Tuesday, 30 September 2014

I've made a mistake...

Looks like I made a mistake in my analysis on BBRY. I let myself get carried away by the hopes that many were placing on it and misread the direction of the trend. Which was/is actually going sideways right now. My own earlier analysis didn't show BBRY hitting $15 until after January. But I got greedy and let myself get caught up in the flow of people pumping the stock up and thought it would go up to $15 after this last ER. As such, I had bought too many contracts at a price target that it likely won't hit and killed off my capital.

Since I didn't mind losing the money I had invested to begin with, I am going to continue to hold them and sell them off between the 8th of October and the 10th of October. Chances are, I'll be taking a heavy loss though. Of course if the price doesn't stay above $10 per share, I will be losing ALL my investment.

I think I will add a new rule. Once I've set my position and the time frame for it, keep it unless I lose a certain % of it. Going to set that % loss to 15%...of the options contracts I buy.

Thursday, 25 September 2014

Breaking my rules

I know I said I would follow my rules and had set my exit point in BBRY to be $10 a share. But I will be breaking it at this point. The Earnings Report is tomorrow and due to the market sentiment on Blackberry out there, there have been two analysts who downgraded their rating. I feel that the drop in price is partially due to the downgrade that people seem to refuse to read or think about carefully. Another part are people hedging their positions on the short side if the ER is bad. And a third part is that the market as a whole was down today. So due to the many contributing factors based on empty news, the price of BBRY dropped just a bit below my $10 exit point.

I decided that since my analysis said that the price will go up after this ER, which information tells me will be a positive one, that I will wait until the ER tomorrow at 8:00 am before taking any set action. Because if the ER is negative like people shorting the stock think, it will be better for me to switch sides and jump onto the short side to make a profit.

I have a feeling that I will be learning a valuable lesson here. I get the feeling that people only read part of what happens and then act without understanding the action fully. In my eyes, if an analyst had given a stock a Buy rating when it was trading at $8-9 a share and has a price target of $11.50 and then changes it to Market Perform when it's trading close to $11 a share, it simply means that the stock is performing as the analyst thinks it should. Unfortunately, people tend to be lazy when reading and react only to the word "downgrade" and sell their position too early. I can't really blame them based on Blackberry's past performance. But doing it this close to the earnings report I think is folly. But I guess I'll see tomorrow how things stand with the company.

Monday, 22 September 2014

Putting my eggs in one basket

While scanning my portfolio, I noticed that HLF had gone down further in share price. But I only had 5 contracts in them and the profit for the risk wasn't scaling and couldn't scale to other potentials out there. Such as BBRY, which has the potential to easily double or triple my investment. So I sold my contracts in HLF, which I think is going to continue its downtrend and decided to buy more contracts in BBRY. I have added 120 more contracts to my existing 300 contracts with the exit point still being set at $10 a share.

I do understand that this is a very large gamble I am taking but based on the possible reward for the amount of risk as well as my analysis which puts the company heading up in the nearby future, I decided to take this risk.

Wednesday, 17 September 2014

Updating exit points for my positions

Things are looking to be going my way but I've decided to move my exit point to reduce my losses.

BBRY's exit point is being moved up to $10 a share. If it goes below that, take the loss and exit the position.

HLF's exit point is being moved down to $46.50 a share. If it goes above that mark, take the loss and sell the contracts.

I don't expect them to break through these unless BBRY fails to meet analyst expectations with their next ER and HLF actually beats analyst expectations. We'll see in a month or so.

My Trading rules (work in progress)

I've come to understand that I'm more of a trader than an investor now. To be more specific, I seem to fall under the classification of swing trader. I tend to hold my trades for 1-3 months at a time usually. Sometimes I might open positions for a year but doesn't necessarily mean I'll keep it there for that long. With that in mind, here's a list of rules that I try my best to abide by.

1. Cut losses short and let winners run. Meaning if the stock drops more than a certain % (varies depending on stock itself), sell it. But if the stock is on its way up and you're already in a good position, let it keep going up instead of taking profits early.

