Change in plan... or a return to the original

I've been busy the last days so I have not blogged much, not too much to blog about anyway.

I was trading the Q's on the side last time around but I sent an email to our trading room mod and suggested that we consider doing this in the room for some easy trades when not much else is happening with stocks and other ETFs. Within a day or two that is exactly what we started to do so I decided to drop my personal trading, it didn't make sense to keep going with it.

We've been trading for very small targets lately which puts me at a disadvantage given my slightly higher commissions. Having said that there are enough changes and orders that do not get filled that moving to another broker would end up costing about the same anyway until I get to much larger trading sizes. So I am in a holding pattern with regards to brokers and seeing small profits in my account. Of 14 trading days in July 5 have been losing days and 8 winning. I am up but not by much more than about $600.

I have been using a formula to calculate expectancy ratios without figuring in the commissions in order to continue to track the potential of our trading. What I will also be doing is running the numbers without commissions altogether in order to get a better idea of the win loss ratios in order to determine. I was going to change my spreadsheets to let the trades reflect this per trade but I am better to just set a field to display the gross numbers either per day or per month.

The issue with the smaller commissions is not a real factor if I were trading with larger positions though. Some traders are posting profits in excess of the $500 target while I may have seen $100. Obviously they may be getting smaller commission, not counting commissions or over stating their numbers altogether. I do not want to gauge my progress against others though. I will grow the account at my pace and that is the way it will go.

Of course I couldn't help but check to see how much larger of trades I would have to make in order to see similar gains to some of those higher numbers. I would have to be trading 4 times my current sizing. I have intentionally dropped my size in order to allow for a few more concurrent trades in my account as we have a good number of trades held for swing trading now that sucks up my cash. Right now, had I my full trading capital I could run 27 trades at my current sizing. Doubling my sizing would put me at 13 trades, which is about where I would want to be.

I'll be glad when we close out those swings.... for some profits.

Jeff.

QQQQ with chart

No real tracking for yesterday, just didn't take the time.

Today I tracked the next week expiry puts (Jul 30) for the QQQQs and noted how their price reacted to the various time and ETF price factors given that today was a Friday... expected range bound day for a number of reasons.

I took one trade and tracked it until after lunch and notice one large factor that affected my decisions to stay in the trade. I bought the 45 strike puts for 41 cents as the price of QQQQ neared the Primary Pivot Point expecting a move down from that level. I should have been more observant of the moves thereafter while keeping in mind that I expected a range bound day, basically a lot of small up and down moves.

Here is the chart for the day with the correct trades marked.

I held the trade through the down, the next up and even through the third test of the high of day at $45.80. I closed the trade just as I saw the price get ready to kick up past the final test of HOD at about 1350h. My exit timing was good to minimize the loss... considering that I was still in the trade.

The interesting part is that the option price kept eroding away over the course of the day. I bought at 41 cents and each time the ETF price approached the same price level as where I bought I noticed that the option price had not regained the entire 41 cents. At one point it would only see 38 cents. This tells me that, like leveraged ETFs held over more than one directional move, the options have some similar reaction... even if it is for a completely different reason. This changes slightly how I will look at these options in future.

So, looking at the chart I plotted the trades that I should have made based on the numbers that I saw while I was holding this one lethargic trade over the day. The puts were the 45 strike and the calls were the 46 strike. These gave me low priced options in the 50 cent area.

Trade # 1 was in at 0.40 and out at 0.47, 12 contracts at 0.07 = $84

Trade #2 was in at 0.37 and out at 0.50, 13 contracts at 0.13 = $169

Trade # 3 was in at 0.35 and out at 0.47, 14 contracts at 0.12 = $168

Trade # 4 was in at 0.36 and out at 0.59, 13 contracts at 0.23 = $299

Less #133.60 in commissions leaves $586.40 in profits based on a $500 startup amount.

This style of playing is right in line with my old Counter Trend Positioning style of trading on a much shorter time frame. What I was missing was the confidence to go ahead and exit the trades when I saw the small profits and re-enter the opposite trade and again capturing smallish profits. The thing is that these small profits add up really quick as I would have doubled my $500 in one day and I have to realize that taking a 7 cent gain is not a bad thing... it just sounds to small to take at the time.

