2007 02 27 NLV Portfolio Year to Date Results

February 27, 2007 Year to Date Results

Commentary
You've probably read and heard about today's market melt-down sufficiently
without a complete analysis from me. Suffice to say, most everyone,
including me, got burned. I tell you this, however, I still stand by
everything I've said the past few days: Fundamentally, the economy still
seems ok, and that this (over-?) reaction from the investor community is
based on panic and little else. So we finally got the short-term correction
that the Negative Nellies out there have talked us into. All that was needed
was a catalyst to ignite the fire and they got one with the Chinese stock
market dropping more than 9%.

Let's keep today's 3.29% DOW drop in perspective. It comes at the tail of a
four year bull market which saw the DOW rise by approximately 65%! Not that
I'd like to see it but using the DOW as the yardstick, we could well
"afford" to give back another six or so percent (like the Chinese did) and
still have a hefty base upon which to grow into the future. Maybe afford is
not the right choice of word here but I think you know what I mean.
We're still not out of the woods, however, short-term corrections usually
take a few days to simmer down so we can still experience more market
turmoil, both here in the U. S. and around the rest of the globe. Keep in
mind, a short-term correction is not usually the harbinger of a bear market.
Bear markets usually linger for months and bring much, much pain. But bear
markets are usually tied to the fundamentals of the market and the economy.
Today we have no big unemployment, no high interest rates, no major sectors
of the corporate community coming up with dismal earnings reports and
bleaker outlooks.

Since there's no way I, nor anyone else for that matter, knows what tomorrow
will bring all I can do is guess. And since my guess might be as good as the
next guy's here's what I guess: tomorrow will show another loss but not as
big as today's. And Friday will bring the smallest loss yet. The next three
days will be sort of a thermometer as to whether we are indeed only
correcting, or have finally entered the next bear market phase. On the other
hand tomorrow will bring a more sophisticated investor back to the market.
Then it's whoopee time all over again (but again waiting for the next
correction, and so on ad nauseam). My guess is also based on all things
being equal like no other bad news occurring, especially in the geopolitical
arena. Stand by, please.

Paper Profits Table
It's ugly! The only "good" news here is that if there were only 1,000 ways I
could make a dumb error while trying to learn stock market dynamics since I
started back in May 2005, I just made dumb error #999. Without going into
all the details, I assumed when I placed a stop/loss order with my broker,
that before it would be triggered, some third party would have to fill his
or her order at the price I entered my stop/loss. Wrongo! Right off the bat,
one of my stop/losses was triggered at a hellacious price. The market
specialist at the exchange really trimmed my tresses with a phantom asking
price that no one but me was stupid enough to "take". About 20% of my losses
today is a direct result of my ignorance.

Fortunately, my blunder occurred right at the opening. By simply drilling
down in the myriad menus (and sub-menus) my broker's online software offers,
I was able to change the stop/loss pricing option from their default to the
one I actually want. It must have worked because only two other positions
were closed and then only because the asking prices on the screen were real
in that that was what some real person had just filled on their positions.
This doesn't mean that I'll no longer lose money. To the contrary; today's
market may suck in other panicky investors who seek to close their position
at any cost. That action would suck me in as well, but that's what honest
investing is all about. Ya takes da good wit' da bad! Frankly, I wouldn't be
averse to a little more on the good side tomorrow. Please?

Closed Transactions Table
Read 'em and weep. Naturally, the above discussion holds here as well.

