Investing Update #4

I sold all of my silver and silver options the other day for some very nice gains, and today I bought some silver put options. I was afraid that silver would keep on going up, but it had a pretty bad day today. I think there will be a small recovery on Monday, though. If that does happen, I will probably increase my silver put option position.

I am extremely annoyed by the fact that financials have been stronger than the overall market no matter what happens. When the broad market goes up 1%, financials will go up 2%. When the broad market goes down 1%, financials will go down 0.5%... or sometimes even go up 1% anyway. The banking sector is still rotten to the core -- nothing has changed -- but I've been waiting for three months now, and the options-like decay of leveraged funds has probably wreaked havoc on my positions.

I also need to work on my risk management. Almost all of my trades so far have been winning trades, except for two: FAZ and SDS. Although I'm annoyed by the size of my loss in SDS, I'm not that worried about it because it's such a small position. But when I bought FAZ, it formed somewhere around a third of my portfolio. I made two big mistakes buying FAZ. First, I bought too much of it. Except for gold and silver, which I know very well, I've decided that I should not be putting any more than 20% into any single investment. Second, I didn't sell it sooner. What I should have done was sell it when the loss got beyond a certain point, say 20%. I could then easily get back in if I saw that it had reversed itself and starting posting gains. Related to this point, the majority of my trades have been very short, typically no more than a month or a month and a half long. A 20% loss would have been bad, but it would have stopped me from getting even bigger losses (I'm down nearly 70% on FAZ), but equally important, I would have had the extra capital to invest in something else and hopefully make 20% on some other investment to make up for my 20% loss.

I've also learned that buying leveraged ETFs is like playing with fire: It's all fun and games until somebody gets hurt. I've been burned enough times now that the next time I want to bet against the financial sector, I'll buy put options on XLF (the single-leveraged financial ETF) instead of risking my money on SKF or FAZ. Options are certainly more volatile, but at least they're a little more predictable.

I'm still up overall, but my bad bets on SDS and FAZ have been dragging my performance down a lot. I'm effectively subsidizing my losses with the gains I've made on my other investments. I would sell them, but I'm still hoping for that long-awaited stock market crash, and it's been so long now that I might as well hold them until the end. I'm not asking for much; the best I'm hoping for is to break even. As they say, hope springs eternal.

Closed Trades
7. LONG iShares Silver Trust (SLV)
Bought 150 shares at $13.53; sold 150 shares at $14.74; gain of 8.9%; held for 51 days.

8. LONG iShares Silver Trust October 14 Call Options (SLVJN)
Bought 15 contracts at $0.90; sold 15 contracts at $1.34; gain of 48.9%; held for ~34 days.

9. LONG iShares Silver Trust October 15 Call Options (SLVJO)
Bought 5 contracts at $0.87; sold 5 contracts at $0.83; loss of 4.6%; held for 47 days.

10. LONG iShares Silver Trust January 14 Call Options (SLVAN)
Bought 5 contracts at $1.27; sold 5 contracts at $1.78; gain of 40.2%; held for 20 days.

Open Trades
1. LONG ProShares Ultra Short S&P 500 (SDS) (effectively SHORT)
Bought 5 shares at $67.14; currently at $45.35; loss of 32.5%; held for 112 days.

2. LONG Direxion Daily Financial Bear 3x Shares (FAZ) (effectively SHORT)
Bought 32 shares at $78.86; currently at $25.73; loss of 67.4%; held for ~109 days.

3. LONG SPDR Gold Trust January 100 Call Options (GLDAV)
Bought 2 contracts at $4.13; currently at $3.50; loss of 15.3%; held for 22 days.

4. SHORT Intel Corp (INTC)
Sold short 15 shares at $19.17; currently at $18.77; gain of 2.1%; held for 22 days.

5. LONG iShares Silver Trust January 13 Put Options (SLVMM)
Bought 10 contracts at $0.76; currently at $0.74; loss of 2.6%; held for 0 days.

Investing Update #3

It's been a while since my last trade update. Since then I've sold my short oil and long Treasury positions, opened up a new short in Intel stock, and bought a few more options. I'm a little disappointed with my oil and Treasury trades because I sold them after they had hit their highs. At one point, I could have made about 30% on both trades, but I waited a little too long and settled for a lot less. Since then, Treasuries have been trending sideways, but oil has been on a pretty big tear, rallying about 30% in DXO.

