Performance (Warrants)

So here's the recap of my warrants trades till now...

Couple of not good things:

1. I've paid my banks 1'549.00 in bro and made 1'450 myself!

2. My one loser was double the size of my average winner

3. My latest winner was huge risk for very little return

Couple of good things:

1. Green

2. Should get back 240.00 in bro from my bank after email & chat

Profit Warnings & Knives

This stock has traded between 100-120 for over a year. Then yesterday it surprises the market with a big effing profit warning. Stock opens over 15% lower (88) snaps back to 92 and quickly falls to 90 before tumbling down to 86-88. I'm watching and wondering when and if the time has come to bottom fish.

Couple of hours pass and stock deteriates further to down to 25% (80-83). I'm not watching my screen at that point. Even before the good US GDP numbers come out this stock starts moving higher. Only with good GDP numbers do I start looking at warrants for this stock. I find one that is .55/.56 (84). 1min later it's .56/.57. Another 5min later .58/.59 (85). I see the high was .70 for the day and wonder if I should jump on?! (Didn't realize at the moment that around 92 of course that .70 would be normal price, but that I should not expect that)

Then it starts ticking down. I feel good and expect a 1-2% fall on the underlying. Warrant is .55/.56 again and I go long 40k. I feel my heart pumping (adrenalin rush) as I enter order cos I think I have to act quickly before it snaps back to .58. Imagine my shock and horror when literally as I'm buying the stock gets another 1.5% hit and falls to .52/.53. Less than 20seconds after paid .56! I think: Ok, overreaction! , I'll buy another lot and dump them both at .56 or .57 in an hour.

Then for 10min nothing much happens till it once again takes a beating of 2% and warrant is offered .49. I double again up buying 2lots this time. I'm really stretched at this point. I see the markets everywhere are ticking up, surely whoever is shorting this profit warning is going to take breather!?

But this stock just won't make a comeback and closes at the low of the day and with the warrant worth .45/.46. I was pretty devastated. But still a bit hopeful of a corrective move come today, what with the Dow being up 200 points!?

It opened at .50. My breakeven's .5175. It moves up gradually. I am able to dump the whole lot at .53 and thank my lucky stars for this close encounter!

[On a looney side note: I received an email yesterday that made it through the spam filter and was titled "You are going to be lucky". Talk about spot-on! :) Then I also started watchin a film called "Paranormal Activity" - a guy (daytrader) and his girlfriend (student) - trying to get rid of a demon she is haunted by. Makes you wonder sometimes. haha :) ]

Rollercoaster Of Emotions (Warrants)

Above: Chart of underlying

My derivs trade I put on yesterday in the hope of a quick buck tourned seriously sour. My plan was: buy the call warrant (tech stock is underlying) at .22 and sell it at .23. After I bought it the highest it was ever bid was .22 - I didn't even bother putting in a sell limit order at .23 as I prefer to hit a bid vs. showing where I want out.

The US open was looking bit lower but nothing to really justify this tech stock being down over 5%. That's why I bought. Nasdaq was only down 1% at the open so I felt comfortable wating for the bounce this tech stock would have once the market realised there was no reason to be dumping stock in that way.

I was wrong. The tech stock and market tried a small attempt of a rally but got nowhere. My warrant was bid .19 at the european close. Into the US close the selling accelerated and I knew at the european open today my warrant would be off another 10%. It opened at .17. Nice 20% loss on my investment in less than 24 hours. Nice!

The usual thing happened: I was thinking it's time to double up. But didn't cos I gave the probability of a bounce less decent odds than falling off hard today in the US and having even lower price. So I didn't average down. However the warrant has now moved up to .21/.22 and I've dumped it. Am annoyed I didn't buy at .18!

But rather take this loss and be done with it than wait for any profit or even break even. The underlying stock moved up 5% from the low and is 1% higher than close yesterday.

As I write this I'm kind of telling myself what we had this morning was a "climactic" selloff in this stock and nice reversal. But I'm kind of worried the US will see more sellers move in today. Then this stock should fall back. If it doesn't: Fine. Another experience. ;)

Final thought: Glad not to have lost 5k USD as it was showing me this am! But pissed that I've given up the winner I had prematurely sold earlier this week! Also don't like fact that even though stock is where I bought that warrant of course I'm paying the 4%-spread to get out!!

Big Arrogant Banks

Todays discussion with my account manager at a big bank regarding the cutthroat prices they're charging me got me thinking about how little you and I - the retail customer - matter to these giant cash machines.

Knowing that there are now even larger big banks than before the whole mortgage bubble doesn't really put me and my mind at ease when it comes to the importance they asign the individual client nor regarding the systemic risk they pose.