Put Trading Activity for Today
Generally, we want STO Premiums to be as big as possible and we was BTC
Premiums to be as small as possible. This would give us
optimum profits. In other words, we want to buy low and sell high, but with
put writing its always in reverse order. Note that all Premium, STO, and
Profit/Loss Columns should be multiplied by 100 to get the per contract
numbers and that all positions we enter into will always be for as least two

but probably more contracts per position.
Abbreviations: STO-Sell to Open; BTC-Buy to Close; AROM-Annualized Return on
Margin; S/L Tgt-Stop-Loss Target

Sell to Open (STO)
Symbol Expires Strike Premium BTC Tgt S/L
Tgt Sell By Date
None

Account Balance less Margin available to invest: 52.1%
Account Balance less Margin and Voluntary Reserve requirements available to
invest: 22.1%

Buy to Close (BTC)
Symbol Expires Strike STO BTC
Profit/Loss Days Held AROM
COH 01/19/2008 $35.00 $0.70 $1.75
-$1.05 11 -829.5%
AKAM 05/19/2007 $45.00 $0.75 $1.15
-$0.40 12 -243.2%
AKAM 01/19/2008 $35.00 $1.25 $1.85
-$0.60 14 -328.2%

A lesson I learned today is that I should limit my positions in any one
company. The NLV made money on AKAM last week but had a concentrated loss
today. So at one point I had four or five positions open in AKAM because the
premiums looked juicy. I still have one left. Let's see what happens with it
tomorrow.
Comments or Questions?
If you have any comments or questions, please direct them to Leonard
leonard@irsdehassler.com

Disclaimer:
This is the fine print and is designed to protect me in these litigious
times, and until I get better wording for this disclaimer, you are under
notice that I am not selling my services nor any other product, nor am I
trying to induce you to trade along or independently, with me. I am merely
offering a journal, so to speak, of my portfolio's transactions and results
with the hope that you will glean information and educate yourselves in the
stock market in general and option trading dynamics in particular. Trading
in the stock market and in options involves substantial risk and much money
may be lost. Beginners, especially those with little or no understanding of
the stock market, lose most, if not all of their capital in a relatively
short time. In other words learn from me and my mistakes and if you want to
risk your money in the markets, that's your business and has nothing to do
with me. I am not your representative, broker, advisor or any other type
agent acting in your interests. As a matter of fact, if you want to invest
your money, I recommend you hire your own advisor other than me. I also
reserve the right to cease publishing this missive, or change its publishing
frequency at any time without further notice or liability to you.
Copyright (c) 2007 Leonard Mednick, MBA, CPA (Ret); Managing Member LIME
Holdings LLC

_________________________________________________________________
Find a local pizza place, movie theater, and more….then map the best route!

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2007 02 24 NLV Portfolio Year to Date Results

February 24, 2007 Year to Date Results

Commentary
Fourth day in a row for the market to be down. We're down a skosh as well.
<sigh> While there is some negative news out there, there always is! Oil,
Iran, Nigeria, Dallas (Dallas? Yeh, some refinery fire or sumpn.) The point
is that so long as there are naysayers out there hawking a major correction,
their rhetoric's gotta depress traders, which will affect the market to the
downside.

But fundamentally, the economy still seems to be holding up; not like the
go-go nineties of course, but sufficiently for all of us to make $$$ if we
keep our discipline and our heads. So even if we have the self-fulfilling
prophecy of a downward correction, it's got to be a short one, doesn't it?
Anybody? ANYBODY? ANYBODY?

Paper Profits Table
Yeh, the NLV Portfolio is slightly down again, today but we're still
managing to skunk the benchmark S&P. The vagaries of trading, being what
they are, could still reverse the tables (no pun intended) on us. After all
there still are 10 more months before year's end. But each day that goes by
tends to settle the returns into a smaller range. I won't explain the math
reasons on this unless you send me an email asking. Just trust me.
Mathematically, we won't see a real settling down until at least the end of
March. But if there's a big news event lurking out there, even if it were
December 31st, look out. There's no sure thing happening until the fat
trader sings. (Hey, don't look at me. Mednick don't sing and Charley don't
surf!)

