May 9 Weekend Review

Bflakaz Weekend Review

May 9, 2014

Recap of Previous Week's Trades

• GMCR +100 shares @ 90.25 (SHOULD HAVE HELD IT), out @ 93, profit = $275
• IBB -50 shares @ 234.38, covered 222.50, profit = $494
• GMCR -85 shares @ 95.38, covered 90.53, profit = $412.25
• TSLA -1 195/190 MAY14 put spread @ 3.95, covered 4.00, loss = -$5
• IWM -75 shares @ 111.20, now 110.03, profit (unrealized) = $87.75
• QQQ -85 shares @ 87.54, now 86.80, profit (unrealized) = $62.90

Management of Current Positions

IWM

The short thesis for IWM (Russel 2000 tracker ETF) was that the index is significantly overvalued and is do for a serious correction. Word got out that IWM was approaching the 200MA, which it had not closed below since late 2012. For this reason, it has seen strong support at the 200MA several times in the past month, but has closed below it 4/5 days this week. I've been short since Tuesday and plan to stay short next week unless my stops are hit at 111.50, or if IWM reaches the “V reversal” point at 107 from February, which was caused by short term overselling due to the Ukraine ordeal. That said, Friday's action was a little unexpected, closing at the highs of the day but not quite hitting the 200MA. I'm a tad worried for early next week based on that, but hopefully I can stand my ground.

QQQ

The short thesis for QQQ is similar to that of IWM in that the tech bubble is popping and momos are crashing. Well, they already crashed. Look at TWTR... Jesus. Are the momos finding a bottom? Perhaps. If that's the case I already have a strategy planned. For now I remain short QQQ and will not cover until a close significantly above some good resistance at 88 or if it hits my target of 84. QQQ has some moving average convergence happening, which usually isn't a good sign.

Trade Setups for the Upcoming Week

Watching my shorts and for a bottom in momos. 30-60 day long call/short put spreads (depending on IV percentiles) is the planned strategy. Probably won't make a move on TWTR though, don't catch falling knives! More like AMZN, NFLX, FB, etc.

Some Side Notes

Get shorty, stay shorty. Those short plays I had from way, way back in March could have been EXTREMELY profitable had I stayed with the trend. Hindsight 20/20. I'm talking tens of thousands. Oh well.

As for the hot streak ending, it really hasn't. Earnings plays are essentially coin tosses, but with 66/33 odds instead of 50/50 if you do it right. Luck was not on my side, I guess, with TSLA. And I only lost $5 because IV got absolutely hammered the morning after TSLA's earnings. The real trial of the hot streak comes next week... hopefully my QQQ and IWM shorts don't blow up in my face with a huge gap up! But, as I've said before, it's not about being right or wrong, it's about how you manage being right or wrong.

Honestly, I need more work on managing winners rather than losers. I've been too quick to take profits, when, if I had maintained the position, I would have had much greater gains. If I had held my +100 shares of GMCR from Monday to today, I would have made $1809. But this has been a volatile market, and even though I've been “taking profits early,” I'm up better than 50% ROC, and 22% ROI, just since I started this log. In this industry, all you get is a pat on the back for that. It's only been a little over a month... will I hang on to those gains, those returns? Who knows, but I'm confidant that I will perform better as time goes on and as I learn more.

In addition, in future posts, I may nor may not post nominal gains. The point of this log is to, well, LOG (haha) my thoughts, not “show off” how much money I've been making, which I personally don't think I'm doing. Point is, if anyone reads this (doubtful), I don't them to think that it's about making money. It's about a journey; the successes, failures, mistakes, etc.  Therefore, here's a snapshot of the spreadsheet since March 22.

Note that ROC considers a growing capital pool, not calculated based on starting capital. It is also worth noting that equities have substantially less risk than options, so when viewing the ROI vs Cap. Used as % of Total and going "holy smoke! options rule!," consider that. Additionally, all my equity trades are done on 50% margin.