Jeff.

QQQQ index trade Jul 21 completion

Update for the day.

Trade - QQQQ Jul 23 Put 46 strike at 57 cents, 9 contracts

Exit based on neutral day with 1/2 PP stop target = 83 cents, $234 profit

Exit based on 100% profit target reached = $1.14, $513 profit

Exit based on trailing stops using 1/2 PP stops = $1.27, $630

Exit based on near EOD activity = $1.30ish, $657

Jeff.

QQQQ index trade working out well

Today was to be a neutral day after yesterday's large uptrend intra-day so I decided to track and not trade my newish QQQQ index trade plans... which is too bad. At least my plan is viable and that is the main thing.

Seeing as the market displayed a modest gap up from yesterday's close I would play the gap fade at the open to buy puts and consider a bounce to positive to buy calls if everything looked good... the calls would be a pure speculative thing and would have no real reason to play them though.

I jotted down the entry at the open for the Jul 23, 46 puts at 57 cents (the ask). Being that it was a neutral I would target the next PP level. Opening at $45.75 with R1 at $45.72 and 1/2 R1 at $45.26, that would be my target.

Once the QQQQ hit $45.26 the puts were at 83 cents for a profit of 26 cents based on 9 contracts. $234 in profits.

Not bad for a little hit and run. I am still tracking the price to see what my other plans would have produced and I am considering scaling out of positions using various techniques rather than using an all or nothing approach. ie: First half closed at first PP target, second run for trailing stops... I may have to double my trade size to make this worthwhile so I may skip it and stick with the profits (losses) based on my plans in the all or nothing fashion.

Jeff.

QQQQ index trading, charting

I miss playing with the charts to figure out trades and back testing and whatnot, so I like getting back into this again. It let's me do my own thing.



This morning I had not really formulated all of the rules and plans for trade management nor had I really thought the whole thing through. Seeing as the older option pricing is not as easy to sift as a stock I could not really work out the full potential of some variances of the trades.

In the above chart I entered the short trade, in hindsight I know why but I do not know why I did not enter the long trade instead or as well. I saw the setup, the huge gap (don't trade against a large gap...DUH!) and should have gone long where indicated. I know I certainly thought about it but I was stuck in my one trade mindset this morning.

I bought a put (July 23, 44 put) for 50 cents and held it for a 10 cent stop loss. Once the price hit the low of day the first time I recognized that it was a prime entry for a long call being that it was not only at a support level but it was immediately following a large gap down. If I had a choice to play a gap I would choose to always play it to fade the gap. I think I was sidetracked with other trading today and that is partly why I was not on the ball.

So a 10 contract trade at a 10 cent loss leaves a $100 loss.

The long trade was also 50 cents (July 23, 44 call) a few minutes earlier. I should have sold the put for a profit (9 cents or $90 dollars) and bought the call.

Following my various plans would have me exiting the call trade at 67 cents for a 17 cent profit (I marked it down when I saw it as if trading it, not just backtesting). With the 10 contract tradee that was $170.

Using the trailing stop or EOD produced the same result as it was a great uptrending day, exit was $1.35 or an 85 cent profit, $850.

So, entering the put trade at teh ideal time and entering the call trade at it's ideal time would have me netting $750, not bad for an indecisive trade after taking both sides. I would expect that there would be times where the day whipsaws me out of both trades for a loss but it would take a lot of that to eliminate these sorts of gains. I almost exited the put trade, had I had more confidence in my trade plan (newly formulating) I would have exited and bought the call. Each time that I take a profit decreases the odds of ending on a down day. Had I actually done that today I could have easily netted over $900.

Should have, would have, could have means nothing in trading other than to teach a lesson or enlighten on a tweak to a system.

Jeff.

Index trading needs some work, the plans.

