that it should be causing oil to rise to record highs almost daily for the last month, but unfortunately that’s what we’re up against at this point. I believe that speculators are driving the price for the most part. I also believe that a few days ago when it rose to $135 it was the result of a short covering, speculators had to cover their shorts quick because prices kept going up rather than coming down as expected and they were heavily short. I believe the commodity bubble is on the verge of bursting and it like all bubbles when it does it will be ugly. I wouldn’t be too surprised to see it begin to unravel anytime now.

I remain 100% G fund expecting this downward move to continue in both stocks and bonds. I expect momentum to pick up and drive the stock market down far and fast soon taking out the lows made earlier this year.

optionman

“Win or lose, everybody gets what they want out of the market. Some people seem to like to lose, so they win by losing money.”

Ed Seykota

 

[optionman]

Stop Losses & Egos

I wrote this article in March 08, but decided not to post it since the market turned and began moving up strongly, but now since there’s a strong potential for it to move back down I decided to post it. Hope it helps.

I would like to share a couple ideas on how to limit losses in our TSP accounts with those who may not be familiar with them. Most of the “old hands” will know this but it will be a good refresher. The two ideas not new but should be reviewed occasionally. They are stop losses and ego.

Stop Loss:

A stop loss more commonly referred to a “stop” refers to a predetermined point that you will not let your position go below or above if short, a point where you will get out of a losing position. Most professional traders know their stops before they get into a position and surprisingly most use 2% or less of their account value. But the one thing they do is determine and stick to their stops and that’s what we should strive to do. In the TSP case the best one can do is to determine their stop and if it is hit do an IFT.

There are several ways to determine stops. You can approach this like the professionals and use 2% or less as a stop. You can also use chart support or resistance points, moving averages etc. as your stop point, this may not be 2% or less but at least it is a reference that you determined before you got into the position. I tend to try and combine the 2 by using both the 2% or less and also look for a good support or resistance point on a daily chart as a potential stop when in stock funds or the bond fund.

As an example I entered the S fund on Friday, the 15th of Feb 08. My entry price was $18.40 (that Friday’s NAV). Using 1.95% as a stop my stop is $18.04. Since I try and use both a percentage base and chart stop I’m also watching SPX 1325 as a potential stop point. Now I have 2 points of reference or stop points. If one or the other should hit, I determine if staying in makes good sense and will normally only stay in if there is a stronger possibility at that time for the market to move in my favor. One disadvantage for the TSP funds is that if a percentage type of stop is set we still don’t get out at that point since we have to wait for the end of the day NAV. This can work against us, but at least we’ve determined a point at which we will look to get out of the position.

The table below should raise a few eyebrows. It shows how much you have to gain just to break even if you are in a losing position.

Size of drawdown / Percent gain to recover

5% 5.3%
10% 11.1%
15% 17.6%
20% 25.0%
25% 33.3%
30% 42.9%
40% 66.7%
50% 100%
60% 150%
70% 233%
80% 400%
90% 900%

Some say well I’m down this far might as well ride it out. I’ve talked to folks who lost half or more of their nest egg by being advised to “ride it out” during the last bear market. Look at the table above again they had to gain 100% + just to break even.

I say No Way! not me. I would rather take small losses even if I take a few together until I hop on a good run which will eventually happen and I’ll have much more than if I had “let it ride”.

Panic driven sell offs. I’ll spend just a minute on panic driven sell offs. These happen occasionally (I was in stock funds in the most recent one (see post #40 on this thread). Panic driven sell offs could actually happen to a larger degree with the up-tick rule eliminated (see post # 67 on this thread for more on the up-tick rule). In any case when there’s a panic driven sell off and I’m in a position I will normally wait for the dust to settle and the panic to blow over before backing out of a position. I find that generally if I need to get out of a position it’s best to let the panic driven sell off run its course, then look to get out on strength or what’s known in trading jargon as a “dead cat bounce” after words. This is always a difficult decision and the circumstances around each one have to be weighed to determine the best course of action, but for me I will generally hold rather than become a part of the panic.

