SOLD -31 SRS @22.45

I've finally had the courage to take my loss and close out my deep-underwater SRS position. I bought these shares back in April for \$48.08 as SRS is testing a long term support. The next day, SRS tanked over 17%! Having been delusional to myself, I held on.

This is a failed trade right from the start. The biggest mistake is not setting a stop even though the price is sitting on a long term support. A support is only a support until it fails. And when a long term support fails, it usually does so spectacularly. A better trade should have been to establish a short instead when it breaks below the support, well, obvious to everyone now in hindsight.

The total loss from this position is about \$800 on a \$1500 principle. Horrible, and not just number-wise, to say the least.

[caption id="attachment_1558" align="aligncenter" width="500" caption="Ultrashort Real Estate"][Ultrashort Real
Estate][][/caption]

[caption id="attachment_1559" align="aligncenter" width="500" caption="Ultrashort Real Estate"][Ultrashort Real
Estate][][/caption]

[Ultrashort Real Estate]: http://traderpau.files.wordpress.com/2009/07/2009-07-08-srs.png [Ultrashort Real Estate]: http://traderpau.files.wordpress.com/2009/07/2009-07-08-srs_prop.png

Posted 08 July 2009 in stocks.

BOUGHT +1 SRS 100 MAY 09 35 PUT @11.00

Following my stop order, SRS pushed on to beyond \$24.00 to touch \$24.36. I took the opportunity to exit because \$24.50 is a major resistance (Figure 1) and at the same time, S&P500 touched 885, which is a major support (Figure 2).

My total loss for this trade is -(\$6.10 - \$11.00) * 100 + \$15 commission = \$505... For what I thought would be a small play, this amount of loss is totally unacceptable. There are a couple of lessons here:

  1. Always put a number to the risk you're willing to take.
  2. Always adhere to stop levels.
  3. Never enter a trade "in a rush" like I have done for this entry.
  4. Ultrashort ETF's are mathematically a losing game. Never go long in these again. However, they'll be great candidates to short.

I've formalized my first 3 lessons into my 3 Rules to be followed religiously. And I have also gone back to the drawing board to work on my trading strategy. I must remember how much pain this trade has caused and my determination to improve.

Now, I still have 31 shares of SRS to unload after this...

[caption id="attachment_1393" align="aligncenter" width="500" caption="Ultrashort Real Estate"]Ultrashort Real Estate[/caption]

[caption id="attachment_1394" align="aligncenter" width="500" caption="S&P500 ETF"]S&P500 ETF[/caption]

Posted 13 May 2009 in stocks.

SRS: stop order for the shorted puts at $11.90

S&P 500 backed down below 900 today. In particular, 890-900 seem like a vital pivot point from intraday action. Since SRS popped 10.45% today already, I have done something which I should have done when I wrote this put for SRS for \$6.10 in April 9th. That is, adding a stop. My stop to buy back this put is set at \$11.90, or effectively about \$23.3 for the underlying SRS shares. The closest intraday support as of this moment is \$23.40 for SRS shares, just when S&P500 retraced back to 895 or so. But SRS quickly regained footing to \$23.70+ (another pivot).

I am putting a loose stop for now because there seems to be more momentum for this market decline from the intraday sentiment. I'll update my stop as we approach the close today. Since this option expires Friday, I need to get rid of it one way or another before it does.

[caption id="attachment_1389" align="aligncenter" width="500" caption="Ultrashort Real Estate"]Ultrashort Real Estate[/caption]

Posted 13 May 2009 in stocks.

Review of positions: SRS and USO

My SRS position is deep underwater. To add to the mistake, I added to it last Thursday in a hurry hoping for a rebound from a massive selloff to a new 52-week low. Even though the chart looked like it was testing support last Thursday, I should have waited for a rebound before entering. And second, if I don't even have the time to write my trade log, I should never enter a trade.

This is definitely a wakeup call to rectify my tendency of entering too early in the short term. I have since mentally walked through what I should have done and have come up with a simple entry strategy that I will follow from now on. Basically, I will wait validation of a intraday low and then enter only if it passes its intraday resistance. Then I will set a hard stop just below a recent support. This will no doubt create a lot more stopped out trades, but it's up to me to find high probability trades. All it needs now is some verification...

In any case, I clearly need to spend less time trading and more time developing my skills and strategies.

Back to the positions at hand. From Figure 1, SRS is at the bottom of a long term down trend. Stop is \$30. Target is \$41. From the look of it, SRS will be going down even further if the market can hold its ground above 850. However, if the market fails to climb up, then yesterday's slightly higher low than Monday is a small plus point for SRS.

Update: Interestingly, in today's news U.S. Foreclosures Jumped in March and General Growth Files For Bankruptcy: Report. The 2nd news came in the middle of the night. And it's nowhere to be found unless you really look for it. I only read about it from CaraCommunity. For one of the largest REIT to declare bankruptcy, you'd think it'd be all over the news. Doesn't take a genious to figure this incident is deliberately hidden.

[caption id="attachment_1241" align="aligncenter" width="500" caption="Ultrashort Real Estate ETF"]Ultrashort Real Estate
ETF[/caption]

My USO position is faring better, although it's merely hovering above my entry price. Now that the April roll over of USO is complete, the downward pressure on USO should be gone. Even during the roll over, USO has managed to remain above its upward trendline. This is definitely a big plus.

New stop is \$28.80 and conservative target is \$32.

[caption id="attachment_1242" align="aligncenter" width="500" caption="US Oil Fund ETF"]US Oil Fund ETF[/caption]

Posted 16 April 2009 in trading.

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