I've added several options positions, and they seem to be doing all right. I'm a little worried about the October calls, since we're only about two and a half months away from expiration, but we'll see what happens.

Closed Trades
5. SHORT PowerShares DB Crude Oil Double Long (DXO)
Sold short 325 shares at $4.59; bought back 325 shares at $3.77; gain of 18.0%; held for ~32 days.

6. LONG Direxion Daily 30 Year Treasury Bull (TMF)
Bought 29 shares at $35.25; sold 29 shares at $36.68; gain of 4.1%; held for ~37 days.

Open Trades
1. LONG ProShares Ultra Short S&P 500 (SDS) (effectively SHORT)
Bought 5 shares at $67.14; currently at $45.50; loss of 32.2%; held for 102 days.

2. LONG Direxion Daily Financial Bear 3x Shares (FAZ) (effectively SHORT)
Bought 32 shares at $78.86; currently at $29.74; loss of 62.3%; held for ~99 days.
(Note: FAZ did a 10-for-1 reverse split and sold off fractional shares, hence the change in numbers.)

3. LONG iShares Silver Trust (SLV)
Bought 150 shares at $13.53; currently at $14.35; gain of 6.1%; held for 43 days.

4. LONG iShares Silver Trust October 14 Call Options (SLVJN)
Bought 15 contracts at $0.90; currently at $1.10; gain of 22.2%; held for ~26 days.

5. LONG iShares Silver Trust October 15 Call Options (SLVJO)
Bought 5 contracts at $0.87; currently at $0.65; loss of 25.3%; held for 39 days.

6. LONG iShares Silver Trust January 14 Call Options (SLVAN)
Bought 5 contracts at $1.27; currently at $1.65; gain of 29.9%; held for 12 days.

7. LONG SPDR Gold Trust January 100 Call Options (GLDAV)
Bought 2 contracts at $4.13; currently at $4.60; gain of 11.4%; held for 12 days.

8. SHORT Intel Corp (INTC)
Sold short 15 shares at $19.17; currently at $19.32; loss of 0.8%; held for 12 days.

Another Investing Update

Since my last update about two weeks ago, I've added to a few positions and opened a few new ones. I increased my short oil exposure and my long Treasuries exposure. I was doing much better earlier in the week, but overall I'm pretty satisfied. I'm especially satisfied with the improvement shown in my SDS and FAZ positions; I was afraid those would never recover. Of course, I still have a ways ahead of me before I get back in the black for those.

I opened up two new silver positions. The first is the silver ETF, which I had sold just a few weeks ago. Silver has fallen a lot lately, and I think now's a good time to get back in. As of now, I think it has a downside risk of around 50 cents (silver at $13.25 and SLV at $13.00), but an upside risk of several dollars, up to around $18-19 for silver. Considering this, I also decided to buy some call options on SLV. It's my first time buying options, so let's see how it goes. Based on my calculations, I could get gains of up to 275%... or watch my investment go to $0. It will be a fun ride.


Open Trades
1. LONG ProShares Ultra Short S&P 500 (SDS) (effectively SHORT)
Bought 5 shares at $67.14; currently at $57.76; loss of 14.0%; held for 61 days.

2. LONG Direxion Daily Financial Bear 3x Shares (FAZ) (effectively SHORT)
Bought 325 shares at $7.77; currently at $5.09; loss of 34.5%; held for ~58 days.

3. SHORT PowerShares DB Crude Oil Double Long (DXO)
Sold short 325 shares at $4.59; currently at $4.28; gain of 6.8%; held for ~11 days.

4. LONG Direxion Daily 30 Year Treasury Bull (TMF)
Bought 29 shares at $35.25; currently at $38.85; gain of 10.2%; held for ~11 days.

5. LONG iShares Silver Trust (SLV)
Bought 150 shares at $13.53; currently at $13.68; gain of 1.1%; held for 2 days.

6. LONG iShares Silver Trust October 14 Call Options (SLVJN)
Bought 6 contracts at $1.11; currently at $1.10; loss of 0.9%; held for 1 day.