Meanwhile, at the NLV's current rate of return, our portfolio would double
by September 2010. Sure beats the banks' 5% return which guarantees a
doubling of your savings account by January 2021! (And yeh, we could lose
everything by tomorrow but we'd still have 13 years and 11 months to make it
back. <g>)

Closed Transactions Table
It's tough to close winning positions when the market is gloomy so no closes
today. I'm only happy that I got to dump some of my winners last week before
they turned to losers today. <happy, happy, happy>

Put Trading Activity for Today
Generally, we want STO Premiums to be as big as possible and we was BTC
Premiums to be as small as possible. This would give us
optimum profits. In other words, we want to buy low and sell high, but with
put writing its always in reverse order. Note that all Premium, STO, and
Profit/Loss Columns should be multiplied by 100 to get the per contract
numbers and that all positions we enter into will always be for as least two

but probably more contracts per position.
Abbreviations: STO-Sell to Open; BTC-Buy to Close; AROM-Annualized Return on
Margin; S/L Tgt-Stop-Loss Target

Sell to Open (STO)
Symbol Expires Strike Premium BTC Tgt S/L
Tgt Sell By Date
CELG 01/19/2008 $32.50 $0.77 $0.31
$1.00 08/08/2007
GILD 08/18/2007 $60.00 $0.80 $0.32
$1.04 05/23/2007
KLAC 01/19/2008 $35.00 $0.51 $0.20
$0.66 08/08/2007

Account Balance less Margin available to invest: 46.7%
Account Balance less Margin and Voluntary Reserve requirements available to
invest: 16.7%

Buy to Close (BTC)
Symbol Expires Strike STO BTC
Profit/Loss Days Held AROM
None
Comments or Questions?
If you have any comments or questions, please direct them to Leonard
<mailto:leonard@irsdehassler.com?subject=Comments%20or%20Questions>

Disclaimer:
This is the fine print and is designed to protect me in these litigious
times, and until I get better wording for this disclaimer, you are under
notice that I am not selling my services nor any other product, nor am I
trying to induce you to trade along or independently, with me. I am merely
offering a journal, so to speak, of my portfolio's transactions and results
with the hope that you will glean information and educate yourselves in the
stock market in general and option trading dynamics in particular. Trading
in the stock market and in options involves substantial risk and much money
may be lost. Beginners, especially those with little or no understanding of
the stock market, lose most, if not all of their capital in a relatively
short time. In other words learn from me and my mistakes and if you want to
risk your money in the markets, that's your business and has nothing to do
with me. I am not your representative, broker, advisor or any other type
agent acting in your interests. As a matter of fact, if you want to invest
your money, I recommend you hire your own advisor other than me. I also
reserve the right to cease publishing this missive, or change its publishing
frequency at any time without further notice or liability to you.
Copyright (c) 2007 Leonard Mednick, MBA, CPA (Ret); Managing Member LIME
Holdings LLC

_________________________________________________________________
Don't miss your chance to WIN 10 hours of private jet travel from Microsoft®
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2007 02 20 NLV Portfolio Year to Date Results