Ego: Keeping our ego in check:

It’s human nature to hate to be wrong. Let’s face it, nobody likes to be wrong. We hate it so much so that we often do just the opposite of what we should be doing especially when it comes to trading. By that I mean we will let our losses run and take our profits too quickly when we should be doing just the opposite. Successful trading requires you to admit you are wrong and bail out of a position before it moves too far against you. Dare I say that to win, we first must learn to lose, to admit we were wrong and move on. Even professional traders are wrong occasionally and have to bail out of their positions, the difference between us and them is they know they have to get out of a position, not doing so could cost them their job and that’s the way we need to approach this. We work hard and sacrifice things we could have now so we will have a nest egg for our golden years so we must attempt to do our best to reverse what we’ve been doing and cut our losses short and letting our winners ride.

Key points:

1. Determine a stop before placing an IFT. Stops can only be adjusted in the direction of the trade. In the TSP case, once established the stop can only be adjusted up, never down.

2. If our stop is hit and the market or whatever system we’re using is not giving us a good reason to stay in, we get out. We can always get back in later.

3. When in doubt stay out. If one is not sure about getting into a position it is often a good idea to wait for a few days. I find that if I’m not sure about a position in most cases things become much clearer within a few days. So what if I miss the beginning of a move I can still hop on and catch the ride up and will likely feel much more comfortable and confident in doing so if one of my signals, indicators or some other criteria is met.

4. If there’s a panic driven sell off decide what’s best in your situation.

5. Don’t let your ego get in the way of your success, when it’s time to bail, IT’S TIME TO BAIL! This is the hardest one to overcome and the one we violate the most saying to ourselves we will hold on just a little longer and see what happens, then we repeat this cycle until we are in too deep. Remember we can always get back in when things begin moving our way.

6. Review the table above again to see how much you have to gain just to break even if in a losing position.

7. Don’t be married to a position. By that I mean don’t feel like since you got in to a position you must be right so you will stick with it. If you are wrong getting out sooner is always better than waiting for a larger loss.I find that in more cases than not in my trades when I enter a position the trades that turn out to be successful start out successfully. If they’re not moving in the right direction within a few days I review my reasoning for taking them to see if it is still valid and determine if I really want to hold on or back out.

In summary; it doesn’t matter what strategy or system we are using, none, no dare I say not even mine will be right 100% of the time so we have to be ready to act when positions move against us. We have the tools at our disposal to avoid significant losses. The challenge is sidestepping our ego and employing them. Determining a plan and sticking to it, not being swayed by “market noise” all of the news out there. It tends to add to indecision and sway us in to not selling when we should.

Cut your losses short and let your profits run!

optionman

 

[Steadygain]

Re: Weekly Update

Sentiment continues to deteriorate, momentum has shifted to bearish, several SPX support levels have been taken out and IMO we will likely see more downward pressure. There is a potential for an upward bounce at the beginning of next week, but if we get one it will likely be short lived and then SPX will continue to take out lower support levels and establish a new down trend. If a new down trend begins as expected, a strong capitulation may lead to a panic driven sell off that could drive the markets lower and faster than anyone believes it can. In any case, I expect to see lower lows before we begin seeing higher highs and believe we will see this year’s lows taken out soon, perhaps in a few weeks.

Note: For those not familiar with technical analysis markets fall much faster than they rise

This is very impressive!!

I believe you have a very good insight and feel for the Markets.

Your stuff is definately a "must read"

Thanks my friend, very cool indeed

 

[Gumby]

optionman
Some say well I’m down this far might as well ride it out. I’ve talked to folks who lost half or more of their nest egg by being advised to “ride it out” during the last bear market. Look at the table above again they had to gain 100% + just to break even.



I have been telling my co-workers for years that if you wait to long....your toast. Very good analysis. WOW...that 90% loss looks applicable to Bear Sterns. The big boys in Bear probably came out OK but the working stiffs got buried in a pile of governemnt sanctioned excrement.

 

[ripper]

One of the best posts I've read on here...very informative, enlightening and remindful. Thanks, O-man.

 

[luv2read]

worth rep points too!

 

[airlift]

You are very articulate. This post embodies the essence of intelligent investing and trading. Thank you for the excellent advice!

 

[nasa1974]

Re: Stop Losses & Egos

I would like to share a couple ideas on how to limit losses in our TSP accounts with those who may not be familiar with them. Most of the “old hands” will know this but it will be a good refresher. The two ideas not new but should be reviewed occasionally. They are stop losses and ego.

Stop Loss:

A stop loss more commonly referred to a “stop” refers to a predetermined point that you will not let your position go below or above if short, a point where you will get out of a losing position. Most professional traders know their stops before they get into a position and surprisingly most use 2% or less of their account value. But the one thing they do is determine and stick to their stops and that’s what we should strive to do. In the TSP case the best one can do is to determine their stop and if it is hit do an IFT.