In that spirit I loved this quote from J.Granthams last letter to investors (here on the topic of big banks regulation)

"I can imagine the company representatives on the Titanic II design committee repeatedly pointing out that the Titanic I tragedy was a black swan event: utterly unpredictable and completely, emphatically, not caused by any failures of the ship’s construction, of the company’s policy, or of the captain’s competence. “No one could have seen this coming,” would have been their constant refrain". Their response would have been to spend their time pushing for more and improved lifeboats. In itself this is a good idea, and that is the trap: by working to mitigate the pain of the next catastrophe, we allow ourselves to downplay the real causes of the disaster and thereby invite another one. "

He says at another point in his letter regarding lessons learnt in the bonous-culture world;

"Just look at Goldman’s recent huge “profits,” two-thirds of which went for bonuses. It is now estimated that this year’s bonus pool will be plus or minus $23 billion, the largest ever. Less than a year ago, these same guys were on the edge of a run on the bank. They were saved only by “government” – the taxpayers’ supposed agents – who decided to interfere with the formerly infallible workings of capitalism. Just as remarkably, it is now reported that remuneration for the entire banking industry may be approaching a new peak. “Well, we got rid of some of those pesky competitors, so now we can really make hay,” you can almost hear Goldman and the others say. And as for the industry’s concern about the widespread public dismay, even disgust, about excessive remuneration (and, I would add, plundering of the shareholders’ rightful profits)? Fuhgeddaboudit! In the thin book of “lessons learned,” this one, like most of our other examples, will not appear."

"In a bank with a hedge fund heart, you can’t reasonably expect ethical or non-greedy behavior, and you haven’t seen it." (Jeremy Grantham, GMO)

Execution Glitches

Around 15:20 CET I entered a buy order though one of the banks (online webportal) I've got accounts with. So I'm watching the live quote of the warrant and see I've lifted the market maker. I see this on my other screen (not that banks online browser window I've sent trade though).

I click refresh in the banks online banking tool so see what I'm paying commission wise (haven't used them lately). Nothing happens - I see a warning that it can take 300seconds for the account view to refresh - ok I think, it's not going to move that fast, that I'd need to get out. But I'm already kind of telling myself: THAT SUCKS! What happened to 20-30 seconds?! Or 1 second like with my FX broker.

Anyway I keep watching the quote of my warrant and see it's a tick down. So no hurry with the execution. But 1h20min later the trade still hasn't been processed. WTF! This time I'm a bit jumpy cos the warrant has moved up from .48(.46/.48) where I lifted to .49/.51. I want to enter a SELL order at .5. Of course the bank won't let me enter a short sale so I'm fcked. I call and ask what's going on. First I get 1minute of questions verifying who I am. Then the girl says she has to call the trading dep and find out. Jesus. Quote: .50/.52. I WANT OUT! :D

Finally she tells me there's some problem and that they're resolving it. I tell her that's nice but I need to enter a sale now! please. After 5min on the phone finally my trade is entered. I ask her is it done? She says she can't see the execution yet. I glance over at my other screen see nothing.... 2 seconds later it crosses. Done. But the girl still couldn't see if it was done and was amused that I could see it faster than her. :)

Of course after I sold at .5 it went to .52 bid 20min later :S! Then I go and check the commission and see this banks ripping me off charging 1% for the transaction. I've sent an email saying I want .5% on this ballsup. Will keep ya posted bout what happens! Not paying 2% for lousy service on a 4% profit!!!!

Playing With Falling Knife and Cable

Overnight trade to keep the mind working. Or another way of looking at it: Giving the gambler his daily dose of action. Today my first trade in "Cable" as it's also known as.

Just an unnoteworthy 5pip in the black after being 13 in the red. God knows why I bought into that red falling knife. Also getting out after building a base isn't too smart I guess. But I must cross one bridge at a time. Learning discipline and risk management is what I'm working on atm.

I was fighting that little devil inside me that wanted to buy 1.6257-59 level and get breakeven down to 1.6262. But I had to tell myself that Cable with its sudden 40pip moves isn't the place I should do something like that. Problem is still: I didn't fix a mental stop, I was only thinking where do I buy the second lot? That's not sound risk management really....

Update: 15:06CET

Fitting to the 100pip upmove in Cable since I sold it:

"Regret comes too late to affect an outcome, and it can leave you blind to opportunity and paralyzed with self-doubt." Does ring a bell that :)

As to fear when putting on a trade:

"Fear is the future tense of regret. And like regret, it offers little benefit and worlds of hurt. Don't let fear hide in justification. [...] Acknowledge your fears and your doubts, then pursue what you want anyway. The big misconception is that people who are brave live without fear, when without fear there could be no courage. Be afraid. Act anyway."