February 20, 2007 Year to Date Results

Commentary
Give me enough lemons, I suppose, and I'll start cranking out the lemonade.
I've been programming computers for pay on and off since 1956. That's no
typo, 1956; more than a half-century! Some of the statistics I heard bandied
about back then was that there were about 10,000 programmers in the whole
country and at about that same time, Thomas Watson, Jr, CEO of IBM said that
he foresaw a time when the total market for computers might reach its
saturation point at 10,000! Today, you probably can find two or three times
those demographics in any average U. S. zip code.
[Trivia sidebar]
Watson, Sr. was the guy that founded IBM when he couldn't get his then
employer, NCR to share his vision on business machines that computed. But
that isn't the trivia I wanted to relate here. The story is, though it may
be apocryphal, that the first words transmitted by telephone were "Mr.
Watson, come here, I want you." These words were spoken by Alexander Graham
Bell (the inventor of the telephone) to his assistant, Thomas Watson, Sr.
[Sidebar Ended]
So you'd think with all that so-called experience, I'd have learned that
no
matter how much I plan, no matter how much I backup, my good friend Bozo
will find some way to pop his unwelcome presence into my life. You're
already ahead of me: this latest installation was no exception and none of
it is Max's doing.
First there's the issue of my ramping up the learning curve on Microsoft's
newly released Office 2007 platform. The new features in Office make the
trip up the curve look worth it to me so I'm not going to squawk on that
matter. It's just a matter of my fingers learning new places to dance on the
keyboard because of the extensive changes in the graphical interface.
That'll probably cure itself in a week or two so I'm not too concerned
there. I'm actually excited by the promising increases in my productivity
that'll probably emerge as a result.
But now there's the issue of SQL Server 2005 (which was not really released
to the public until the fall of 2006; go figger) which I'll refer to as
"mssql" hereafter. Mssql is a huge, complex set of programs, and is the
growing database of choice among all size businesses up to the lower end of
the really big, big businesses. Another problem with mssql is that it's a
computer resource hog! But then I've got the computer muscle now to handle
it so that isn't a real issue.
For about a decade, ms had also been promoting Access, a smaller scaled
database. Its limits were pretty much the starting point for my needs but it
was a dream to program and use and wasn't as fussy about security. Don't get
me wrong. Security is important, but for the needs of a one-man shop like
me, Access' security model is more than adequate.
Which brings me to my dilemma: Bottom line is that I can't get mssql to work
right now. So do I still stick with mssql or do I switch back to Access?
Access would be far easier for me to maintain and support than mssql. And by
going back to Access I can not only eliminate many layers of overhead which
demand my constant vigilance, but I can eliminate entirely, one of the
programming languages (T-SQL) that mssql uses in addition to the more
powerful VBA language. VBA is also the language of choice for Access, Excel,
and Word! Further, since Access, Excel and Word all fall under the aegis of
Office, it's much easier to get the three programs to talk to each other.
So I'm forced to make a decision: I feel confident that if I keep hitting at
mssql, I'll get my break-through sooner rather than later. But then I have
to contend with the more difficult task of maintaining overhead and
coordinating T-SQL with VBA (which takes two individual heavy programs to do
it). On the other hand, I could probably get up to speed with Access again
in about two weeks and find greater productivity in my output thereafter.
So for the rest of this week, probably, I'll be looking into Access to see
whether it can now serve my needs. I haven't used the product for the last
two or three major upgrades so there'll be a little learning curve there, as
well. Main thing I'll be looking for is whether Access can work with the
150,000 some odd records I add to my database each evening gracefully and
maintain its and my dignity with the 20,000,000 some odd records already
existing.
Meanwhile, I have no way of filtering the incoming records right now, unless
you want to help me each night going through the 150,000 records manually
<g>, so I'm not going to be able to add new positions to the NLV Portfolio.
And here's where the "lemonade" comes in.
Currently, the market has been enjoying a bull run for more than four years;
a little long in the tooth many contend. There's a growing contingent out
there, yammering that it's time there was a more than 2 ½% correction since
that's the way the market's performed historically; a couple of years up
follow by a sharp correction (10% to 20%) for several months followed by
another couple of years up. Each cycle ratcheting the market higher and
higher so that on average, the market has enjoyed a long-term growth of
about 11%.
So maybe it's time to take some money off the table, now. Who's right and
who's wrong? Nobody knows. Ya pays yer money and yer takes yer cherce!
Anyhow, I "choose" to take my money off the table now and through the next
couple of months or so. Ok, so maybe choose isn't the precise word, here. So
what? I still can change my mind if I'm able to get up and running again by
next week. I got the mssql lemon and I made the "liquidate my portfolio"
strategy my lemonade. And if the market drops in the interim, you'll think I
was a genius.
And if I'm not able to get up and running by next week, waal, I can always
use those lemons for that Kool-Aid recipe I got from some guy in Guyana a
couple of decades back. <g>
Paper Profits Table
At least we're breathing down the S&P neck again. Right now I could really
be happy with 20%. Couldn't you?
Closed Transactions Table
We've come back in this department as well. I'd still feel a bit more
comfortable if our Avg Wins came a lot closer to our Avg Losses. But at
least we've got our P(win) to keep us going, good.
Put Trading Activity for Report Date
Generally, we want STO Premiums to be as big as possible and we was BTC
Premiums to be as small as possible. This would give us
optimum profits. In other words, we want to buy low and sell high, but with
put writing its always in reverse order. Note that all Premium, STO, and
Profit/Loss Columns should be multiplied by 100 to get the per contract
numbers and that all positions we enter into will always be for as least two