I could not sit by and not place a trade on my index trading idea. I always find that putting money on the line keeps my attention to the matter at hand better than just sort of watching it. This prompted me to recall an old idea I had in taking two sides of a position in order to capture an overall move, sort of a stopped hedge idea.

I'll get to that later, or it may just be plainly obvious in a moment, or the next post anyway.

The overall idea is to trade calls or puts on the ETF using the price activity to trade with the trend and daily bias for the day using the Pivot Point (PP) and Support and Resistance levels (S1,2,3 and R1,2,3) for entry determination. I figure that using the PP would be the best but the other levels may be suitable under certain circumstances.... today for example.

Any further planning is really just guidelines to use to manage the position once entered.

Plan ONE is to use the very next PP or Support or Resistance level as a target to exit the option trade. Quick in, quick out and quick profits. Use for neutral or light days.

Plan TWO is to use the Support and Resistance levels as stops, once the price of the underlying index ETF (QQQQ in this case) passes each level the one immediately preceding is then the new stop... or move the stop as if a VTSO based on the space between the levels. Use for more heavily biased days or when the stock price takes off and allows early stop setting in profit.

Plan THREE is to enter initially and close near the End Of Day (EOD) in order to take advantage of large intraday trending moves. Sort of the default ini the case where nothing else gets hit and I want to exit to be in cash overnight... no holding these overnight.

Plan FOUR is to set a target of 100% profits. Based on the initial price of the stock I would set a limit exit at 100% of the option price no matter what the stock is doing. This is not so much a total plan as an add on to the exiting ones as I might just use this point as a stop order to secure the 100% gains and perhaps let the price run with a true VTSO (if I can do those on options...I've forgotten now). I might also consider this as a default as perhaps I should be happy with 100% gains and just get out to be out at this point every single time.

In all cases the stop loss will be set to exit the trade if the stock hits the next PP, Support or Resistance level in the wrong direction... that might be 10 cents on the option or so.

Also, I will ALWAYS use the front month (very next expiry series of options) and very close to the money. The QQQQs run $1 strikes so this is very easy.

Jeff.

Expanding on the index trading just a little bit

I decided to take a few minutes and go back to last week and do some math to support the idea of option trading the the QQQQ based on the daily bias.

The price opened on the primary pivot point and headed steeply down.

Trading the stock would have produced about 70 cents per share, $70 on my 100 share trade while trailing the stop at 1/2 PPs and a full $1 near EOD closing.

Going back to the options and trading strictly the next option expiry is a lot different.

The July 23 44 puts traded at 0930h at 20 cents... so I figure that a market order at the open might have cost 25 cents (I cannot see the quotes, just the actual traded options). A 25 cent option with $500 to trade with is a 20 contract trade. The first exit has the option selling at 40 cents and the EOD exit lowest was 47 cents.

Compared to the $70 and $100 stock trade profits these profits are in the neighbourhood of $300 and $440. Even if I flubbed the trades and only snatched half of the move with options I still make 50% more on the smaller trade than nailing the stock trade on the high side.

Thursday was a $240 day.

I am sure that day one will be either mediocre or a loss but I will get this going and figure out what an acceptable loss per trade might be and see how it runs long term.

Jeff.

Room to play the Q's, more on the index trading.

Well, deciding not to play with the momentum stuff for now led me to play with something else.... I just cannot help it.

Last week I posted about a plan to trade the QQQQ (NASDAQ ETF) based on our trading room daily bias estimate (bearish, neutral, bullish with various degrees). I recall playing it as if I traded the stock, mainly due to the historical option prices being more complicated to gather for profit targets and the profit came to something like $1,250 for a couple of recent weeks trading.

Today I started with this in mind but I tracked both the stock and option prices. Although the day is not over I hit one of my target exit points, the first level resistance below the primary pivot point. Being that it was a neutral expectation today I would do a profit hit and run rather than holding for larger gains, one half of the first resistance was my target.

Playing the ETF when I saw the entry would have me short at $44.70 (probably higher as it was higher when I "thought" the trade should go but I like to fudge against me). Exit would have been at $44.30, the 1/2 resistance was $44.32, for a 40 cents per share gain.

