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!