but probably more contracts per position.
Abbreviations: STO-Sell to Open; BTC-Buy to Close; AROM-Annualized Return on
Margin; S/L Tgt-Stop-Loss Target

Sell to Open (STO)
Symbol Expires Strike Premium BTC Tgt S/L
Tgt Sell By Date
None

Account Balance less Margin and Reserve requirements still available to
invest: 7.6%

Buy to Close (BTC)
Symbol Expires Strike STO BTC
Profit/Loss Days Held AROM
MS 04/21/07 $70.00 $0.25 $0.15 $0.10 10
22.7%
ANF 01/19/08 $50.00 $1.00 $0.70 $0.30 33
43.3%
Disclaimer:
This is the fine print and is designed to protect me in these litigious
times, and until I get better wording for this disclaimer, you are under
notice that I am not selling my services nor any other product, nor am I
trying to induce you to trade along or independently, with me. I am merely
offering a journal, so to speak, of my portfolio's transactions and results
with the hope that you will glean information and educate yourselves in the
stock market in general and option trading dynamics in particular. Trading
in the stock market and in options involves substantial risk and much money
may be lost. Beginners, especially those with little or no understanding of
the stock market, lose most, if not all of their capital in a relatively
short time. In other words learn from me and my mistakes and if you want to
risk your money in the markets, that's your business and has nothing to do
with me. I am not your representative, broker, advisor or any other type
agent acting in your interests. As a matter of fact, if you want to invest
your money, I recommend you hire your own advisor other than me.
Copyright © 2007 Leonard Mednick, MBA, CPA (Ret); Managing Member LIME
Holdings LLC

_________________________________________________________________
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FW: 2007 02 14 NLV Portfolio Year to Date Results