Here is where my stock trading idea falls apart. In order to make this trade worth the bother I would have to be trading a few hundred shares at least. I know I said that 300 shares would tie up an acceptable amount of cash but this is over $4,000. I also know that the stop would be in the under $100 range, but for my trading purposes I would rather be using less cash, $1,500 might be my max which leaves me with a 100 share trade and a $40 profits. That is just not worth taking my attention away from my other trading.

So I tracked the option activity and pricing. Options are much cheaper so I figured I could spare $500 or so to play and see what I could scare up.

I would trade the front month or the next expiry period. With the QQQQ options there were July 23rd options in addition to the July 18th. I tracked the Aug 21st as well.

July 44 puts cost 37 cents when the ETF price neared the $44.70 entry, this is also fudged against me. August were at $1.08.

At exit target July were at 47 cents and August were at $1.26.

These are all market orders so I count as if I were paying worst price at the times, buy the ask, sell the bid.

Profits would be $240 for 15 July contracts and $90 for 5 August contracts and both trades used less than $600 in cash.

Well, this looks to be far more lucrative than the stock play at this point and it is just extra cash in my account to use for other trading... or maybe this can be my play money stash. Doing a bit of a back check I see that the market more often tracks with the bias laid out in the morning so I should be able to establish a pretty good edge for this idea.

Although today was a virtual trade but I think I may follow it up with some live trading over the course of the week... or at least into next week. It only takes an extra click to buy and one to sell when I have these setup properly.

Oh, I have two other target exits that I am playing with. Exit 2 will use a trailing stop using the 1/2 pivot points and the other will use a near end of day exit to see if, on extremely bearish or bullish days, I can capture some large moves.

More fun and games to add to the mix.

Jeff.

Daytrading only for now

I decided to stick solely with daytrading for the time being as it is less sensitive to market moves as generally trades don't get held much past a few overnight or for a few days, normally. This lets me focus on one style and set of trades, although I will keep my trend trades as they take nothing to hold.

I will be trading with cash as if it were still the same account that I was using, which means working with the original $6,700 base plus all of the strictly daytrading profits. This lets me bump trades up to $1,200 per trade based on 60% account usage with 7 concurrent trades... which seems to be the maximum target number right now.

Part of my decision has to do with perhaps taking some more holidays and perhaps being out of touch again. It is easier to just close some daytrades than to close longer term trades, particularly when they may be deeper in the red due to fluctuations in the underlying stock...even if it is expected.

I also decided to drop the momentum stats on my main page seeing as those profits are, basically, at zero now. I'll start it back up later.

Jeff.

Interesting index trading idea

I get an update prior to the market opening that outlines the trading room expectation of the market direction, bearish and bullish with a degree level. Seeing as I have extra capital (20% minimum) to play with outside of cash set aside for trades... assuming that I do the full number of trades anyway... I can place typical stock trades using margin to leverage 3 to 1.

So a bearish outlook in conjunction with various pivot point levels (old school day trading stuff) could easily have me buy or short the QQQQ ETF (Nasdaq representation). I plotted the daily ATR based on a 10 day moving average which has been higher than 48 cents for the last couple of years. In fact the low of the last few months has been 88 cents. This is an acceptable move when applying a tight stop as any gain of even 5 cents can produce at least a break even trade.

So, a bearish day would have me shorting the stock if it nears the daily pivot point...although this strategy I have yet to work out... or buy the stock on a bullish day on the topside of the pivot. This is a single day trade setup per day and it either works or it does not. perhaps a 20 cent stop on a 200 - 300 share trade ($60 MLA).

I figure that a 20 cent VTSO off the start followed by some more trade management once it starts to move (using pivot points and support and resistance levels as stops and targets) in order to hold the trade for as long as possible with the goal of getting at last to break even as quick as possible. This is not my primary trade plan so it is allowed to cut a trade quickly for small profits as the entire goal is to see if I can catch more longer intra day moves based on the forecast than I lose on... without affecting other trades. I can even enter trades pre-market if I think it will work out well.