There are several ways to determine stops. You can approach this like the professionals and use 2% or less as a stop. You can also use chart support or resistance points, moving averages etc. as your stop point, this may not be 2% or less but at least it is a reference that you determined before you got into the position. I tend to try and combine the 2 by using both the 2% or less and also look for a good support or resistance point on a daily chart as a potential stop when in stock funds or the bond fund.

Some say well I’m down this far might as well ride it out. I’ve talked to folks who lost half or more of their nest egg by being advised to “ride it out” during the last bear market. Look at the table above again they had to gain 100% + just to break even.

I say No Way! not me. I would rather take small losses even if I take a few together until I hop on a good run which will eventually happen and I’ll have much more than if I had “let it ride”.

Panic driven sell offs. I’ll spend just a minute on panic driven sell offs. These happen occasionally (I was in stock funds in the most recent one (see post #40 on this thread). Panic driven sell offs could actually happen to a larger degree with the up-tick rule eliminated (see post # 67 on this thread for more on the up-tick rule). In any case when there’s a panic driven sell off and I’m in a position I will normally wait for the dust to settle and the panic to blow over before backing out of a position. I find that generally if I need to get out of a position it’s best to let the panic driven sell off run its course, then look to get out on strength or what’s known in trading jargon as a “dead cat bounce” after words. This is always a difficult decision and the circumstances around each one have to be weighed to determine the best course of action, but for me I will generally hold rather than become a part of the panic.

Ego: Keeping our ego in check:

It’s human nature to hate to be wrong. Let’s face it, nobody likes to be wrong. We hate it so much so that we often do just the opposite of what we should be doing especially when it comes to trading. By that I mean we will let our losses run and take our profits too quickly when we should be doing just the opposite. Successful trading requires you to admit you are wrong and bail out of a position before it moves too far against you. Dare I say that to win, we first must learn to lose, to admit we were wrong and move on. Even professional traders are wrong occasionally and have to bail out of their positions, the difference between us and them is they know they have to get out of a position, not doing so could cost them their job and that’s the way we need to approach this. We work hard and sacrifice things we could have now so we will have a nest egg for our golden years so we must attempt to do our best to reverse what we’ve been doing and cut our losses short and letting our winners ride.

Key points:

1. Determine a stop before placing an IFT. Stops can only be adjusted in the direction of the trade. In the TSP case, once established the stop can only be adjusted up, never down.

2. If our stop is hit and the market or whatever system we’re using is not giving us a good reason to stay in, we get out. We can always get back in later.

3. When in doubt stay out. If one is not sure about getting into a position it is often a good idea to wait for a few days. I find that if I’m not sure about a position in most cases things become much clearer within a few days. So what if I miss the beginning of a move I can still hop on and catch the ride up and will likely feel much more comfortable and confident in doing so if one of my signals, indicators or some other criteria is met.

4. If there’s a panic driven sell off decide what’s best in your situation.

5. Don’t let your ego get in the way of your success, when it’s time to bail, IT’S TIME TO BAIL! This is the hardest one to overcome and the one we violate the most saying to ourselves we will hold on just a little longer and see what happens, then we repeat this cycle until we are in too deep. Remember we can always get back in when things begin moving our way.

6. Review the table above again to see how much you have to gain just to break even if in a losing position.

7. Don’t be married to a position. By that I mean don’t feel like since you got in to a position you must be right so you will stick with it. If you are wrong getting out sooner is always better than waiting for a larger loss.I find that in more cases than not in my trades when I enter a position the trades that turn out to be successful start out successfully. If they’re not moving in the right direction within a few days I review my reasoning for taking them to see if it is still valid and determine if I really want to hold on or back out.

In summary; it doesn’t matter what strategy or system we are using, none, no dare I say not even mine will be right 100% of the time so we have to be ready to act when positions move against us. We have the tools at our disposal to avoid significant losses. The challenge is sidestepping our ego and employing them. Determining a plan and sticking to it, not being swayed by “market noise” all of the news out there. It tends to add to indecision and sway us in to not selling when we should.

Cut your losses short and let your profits run!

optionman

WOW!!!

I hate to waste space by quoting most of optionman, but the man is right. Very wise. Very wise.

EGO is the enemy.