Recap Of Trades Till Now (October)

So below are my trades for the month so far. It's been a sleepy month for me. Just noticed I only did one EURUSD in/out and was more focussed on USDCHF. Maybe there's a lesson there aswell: Sometimes it's easier to trade something new because there's less or no mental baggage. Mental baggage in the sense that one will remember fondly or in horror what happened at certain price levels. That in turn can influence judgement. It certainly always has been issue for me.

This week I'm up 0.8% on FX or in absolute terms: 322.4$

My total loss since starting in may is now just under 600$.

I'm going to spin that as 600$ dollars I spent on education. Nothing could have taught me more than just throwing myself in the cold water of this leveraged FX world and seing what happens, how I feel, and consequently how I trade.

And here's what I traded in August. Nothing in september.

Derivates Trading

My derivs trade was on another account. So I guess I won't start mixing that with the FX trades when it comes to performance. But I think I'll continue to post what derivs trades I do here aswell. After all these markets are corelated to some degree and seing something in one market can lead to a window of opportunity opening in another.

One thing I noticed with trading options/warrants this week was: I hate when I buy a put say at 0.40 (0.39/0.40 Bid/Ask), then seing the stock move as I thought I would by 0.5% and the warrant doesn't budge. I prefer trading the underlying with leverage than being dependent on some market maker!

Recession Not Over - Maybe GBP Bottom Fishing Time?!

Starting to get that impulse to stick a toe in the water and go long some good old sterling!

Update! Fck it! Just watched it go back up by 40pips since this post. Note to self: More trading, less posting :D

UK economy contracted another 0.4% in 09Q3: notably below market expectations of a small 0.2% gain, and only a slight improvement from the 0.6% contraction in Q2. The UK economy has now been in recession for 6 quarters. source: BOFA/ML

Looking at this daily chart of Cable I can't quite be convinced this is a chance to buy into. It was lovely bottom back end of sep/begin oct, but I'm expecting more suffering for Cable!

^^ ICAP agrees with me according to DJ : The failure of UK GDP growth to pick up significantly amid the global economic recovery is, psychologically, very damaging for sterling in the medium term, says ICAP. "Aside from its effects on relative real interest rate expectations and foreign direct investment flows, it presents a case for UK monetary policy to remain exceptionally accommodating for a considerably longer period than either the US or euro zone," ICAP says. "Very positive outturns for 3Q GDP growth in the euro zone and US will likely compound this effect."

Doubling Up Saved The Night

I thought 1.0100 would be where we trend toward again when I bought 1 lot USDCHF around 1.0070. So when nearly 3 hours later the trade is showing me -300$ I start to feel stupid. It coincided with the Dow rallying. I have to admit it wasn't something I'd envisaged. I did sell my Nestlé puts yesterday, but even when I sold them I thought correction should go on. Anyway so I'm on my loss and thinking "Time to double up - and then only need a 15pip bounce to be in the black?" I decided yes, what the hell, why not, I won on the derivs trade so I have some room for risk. 1.5hours later I offloaded the second lot for an 8pip profit. And now another 8 hours later I offloaded the second lot for a 6pip loss. Net 1.7pip gain. Even though I won nothing, it feels like a victory. The market had taken 300$ from me and I made it give it back ;)

Graveyard Shift Spreads + Derivs Trade

Well, was looking at the chart of the DOW, and that end of day sell-off. That got me thinking that USDCHF must be tending toward short-term oversold levels, and EURUSD must be in overbought territory, so both due for a 1-2% correction! So I decided to get long USDCHF. I was also fighting impulse to increase my size to 2 lots instead of 1, but in the end kept with 1. Good thing too. Graveyard shift in USDCHF wasn't a good idea to be wanting to make a quick kill. Spreads are 3-3.5pips. Doesn't sound like much, but when I'm looking for 10pips it is. Darn thing would've needed to move 13-15pips for me to get what I wanted. So after 40min of not moving much I decided to scatch the trade. 5$ for me, 20$ or more for my broker.

Update: I kind of expected it. It moved back to 1.0100 (45pips!!). I wanted to have it overnight. It would have been a small risk. Reward was decent. But it wasn't to be!


Nestlé 5 Day Chart - Warrants Trade

Update 2! - Saw Nestlé had results out today. They had been upgraded by UBS couple of days ago. Guess what: They announced larger buyback programme and good results. But I felt the insiders would be offloading the news. So I bought 20k usd worth of puts. Sold them an hour later for 20.8k usd. So I'm feeling cocky and good. First derivs trade in a year for me.