This will be the start of my stock trading in place of options. Even though this is not part of the day trading plan I like the idea. 200-300 share trades at this point are only going to take about $3500 with a $60 loss allowance.

Seeing as we have had many days where a bearish (or bullish) day was expected and all of our option picks ran away without us this gives me the opportunity to take advantage of the overall move without undue risk. It also sets me up for stock trading practice with the different available order types in the Elite platform now.

Examples of gains from this would be:

Friday = 70 cents (all 250 shares based on the startup cash float...this can grow each day if wanted)

Thursday = 40 cents

(Holidays for one week)

July 2 = 40 cents

July 1 = 75 cents

June 30 = 80 cents

June 29 = 60 cents

June 28 = 9 cents

June 27 = 25 cents

June 24 = 30 cents

June 22 = 80 cents

June 21 - 50 cents to $1 ( I will use 50 cents)

There is about $1,250 in profits in those simple little trades. Now I am sure that I might not get in all of them as well as that and others I could easily have gotten in better so that may work out in the wash. There are also about $130 in commissions to account for but all in all these are easy small quick trades of 250 shares using pivot points for entry and exit guidelines. Pre-market trading may likely add more to the profits as the levels are known at the previous day close.

Just an idle idea that I may try out in real trading upon my return on Monday.

Jeff.

Momentum / day trading account split

Just a little blathering on about playing with numbers regarding trade sizing again.

Seeing as I was playing with profits only for the momentum trading and most of those tanked due to poor entry timing, I am having to consider how to size those trades... which I have talked about before. Now it is not so much how to size the new trades but how to split the account into three partitions for each of the three methods of trading. Trade sizing using the equal value model is the way to go... that part is the easy part.

Having said that, my gut says to drop momentum altogether and just go with daytrading for the next while THEN get back into the momentum stuff. I don't always listen to my gut though.

So I figure that I will count the stock trades as liquid capital, to be used if needed as it is only about $1,500 in cash due to the way stocks get assigned margin based on the buying power in the account. I have decided that I will set aside 20% of the base capital to hold as cash anyway so these get lumped into this float amount.

Then I will split the balance into two unequal parts weighted heavily towards daytrading. If I go with 10 possible concurrent trades in daytrading and the same for momentum trading and I use a 60+/40- split that allows all daytrades to be a minimum of $1,000 I should be OK.

I may go as high as 75% but that puts my momentum trades into such a small scale that I may be best to just leave them alone until the capital base is larger. Perhaps when reasoning confirms my gut I should go with that and assign 100% of the trading capital to the daytrading and be done with it.

That makes my trades in the $1,500 range and we are not likely to get to 10 concurrent trades as the room is aiming for 3-5 per day... the odd one gets held over depending upon the market conditions at the time.

I may see how many trades are expected in the momentum trading, if I figure on 6 or 7 and lower the daytrading to the sort of 7 max the numbers look a little more favourable to continue with both trading plans. This gives me a 65/35 split which puts daytrades into the $1,400 size and momentum trades into the $750 area. That would be acceptable and, given the track record of both services I feel comfortable with those numbers.

Now it's time to wait for Monday's trading.

Jeff.

July update

Today was a little more like it in the day trading realm as it was a $350 day. This month has been very lack luster as the first week was a holiday week, the trading room had to do some paring of deadwood and the market is not moving very fast anywhere to enable quick trades to take place in the first hour.

I figure that anything over $500 this month is a bonus so I have no expectations for the rest of the month... that does not mean there will be no more profits than that, it just means that $500 or more is my target.

Why set an upper limit target?

My momentum trading is still set to take a large hit tomorrow as nothing is really moving in my favour. One option is actually in the money but I paid enough for it that the stock price would have to be a couple...or three... dollars ITM to be even break even. I just have to be sure to close any trade that is set to expire ITM as I do not want to get assigned a stock. In fact I think that I will contact Questrade and clarify if I need to close positions if I have no intention of taking the stock.

Jeff.