In 2007 I was doing very well and EGO got the best of me. By July 9th I was 11.94% YTD and on cloud 9. I told myself go into G and wait. But I got greedy. The market if everyone remembers went sour. But I kept thinking that it would get better. If I had optionmans wisdom I would have bailed into G by mid July. But NNOOOOOO!! :embarrest: :embarrest: I tried to ride it out hoping it would get better. By mid August I was 0.58% YTD. I was stupid and lost 11% in a month. It has taken me almost a year and I have almost gotten to where I was in July of 2007. Listen to the master. I bow to your wisdom.

Everybody on this MB should see optionmans post and mine.

 

[Guest2]

If I had this kind of info back in 1990, I'd be financially ready to retire
after 20 years. Listen up youngsters, there's bear in them there hills !
What great contributions you've both made. Hope the rookies get the
message and use it as one of their golden rulez.

"They may have time to recover, but recovery takes up alot of time"
(I just made that up, not bad for a squalebear) :nuts:

 

[nasa1974]

"They may have time to recover, but recovery takes up alot of time"
(I just made that up, not bad for a squalebear) :nuts:

LOL SB you're too much.

 

[optionman]

Mid Week Update

Monday: Memorial Day and the US Markets were closed.

Tuesday: We saw a bit of a bounce as expected and the media outlets were saying it was because oil prices were falling. I don’t believe it will hold. I’m actually growing more bearish now than I have been for a while and expect a significant drop in the market and soon even if oil continues to fall.

Wednesday: A bit more of a bounce up today and now we are up against the resistance points I expect to the markets to retreat from despite what oil does.

Do you believe the markets will rise when oil falls? The pundits would have us believe it will, but let’s step back and take a look at a few things. First energy represents 12.86% of the SPX so if oil falls there’s a stronger probability the SPX will fall than rise (at first we will likely see a knee jerk reaction pushing the market up, but that will be short lived). Do you believe that Walmart and Costco recently beating their earnings estimate shows signs of a potential recovery? I read it as an additional indicator that we are in more trouble than we want to admit. To me it suggests those who use to shop at Nordstroms, the GAP, Eagle etc. are being squeezed by the rising oil to the point they are now shopping at the big box discount stores because they can no longer afford to shop at the higher end stores. Then there’s is the credit crunch and housing problems that are beginning to resurface with the glut of unsold homes rising, prices dropping and foreclosures rising. Makes me wonder if BA will say hey Countrywide forget it we are dropping our bid to buy you since the hemorrhaging continues and doesn’t seem to be letting up.

Here’s an interesting excerpt from Gene Inger’s Daily Brief for Tuesday May 27, 2008 published on decisionpoint.com

“I suspect you should assume that a portion of the oil rush, rather than being attributed simply to speculation, includes the recognition of brokers having to buy actual oil just to underpin the Call buyers; which causes (as has been noted) them to be viewed as 'commercial' rather than trading contracts. It's pertinent because it's not real energy demand, but 'demand in drag' so to speak; and will vanish when contracts expire. At this point the majority of oil commentaries 'think' actual demand is that strong; it isn't, but appears that way due to the strategy just mentioned and the holder classification.”

Futures at this point are not deep in the red and may not get deep in the red today, but keep in mind the last few times they were prior to the market open the FED stepped in and saved the day. We could soon see a day when they are deep in the red prior to the market open and the fed not have a rabbit to pull out of its hat, then the market would have to fend for itself which would likely lead to a significant sell off.

My stock fund signal remains on a sell
My bond fund signal remains on a sell

I remain 100% G fund expecting this downward move to continue in both stocks and bonds. I expect momentum to pick up and drive the stock market down far and fast soon taking out the lows made earlier this year.

For the reasons mentioned above and my technical analysis I continue to grow more bearish on the stock market. This is not meant to alarm you, it’s just my opinion based on my market analysis and I certainly could be wrong, but will remain bearish until proven so.

I’ll check in again this weekend with a follow on to my Stop Loss article posted last weekend.

Trade well!

optionman

 

[DrFaustus]

Amen, Bro!

I've said much the same thing to anyone who will listen: DONT GET GREEDY. **Every** time I have decided to try to get just a little bit more, I have regretted it.

I like what you said about using the stop-loss. I have been sort of following this idea but not in any codified fashion. Paid for it in April 08 (I should have stayed in the USMs) but oh well, live and learn (again).

Dan