2. Be very careful if things are working out too well. You don't want to get complacent and make mistakes in your analysis. It's best to be more careful if things are going too well your way.

3. Keep an open mind and listen to both bullish and bearish views. There might be information that can be a game changer to your position.

4. Set an exit point before you enter your position. That way if things don't work out the way your analysis says, you'll still be able to protect your losses. Don't set it too high/too low either. At most, leave a 25% leeway for volatile and/or cheaper stocks but try and keep it at or below 10% when possible.

5. If you're scared to sell when things are going your way but the market is looking unstable, get out of the market. Better safe than sorry.

6. If you're making a lot of mistakes in your analysis, take some time off. Better to clear your mind and free yourself of possible biases that might have lodged in the head.

7. Make sure to write down your reasoning for each trade you make. This will allow for analysis later and reduce future mistakes. It can also open up possibility for refining your trading system.

8. If you're uncertain of how a stock is going to perform, don't buy it. If you've already bought it, sell it and wait till you have a better grasp on its direction.

This rule is a work in progress for options trading:

9. Limit the amount of contracts traded to 100 each. It's ok to buy options of the same stock but spread it out between different expiry dates and/or strike prices. Unless the open interest for it is high.

That's all for now.

Tuesday, 16 September 2014

Small change, big gamble

Decided to make some small changes in my portfolio. Sold my existing position in Blackberry of the $9 strike call options and the $10 strike options I had. Instead, I took them and used all profits to take a gamble and bought 300 contracts for $12 strike, set to expire on the 18th of next month. It's a risk but the risk to reward is one I like, so I decided to go with it. It's in line with my own analysis of the direction that Blackberry is headed in anyway. Here's to hoping it hits $15 a share after the ER.

This is considered to be a big gamble since I'm putting most of my portfolio in one place. If the market crashes or something happens to BBRY, I have to be ready to get out quickly though. 

Current holdings:
Call options in BBRY
Put options in HLF

Friday, 5 September 2014

Short term long with BBRY

I decided to take some contracts for a long call with BBRY with the cash position I had. Expiry date is set for October 10th with the strike price at $10. I took 33 contracts as I strongly believe that they will slowly go up enough by then to make this into a profit for me. Their base fundamentals are now better than touted by the media, which suggests that there is some nice information arbitrage due to the stubbornness of US media. I mean...their fundamentals are posted on several sites already including BBRY's own website. I'm betting about 25% of my portfolio on this as I think it's a strong buy.

Thursday, 4 September 2014

Took an exit on two of my positions

I took my exit in FOLD (Amicus Therapeutics, Inc.) and GTAT (GT Advanced Technologies, Inc.). For both, I followed the rules I set before. With FOLD, I took the exit position a bit too early. But wasn't really certain of its direction at the time and took the exit. I don't really see it going up much higher either. Might get back into it after a bit more due diligence. I'm hoping IBD will have some info on it that I don't have access to. Because after a little bit of DD, I've come to realize that it might have been a mistake to exit on it. I should probably have added more to my position if I can.

As for GTAT, it went below the exit point. So I followed my rule and took the loss. I could've took the exit earlier when it was still closer to my exit point but I waited thinking it might go back up due to AAPL going back up. Learned and reinforced a couple of valuable lessons from this. Even if two companies have some kind of relation, their share prices might not necessarily go up together or even at the same rate. Because they're essentially two different companies. The other lesson is that if I set an exit point, follow it and get out of the position as soon as the SP goes below/above that exit point. Because I hesitated and let my hope get in the way, I lost a bit more than I should have. At least I didn't lose all of it so now I can recoup my losses by putting this money elsewhere.

And that brings up the next question...where to put the cash I have after exiting the positions. I can get back into FOLD for a short-term position again. Or I can put it into BBRY and double up my position in it. Or even take another sort position by shorting AAPL and see where that goes. That's a bit of a gamble though as it might be better to take another short-term long position in AAPL instead. Not sure if I can afford too many contracts for it though. We shall see~