More pro-value sizing calculations

Previously I had started using same sizing on my daytrades, I was up to 5 contracts for each when I shifted over to same value instead, due to it proving to be a better all round plan.

Something I noticed today, not really terribly relevant but interesting none the less, is that the average option price based on trade value based on same value sizing is much lower than the average real option pricing based on historical trades. But I will ignore that for now and try another way of calculating potential profits based on historical trading numbers.

My previous option price average was $2.61.

My overall profit per contract was $19.

I have traded 196 trades to date.

Using a $1000 trade value:

- same sizing 3.8 contracts per trade or 744 contracts

(I should be using 3 as partials cannot be traded)

- same value is 6.9 contracts per trade or 1352 contracts

(6.9 is accurate as it is an average of trades between 2 and 12 contracts)

A) Same sizing yields $14,136

B) Same value yields $25,688

These need to be adjusted for commissions.

Old commission rate totals:

A) $5,388

B) $6,604

New commission rate total:

A) $3,840

B) $4,752

A note about the same value contract count:

Same value trading is higher due to the lower option prices allowing to trade up to 20 contracts per trade. The range, adjusted to fit the $2.61 average price, leaves me with prices from 81 cents to $4.06 possible and sizes from 2 to 12 contracts. Figuring that there are about 10 trades per price level to spread it out evenly allows a trade size average much higher than using a straight $1000 divided by the average price. As a result a 12 contract trade will yield a higher profit than a 2 contract trade based on the 19 cent average profit. The trouble with this may be that it artificially inflates the profits on the smaller sized trades as they may have typically smaller per contract gains. I am making the assumption that the same is true for the larger trades as 19 cents is a very small move in a $3 option. In fact that move on the smallest price in the range of 81 cents is 23.5% and in the highest range of $4.06 it is only 4.7%. Lately our targets have been in the 20% range for the daytrading... so these numbers are not that far off.

Jeff.

The hard truth about losses

Losses are not fun but they always provide lessons to learn from... it's either that or the lesson is not learned and the losses are repeated in the same manner as before. That usually means that there was a way to mitigate the loss that was either a result of ignorance or ignored in greed.

Of course there is over confidence, but that is a side bar of greed of it's own reasoning.

Enter the largest possible single day loss that I may be racking up this Friday. While I will not count it out yet I will learn from the potential loss as if it had already occurred.

This is primarily in the momentum trading account, which is now combined with the day and trend trading, but that matters little.

Last month I ratcheted my trade count up to 5 contracts per trade. I already had a number of positions of 3 and 4 and now a few in the 5 area. Then we entered some "second string" trades, basically averaging down but still counting the additional contracts as if they were a separate trade. These I did not enter as five contracts per trade but 2 or 3 contracts were added. All in all I end up with 17 separate options in play with about 104 contracts in total. This is about $21,000 in options purchased, most of which are expiring this Friday. Seeing as I have combined my capital and trades I can count all my profits together and know that this eats up a great big chunk of my total profits since this program's inception as that $21K could be a 100% total loss... although I think some of it can be recouped with some careful trade management assuming that the market, or at least some of the individual stocks drop in price by weeks end.

The lesson, which is more important than the loss, is that better trade sizing would have made this a much sweeter pill to swallow, or at least not quite so bitter.

Seeing as I like my spreadsheets I created one to track all of my momentum trades as if they were of equal weighting, similar to what I am doing with the daytrading now. This serves to make a trade returning 20% no matter the option pricing, return the same dollar value as any other trade returning 20%. This also keeps the maximum loss of any single trade to the same maximum loss of any other single trade.

Total trading profits to date = approximately $21,000

Current trades as if 100% loss = approximately $21,000 loss (Yah, Ouch!)

Trade size = $1,000 from inception total profits = $30,000 (without changing my daytrading)

Current trades as if 100% loss = approximately $11,000 in profits retained

This is due partly to the same valuation of each loss, nothing oversized but also to the fact that a smaller priced option would have the exact same weighting on the profit scale as any other option given a similar actual ROI. 20% of a $1000 trade of 50 cent options would be the same as a 20% gain in a $5 option... with some variation due to commission structure.