February 14, 2007 Year to Date Results

Commentary
Fed Chairman Ben Bernanke did not disappoint, today! From his lips to our
ears, he said that economy-wise, all is well with the universe, and further
implied that He (Uncle Ben) still sits on His throne. Fierce buying ensued
and the Dow made another All-Time High. Most of the other averages did
(somewhat) likewise.
So what's wrong with this picture? Well, there's tomorrow, for instance.
Uncle Ben will be pronouncificating (don't look it up, I just invented it
<g>)some more, and then there's some unemployment data that's to be
released. If the job market looks like it's heating up -- all bets are off.
Perversely, a better job market means potentially higher wages and that's
b-a-d for companies and consumers. Higher wages push up prices, that's
inflationary, and Dr Bernanke is the sworn enemy of inflation. His current
weapon of choice to fight this evil? Increasing interest rates. That's bad
for companies, too. Pushes up prices, you know, old bean. The Fed think's
that in that case, that's good. But isn't that inflationary, too. Just
asking!
Investors dislike this (low unemployment claims data) scenario so much that
the bulls will run away and hide, while bears come in acrunchin' stock
values. Bad for investors, bad for markets, and of course, bad for S&P and
NLV! So's here's hoping you and yours get fired, and all your friends go on
welfare! And that's good for the economy? Go figger! <g>
Paper Profits Table
As mentioned, the markets were kind to the S&P and the NLV. The S&P,
however, is still pulling away from us. I'm hoping my new policies will
reverse that trend in the weeks ahead. One by-product of the new policies is
that their results will take longer to show up. I expect that. Meanwhile,
there's always luck to help us to help us sooner. The good kind, I mean,
silly!
Note the slight changes in the last column (Rating). I've color-coded the
NLV / S&P (nee NLV vs S&P) numbers so that you can get a feel for their
relative values. The four colors and their values are Red - Not good, Green
- Good, Blue - Excellent, and Violet - Superior. Even though the NLV Return
is at a somewhat respectable 14.74%, since we're running at only 0.7 (70%)
of the S&P that's gives us a grade of Red - Not Good.
Closed Transactions Table
No STCs today. Again, our new trading policies should make for less churning
in the portfolio and, we're hoping, higher profits at least two ways. More
Option price erosion and lower transaction costs.
Notice there's a modification to the last column(s). Like in the Paper
Profits Table, In order to give you a better feel for the relative values,
I've used the same color-coding scheme but not quite the same numerical
mappings. I've also dropped the alpha ratings ("Not Good", "Excellent", etc)
column and substituted it with the numerical ratings (upon which the alpha
was based, in the first place.)
Put Trading Activity for Report Date
Generally, we want STO Premiums to be as big as possible and we was BTC
Premiums to be as small as possible. This would give us
optimum profits. In other words, we want to buy low and sell high, but with
put writing its always in reverse order. Note that all Premium, STO, and
Profit/Loss Columns should be multiplied by 100 to get the per contract
numbers and that all positions we enter into will always be for as least two

but probably more contracts per position.
Abbreviations: STO-Sell to Open; BTC-Buy to Close; AROM-Annualized Return on
Margin; S/L Tgt-Stop-Loss Target

Sell to Open (STO)
Symbol Expires Strike Premium BTC Tgt S/L Tgt Sell By Date
MGM 01/19/08 $45 $1.00 $0.40 $1.40 08/02/07

Yesterday I said that I chose to make my Reward/Risk Ratio (R/R) 1.2 to 1. I
"lied"! When I went to actually implement this ratio, I really didn't like
the potential results so I changed it to 1.5. This means that if all works
to plan, in the long-run I'll have bigger net profits. Only time can tell so
I really hope not to have to tamper with this ratio again for the next
couple of months or so.

If you're really sharp-eyed and retained yesterday's discussion of the R/R
derivation, you'll see that a 1.5 to 1 ratio is imbedded in the BTC and S/L
Tgts above. In other words the NLV stands to profit $0.60 ($1.00 - $0.40)
and lose -$0.40 ($1.00 - $1.40) if the trade goes the wrong way. Dividing
$0.60 by $0.40 gives us 1.5 to one.

We've still got 24.4% of our available funds (Total Cash less Margin and
Reserve requirements) left for investing opportunities tomorrow.

Buy to Close (BTC)
Symbol Expires Strike STO BTC Profit/Loss
Days Held AROM
None

Disclaimer:
This is the fine print and is designed to protect me in these litigious
times, and until I get better wording for this disclaimer, you are under
notice that I am not selling my services nor any other product, nor am I
trying to induce you to trade along or independently, with me. I am merely
offering a journal, so to speak, of my portfolio's transactions and results
with the hope that you will glean information and educate yourselves in the
stock market in general and option trading dynamics in particular. Trading
in the stock market and in options involves substantial risk and much money
may be lost. Beginners, especially those with little or no understanding of
the stock market, lose most, if not all of their capital in a relatively
short time. In other words learn from me and my mistakes and if you want to
risk your money in the markets, that's your business and has nothing to do
with me. I am not your representative, broker, advisor or any other type
agent acting in your interests. As a matter of fact, if you want to invest
your money, I recommend you hire your own advisor other than me.
Copyright (c) 2007 Leonard Mednick, MBA, CPA (Ret); Managing Member LIME
Holdings LLC

_________________________________________________________________
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2007 02 12 NLV Portfolio Year to Date Results