Investing Update

Some of you might know that one of the things I like to do is investing. It's a lot of fun, and if I had enough money and enough guts, I would turn it into a living. It's also quite dangerous, of course, if you don't know what you're doing. I like to think that I do know what I'm doing, although whether I have true wisdom or merely youthful arrogance remains to be seen. One friend warned me to be careful recently. I feel very touched by his concern!

I've been doing it for quite a while though. I first started back in junior year of high school, not with stocks like most people, but with silver. Yes, the shiny metal. Bars of it. I converted most of my savings in high school into silver bullion, and I still have a fair amount of it (safely stored away; if you want money, go rob a bank). College made going out and buying bars of metal rather difficult, so I spent most of college merely watching the investing world on the sidelines. More recently, I decided it was time to get back in the game; I had been watching long enough, so I opened an online brokerage account.

You can think of investing as putting into action what I believe about what's going on in the economy and world. There's no reason why I shouldn't take the opportunity to make some money off of it. I've always had a pretty pessimistic view of things (that's just my personality I guess), but to me, my pessimism is the result of my realism. I have the grim satisfaction of first learning way back in 2004 that the huge rise in housing prices was unsustainable. By 2006, it was plainly obvious that the housing market would crash; it was only a matter of predicting when.

Knowing something like this doesn't require any special talent or superior intellect, though of course that would help. But the two main factors in predicting things like this and profiting off of them are the ability to make logical conclusions based on the evidence, and the ability to stay rational and withstand peer pressure even when everyone around you has drunk the Kool-Aid and tells you vehemently that you're wrong -- and that is one of the most difficult things in the world to do. It's a rare ability, and it's something that I'm still working on.

With that in mind, I've already written pretty extensively on what I think about the economy and the future of the dollar. Some people have said that I'm being overly pessimistic. I'm just telling it how it is.

What do I think about the markets in general? To put it in a nutshell: In the short run, things can change very quickly, but right now I'm bullish on Treasuries and the dollar; bearish on gold, silver, oil, and the stock market.

In the long run, though, I'm bullish on gold, silver, and oil; bearish on the dollar, stock market, and Treasury bonds. Follow that advice, and you'll be prepared for what's ahead.

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I titled this entry "Investing Update" because I mean to give an update as to how my investment decisions have turned out.

I transferred my money to my brokerage account a few days before my birthday, and I made my first trade a few days after my birthday. Somewhat surprisingly to me, my first trade was shorting stock. Details below:

Closed Trades
1. SHORT Saks, Inc. (SKS)
Sold short 50 shares at $4.72; bought back 50 shares at $3.60; gain of 23.7%; held for 19 days.

2. LONG iShares Silver Trust (SLV)
Bought 242 shares at $12.29; sold 242 shares at $14.90; gain of 21.2%; held for ~43 days.

3. LONG ProShares Ultra Silver (AGQ)
Bought 25 shares at $42.76; sold 25 shares at $53.38; gain of 24.8%; held for 28 days.

4. LONG ProShares Ultra Silver (AGQ)
Bought 10 shares at $56.62; sold 10 shares at $48.22; loss of 14.8%; held for 4 days.

(For trades 3 and 4, I was stopped out early, so I wanted to get back in partially, which turned out to be a bad idea; the weighted exit price of the two trades is $50.02 for a weighted gain of 17.0%.)

Open Trades
1. LONG ProShares Ultra Short S&P 500 (SDS) (effectively SHORT)
Bought 5 shares at $67.14; currently at $52.63; loss of 21.6%; held for 49 days.

2. LONG Direxion Daily Financial Bear 3x Shares (FAZ) (effectively SHORT)
Bought 325 shares at $7.77; currently at $4.35; loss of 44.0%; held for ~46 days.

3. SHORT PowerShares DB Crude Oil Double Long (DXO)
Sold short 106 shares at $4.66; currently at $4.73; loss of 1.5%; held for 2 days.

4. LONG Direxion Daily 30 Year Treasury Bull (TMF)
Bought 15 shares at $33.33; currently at $35.49; gain of 6.5%; held for 2 days.