FX Trade info:
Duration held: 40min
Pips: 0.5 (!)
Size: 1 lot

Another Play In USDCHF When EURUSD Was 1.5000

Good thing I wasn't watching my screen when USDCHF was dropping through 1.0100. With my morning frame of mind I'd have jumped at the opportunity to get in around 1.0090 for sure. Then I'd have watched it plummet to 1.0055. But I was "lucky" napping. It felt "safe" buying after falling 40pips from a big figure on USDCHF and also EURUSD was printing 1.5000. I felt confident we'd see a parallel move off the highs in EURUSD meaning higher USDCHF. Anyway I was rewarded with 10pips.

Another trade:

Duration held: 12min

Pips: +9.8

Logical Fallacy Of Wishful Thinking

Yesterdays post got me thinking about my tendancy as a human to practice WISHFUL THINKING; what is wishful thinking? A logical fallacy (a misconception resulting from incorrect reasoning)

"In addition to being a cognitive bias and a poor way of making decisions, wishful thinking is commonly held to be a specific logical fallacy in an argument when it is assumed that because we wish something to be true or false that it is actually true or false." Wikipedia

Todays trade might have started with a portion of wishful thinking, namely that 1.0100 would prove as support and see some small bounces, but I was able to squeeze a profit out. See below for trade details;

Duration held: 50min

Pips: +10

Size: 1 lot

Mustn't Grumble

Exactely 5 hours. Way too long - but very typical. Put on a trade and the wishful thinking cap and wait. USDCHF is one pair I fancy to see first intervention in. Big multinationals like Nestlé, Novartis, Roche get effected by this, and then pay tax accordingly.

So that's why I felt 1.01 was a decent area to get long. But I don't like waiting, and I hate losing. So when a trade is negative for 4h45min I tend to get very pissed. And then way too pleased as soon as it's in the black. See below. Let's call it +10pips.

Finance Minister Don't Like USD Strength

"Juncker said the euro's strength is a "problem that worries us", while Trichet said that excess volatility in the foreign exchange markets hurts the economy. The euro has already climbed over 20% against the dollar since March this year." DJ newswires

So - this is kind of what you'd expect when you get to big figure like EURUSD 1.5000 - well at least we're extremely close. Verbal intervention. But it's been with ZERO effect.

With this in mind I don't really want to be short EURUSD. Except from a scalper standpoint. There only 10 minutes or 1 minute counts. But talking days here I feel the rhetoric could get stronger.

What I have little faith in: That Fed helps to cool strength of USD. And without them, how can the market really believe the turning point has come? Hm.... Maybe if the Fed were to aggressively pull back liquidity. Not very likely right?

I also saw my old friend EURCHF is getting close to the last SNB intervention levels. 1.5020 had been intervention. Now we're around 1.5120.

So will we have some news that pushes us though EURUSD 1.5000 and gets people talking - that in turn leads to intervention and cooling off to 1.4500. That's my bet at the moment. So sidelined :D

The Dream EURUSD 1.50-51 - Followed by CB intervention

Back in AUGUST - and a few days after my lucky punch falling asleep with a position - I had a dream. Sounds like martin luther king there for a second. But serious: I dreamt I had a position short EURUSD @1.47 (back then it was actually trading 1.42-43 area). Then it went to 1.49. I shorted more. Then in a climactic news worthy moment with central bankers commenting it went to 1.50-51 intraday. And I was short all the time.

Since then I haven't been in the mood much for trading. That dream is what actually happens to me often I believe. I get to like a certain level as a shorting point, and just can't close it.

On the other side: Had I looked at that dream as a premonition that we're going to 1.50 - then at 1.43 - I'd be happiest person on the planet now. I'd have loaded buckets full. Well - money isn't everything I know - but still. [Hm on second thoughts, maybe I did act correctly in staying out the market - after all I was pretty confident we'd hang around 1.40 for longer and not go into 1.46 area so quickly]

But where do I go from now. Do I try and ride this EURUSD to 1.50 or is this the top pop.

I also just noticed that cos I double guess myself so often, I can then always fall back into justification process telling myself: I KNEW IT, I KNEW IT WOULD DO THIS, I JUST DIDNT HAVE GUTS TO GO WITH IT....

Covered lunch

Well! I've not traded for over 40 days?! Just completely lost interest. Strange that.
But. Today I felt like it again.
Two small trades. One was a little loser the other a small winner. Duration I held them both: 40 minutes. Put them on pretty much simultaneously.
Net gain of a decent lunch - +60 USD ;)
Funny cos I had spent about 30min in front of slot machines off Oxford Street with a girlfriend over the weekend and lost -6USD. :D
A shame that my winnings of the day don't get spat out of my computer in 10 pence pieces. It would be highly motivating. I tend to lose touch with how much I'm actually "betting" otherwise.