CMC results to date

The posted CMC trades, just one of the stocks that I am tracking and trading, has produced a decent return on investment since September.

Five trades posted, 4 winners and 1 loser.

Using the typical "$1,000 invested could have been..." method of reference seems a little unrealistic as the price varies and percentages can be deceptive if spun the right way. Assume that a trade size of 100 shares (the typical lot size) the first trade (a short at $14.50) would have tied up $1450... so I will use that as the starting capital. All trades thereafter remain 100 shares and, but as it turns out, $50 would have had to have been added to keep this size as the price does rise into the last trade.

Total profit was $400 for a 27.6% return based on the first trade of $1450 (26.7% if you count in the extra $50 added at the end)

Not bad.

Doing the compounding thing based on the share prices for each trade turns this out to $406. Interesting as I thought that it might have been a bit higher. The loss early on and the larger share price at the end reduced the effectiveness of the compounding.... but an extra $6 is still $6.

I'll post my total record next time around. I have the data but just have not run it through the ringer yet, some I traded and some I did not so it's a little all over the place right now.

Jeff.

CMC and not so live trade blogging

I've been somewhat tied up in other projects (personal and work related and I have not taken the time to keep my blog updated. Some of the trades that I have been tracking I have not actually managed to get into, and some I have. I can only do so many things. So, I am updating my favourite stock following today.

My CMC trade posted active on November 23rd, 2010 didn't get entered. The way the price hovered around $15 then broke up just did not instil much confidence in a followup drop in price, basically the setup looked far more bullish than bearish. As a result I just decided to let it settle into the next groove. In the interest of not looking like I am fitting the trades to the hindsight circumstances I will keep it in the mix as if it were made anyway.

Book one loss of $1.50

As such the setup came for a long trade, a little more aggressive based on older support / resistance rather than new trend establishment, enter long at $15.50 following the mid-December high of $17.46. February 17th saw the $18.00 break which made the setup a little less aggressive but still active.

Mid-March saw the price spending most of it's time in the $15's so there was lots of time to get a decent price for this trade. Target exit at $17.00 met on March 29th.

Book one profit of $1.50

Of course a short is in order next, target entry was for $17.50 to allow a little space to wind up and make this a lower risk setup. Trade filled on April 1st and closed on April 18th at the target of $16.00.

Book another profit of $1.50.

All in all not a bad producer.

Jeff.

CMC surpasses targets this morning

Today my CMC trade has passed the $15.00 target. The trade had called for a possible entry at $13.50 and $13.00 but the $13.00 mark never was hit.

That makes a nice 11.1% gain in about 3 weeks and change.

Now, I have not closed the trade myself yet as I let it run past the profit target, something I am apt to do if I am trading with a trend. I have placed a tight VTSO of 25 cents which puts me somewhere above $15.00 now. I will probably close the trade before the end of the day even if the VTSO is not activated.

The reversal trade for this is coming up for a short at $16.00... I need to double check that entry as I did not think that CMC was going to hit target so hard this morning... so I did not do the chart work to determine the short yet.

Jeff.

CMC trade closed and the next opened

As noted in my Live Trades window the CMC trade closed Wednesday for $1 and $1.50 targets for the two trades which yields a 6.9% and 10% profit.

I have been involved in regular meetings this week so I was not as on the ball as I could have been with the re-entry into this stock. My entry target was $13.50 (long) and I could have gotten in the same day as the short profit target was tagged but I didn't do so until today.

No big deal... unlike the IRM trade that I missed for the sake of an hour, I find that most trade entries, and exits for that matter, have much longer windows of opportunity.

I re-entered CMC long adding the profits from the short trade to compound the trade size.

A brief note on the compounding effect.

Something that I overlooked when trading options, which was ultimately part of my reason for getting out of option trading for now, was the method used to compound returns based on profits. I won't go into the details other than to say that not doing it properly can easily blow up your account due to not being able to change position sizing in gradual increments.

With stocks, compounding will allow gradual increases in absolute risk following every profitable trade and an easy method to downsize trades in order to minimize risk following a loss.

I'll put up some numbers in my next post.

Jeff.

CMC live stock trade and odd comments

I have been busy with all sorts of projects lately, not the least of which is getting my trading strategy tweaked and making sure that I am positioned where I want to be. It would certainly be a lot easier if I were just following someone else's plan... but wait.... I tried that already and none worked.

So, I have some new trades on the go and they are looking, well, traded. One took off out of the gate for me, which was nice. $1.50 in the first 30 minutes of trading after getting in on the first target price ($26.00) yesterday and seeing it drop by 50 cents ($25.50ish) into the close. Although it dropped that much I was allowing it $3 of room to drop right down to $23.00. Perhaps this will be a shorter than average trade... I always like those.

For my live trade that is posted, CMC, I am in for an average of $14.76. Actually it is only one position so it is hardly an average. I didn't manage to get in at $15 for the second entry (busy) so I figured getting halfway between first and second entry pricing was good enough. It sits at $14.86 right now.

I posted the stop for CMC at $16.00 but I am not overly fond of even dollar stops as they seem to get "just touched" before the price reverses often enough that, at this price level, I will change it to $16.15 or $16.20.

CMC Live Trade Update

I was looking over my charts today and realized that I need to adjust the exit target for CMC. The second exit target needed to be lowered by $0.50 to $13.50 due to my shift in profit targeting but, more importantly, the primary entry needs to be raised to $13. 50 due to the next trade setup.

I already posted the first change in the Live Trade column so I will update the latest exit and post the next trade setup.