So, if I end on a sour note on Friday I will be re-visiting my trading sizing overall once again in order to determine where best to apply my capital in order to maximize the profit potential going forward.

I think that I will consider daytrading the primary method of trading for right now, concentrate on the short term in and out trades while aiming for that $500 daily average. If I use 15 possible concurrent trades and apply 80% of the trading capital I should end with a decent buffer and be able to increase the trade sizing gradually while reducing the amount of trading capital in use. At some point I will get back into the momentum trading with small trade value sizing once I have $5,000 that can be applied as 10 $400 trades (using only 80% in total)... perhaps a month or two...perhaps less.

Jeff.

Delta isn't all it's cracked up to be

I had a small lesson in Delta, one of the "Greeks" having to do with options. This one represents the expected option price change relative to the underlying stock price change.

For example, a Delta of 0.5 would indicate an expectation that if the stock price moved $1 the option would move 50 cents.

Today I was watching a position that was held overnight that was down about 35 cents with a Delta of 0.45. The stock was set to open up about $1.50 which would lead one to conclude that the option should move approximately 68 cents. Instead it moved 40 cents, which was enough to put the position in a slight profit and let me close it but demonstrated that the Delta is not a sure thing.

I have known this all along but I paid particular attention to this one out of curiosity. Often the option price does not move as expected as there is a supply and demand issue as well as a certain expectation of a stock's most likely move.

On the regular trading front trading is not so hot right now. The market is at a strange point and have been moving or oscillating while not following any particular pattern... at least not one that is very predictable.

We'll see how things fall out later this week.

Jeff.

Holidays are over...back to business

Well, the holiday is over. Five days of hot camping weather and no rain until the last day. Couldn't have ordered it much better.

Of course looking at the markets I could have ordered those MUCH better. That rally last week has driven my mostly put trades well into the red and most of them are expiring on Friday... we will see what this brings. Hope really has no place in the market so I will just wait and see what the numbers say.

I have consolidated all of my trading cash into one account over the break so now I can tinker with larger trades and decide how much to allocate to daytrading, momentum swing trading and trend stock trading on the fly. Currently I decided to use all spare cash for daytrading only. This week I will probably keep trades smallish... perhaps $1,000 per trade. Once we, as a group, get settled into the trading again I may ramp it up a bit more. I am aiming to be able to handle a certain number of concurrent trades and, once expiry is done with, I will apply that rule of thumb across all my option trading. I think that allowing for 20 concurrent trades in total with a 20% cash buffer should suffice.

In the future I anticipate that the cash buffer will allow me to skim profits even when I might have a poor month without directly affecting my trading power. The cash buffer may reduce during those times but the active trading capital should remain at least constant.

I don't expect that there will be a lot to talk about here for the next week so the blog will be mostly quiet. I have my plan dialed in now.

Jeff.

Making the consolidation move

I called Questrade services yesterday and got things rolling for putting everything into the margin account. They have changed a few things since last time I had to call anyone about USD being held in accounts.

Apparently they have changed how USD is dealt with in margin accounts now. If I hold CDN$ it still works the same, I borrow against the CDN and am charged interest for this as it just uses the CDN balance as collateral. For me it is silly to do that only to incur a useless interest charge when I can just always use USD anyway.

So my TFSA balance is on it's way to the margin account. I started out also transferring the option positions as well but there was some hiccup in that transaction. I will have to just transfer those once they are in cash.

I realize that I will not be able to put any cash back into the TFSA until January and I may do that if I am still trading with Questrade. I anticipate moving over to Interactive Brokers and there are no TFSAs over there anyway and this lets me double my trading capital to boost my gains. I may have to pay taxes on the profits but those taxes are less than half of the more than doubling of my profit margin. I talked about that before and it would take some time for the TFSA to catchup with the margin trading based on the current limitations. Besides, I plan on trading stocks at some point and margin will likely be needed as well as being able to short stocks.

I am heading off camping for the next week so there will be no trading until the 12th, nor will there be any blogging until then either.

Jeff.