Next trade entry will be:

Entry 1 - $13.50 Target - $15.00

Entry 2 - $13.00 Target - $14.50

Entry 3 - $12.50 Target - $14.00

Full Stop at $12.00

The exit targets may shift depending upon how low the next move goes... if it only fills one or two of the trades then the exit may shift down a bit on the first trade in order to secure profits. and to set the next short trade if it sets up as well.

Jeff.

Putting the trade in context, CMC

I have more history on CMC other than just the trade setup that I posted, I have the whole year and change so I thought I should put the stock and activity into context relative to the current open trade.

A quick note about the changing profit targets. While I had to go back to the charts to see how the target limit orders would have filled it was based on the trades that were dictated already. I do wish that I had actually placed on thee trades and made some real cash... too busy with other plans. The primary entries would not change and most of the second and third would not either but I wanted to check the executions. Seeing as in any case where the primary hit full target the 2nd and 3rd would, necessarily, have also hit their targets as they would have been at lower prices.

CMC- Commercial Metals Co.

40 Trades since June 2009 (these are divided between 1st, 2nd and 3rd entry targets)

First Entry = 19 74% hit profit target

Second Entry = 16 81% of these hit their profit target

Third Entry = 5 80% of these hit their profit target

Not every target is a full target as there are some that the targets are set tighter on due to the next entry being so close, playing the short term moves in both directions can do that. Basically, one exit for a long position is at the same price as the next short entry price so the trade essentially flips. The key is in selecting valid targets.

I plug in a trade value of $1,000 and consider that the trades are all simple with no compounding therefore the trade value of $1,000 is always the same.

Total Profits = $1,781.00

Then using a starting trade value of $1,000 and compounding the profits into the very next trade.

Total Profits = $ 4,885.50

Unlike other speculative and subjective back testing these are firm numbers, now they are adjusted for my commission structure with Questrade so figure in 40 round trades worth if yours are higher. I used $5 commissions or $10 for the trade in and out. It's actually $4.95 for up to 495 shares.

Also worth noting, if I were actually in the trades and was putting money on the line every time I would be able to get better entries and exits in many of the cases but I am using my firm rules based system for both entry and exit for the sake of objective consistency.

Jeff.

First live trigger, CMC short

CMC, Commercial Metals Company

Of course the first live trigger that I post is a short sell, and it also was hit last Monday... which makes this "not so live" but still active. This one has been a solid short five times this year alone. Now the price being around the $15 mark makes it a smaller per share target but every profit is a profit.

The setup had been for an entry to sell to open at $14.50 and a second position at $15.00. Both orders were filled.

Profit targets are $13.00 for position one and $14.00 for position two giving $1.50 and $1.00 per share respectively.

Stops to be set at $16.00 for both positions.

Assuming that the targets are hit and based on the average entry price of $14.75 and the average exit price of $13.50 the ROI would be 8.5%

Loss would also be 8.5% for a profit loss ratio of 1:1.

This one is still active and orders may yet be filled for $14.50 today. I would set the stop at $15.75 at this point.

Jeff.

CMC accidental sale...DRAT!

I was looking at my CMC option position just before lunch and decided to place a stop order to secure some profits as it was up to $6.30. I was going to set $6 for today.

By accident, and I have VERY seldom done this, I sold the option at a limit of $6 as I forgot to select the STOP box.

The only good side is that at least I got the $6.30 price so my profit was $1.20 per share. I had been considering selling the option as the stock has hit a recent resistance level at the $18 to $18.50 zone...it was as high as $18.65 and I suspect that it may have more room to move...another $1 I had aimed for anyway.

Seeing as I dumped my CAH put option side of the straddle this morning for a loss, this one covers that loss and change. The call for CAH was increasing at a much loser rate than the put was decreasing... the discrepancy was due to the spin off and symbol changes. I may look for another long straddle for next week, or at least after this run up has run it's course.

I had considered dumping both sides of the straddle and starting with a different call for CAH fully expecting the price of the stock to rise following the change, I decided to save the extra commission and just hold the call that I already had.

Having said that, I would have bought calls that were closer to the strike price, or even the first call that was out of the money. These calls are far cheaper which leads to another thought about ATM call trades.

Jeff.

CVA and CMC revisited with options

I keep looking at the options that I am trading now and consider that what I am doing is the best method for the style of trading that I am pursuing... but those cheap ATM or OTM options look awfully tempting.

I bought two new option contracts this morning, CVA and CMC...both of which I have trade stocks in my new plan recently and both are using the Point and Figure entry method.

In CVA my entry trigger for the stock was between $17.25 and $17.50, and I even entered a stock order at that limit initially as I wanted into the market at that price. This gave me time to investigate the options. The price hovered around $17.30 for a while, I entered the option data into my spreadsheet, decided upon the option, cancelled the stock order and placed an option order. Strike was $15, expiry Jan '10. In at $2.90 after playing with $2.80 and $2.85 for a while.

Option cost $2.90, $2.25 ITM so 65 cents Extrinsic Value, 22.4% of the price was EV.

CMC was, more or less the same deal. $16.75 to $17. Option was the $12.50 strike, Jan '10 expiry.

Option cost $5.10, $4.25 ITM so 85 cents Extrinsic Value, 16.7% of the price was EV.

Looking at my sheet comparing the various strike prices with their EV based on paying the asking price (which I didn't) makes these look like the best deal as the Deltas are high and the EV was relatively low.

Then I consider the element of risk. Options reduce risk in the sense that they are somewhat unaffected by some attributes of the stock activity...CAH example as I would have lost over 50% of the value of my stock only position where I did better holding my own in the options.

Let's just see where these trades take me going forward.

Jeff.