February 12, 2007 Year to Date Results

Commentary
No breaks caught today. The bright side is that the market could have been
worse in that it wasn't as bad as Friday. <groan>
Three more of the NLV's positions were stopped out today for expected but
nonetheless unwelcome losses. There are still two more positions (AKAM and
MS right on the cusp of their being stopped out tomorrow).
Everybody's waiting for a boatload of economic data to be released over the
next couple of days, not the least of which is Fed Chairman Bernanke's
general assessment of the economy on Thursday and the level of interest
rates soon to be set (or not). Which brings me up to the following tweaks to
my trading methods.
While I'm somewhat satisfied with how the profits come in when the market is
bullish, I'm not happy with the size of my losses when it tends to be
bearish. Therefore I reviewed my philosophy and policies and came up with
the following facts:
* I sell options to buyers. Options are a wasting asset, that is, all
other things being equal, a portion of an option's value disappears each day
(like the value of an auto policy) and that disappearing value inures to my
benefit as the seller. This means that at expiry the option will have wasted
away to zero and I get to keep the entire premier collected up-front.
Meanwhile, if I decide that it's propitious to cash out earlier, I get to
buy back the option for more than zero but somewhat less than the amount
originally paid to me.
* Each day that we get closer to the expiry date, the option wastes
away faster and faster. For example, if the option lost four cents in value
yesterday, today it might lose five cents, and tomorrow another six cents.
* Therefore,, the longer I hold an option, the more advantage this
accelerated wasting value accretes to me.
* Right now, I've been placing time-stops on my options anywhere from
21 days to 30 days, but in reviewing my STOs, I find that most of them have
expirations from six to 12 months out.
I conclude from the facts that if I were to hold my options a while longer,
I may be able to profit more by allowing the natural course of accelerating
option price erosion to attach itself back to me. Further, there are
transaction costs to consider like broker commissions and slippage. Slippage
arises from the fact that in the market there are two prices on any product
(stock, option, bond, etc) at any one time; the bid and the ask. The bid is
the price that a buyer is willing to pay (think of the bid as the wholesale
price while the ask is what a seller wants for his or her holding (think of
the ask as the retail price). The bid price is always the lower of the two
prices!
The dynamics of the markets are such that when you're a buyer you're faced
with the prospect of having to buy at retail, and if you're a seller you're
facing the prospect of selling at wholesale. This means that if I STO an
option now, I get the bid (wholesale) price, and if I want to turn-around
and buy it back (BTC), I have to pay the ask (retail) price. So not only do
I have to pay commissions on the STO and BTC, but I've also got to absorb
the slippage, which is difference in the bid and ask price, before I can
realize any profits.
If I'm to keep fully-invested and I have a short term time stop of say one
month, then I'll have to turn over my portfolio at least 12 times per year
to stay fully invested. This means I take a hit of 12 round-trip commissions
and 12 slippages. Poof! But if my time-stops are increased to, say, three
months on average, then I only have to suffer four hits per year (12 months
/ 3 turns). The downside is that my return (AROM) will probably be reduced a
little because I'll have my money tied up a little longer per position.
Here's how I acted (or am going to act) upon the facts while compensating
for the negatives just put forth:
* For starters, I'm going to increase each time-stop to 1/2 the time
between the dated entered into the position and the drop dead date to get
out of it. For example if I STOed PCU on 2/6/2007 (which I did) and its
expiry date is 6/16/2007 (which it is) then the time to expiry then was 130
days. Half of 130 days is 65 so I'll put a time-stop on PCU to bail out by
4/12/2007 (2/6/2007 plus 65 days).
* Then, in order to take advantage of PCU's accelerating time erosion,
I'm going to reduce the target BTC stops. As of this moment, I'm not sure by
how much but I should have a percent in mind by the end of trading tomorrow.
The lower BTC gives me greater profit potential.
* Finally, I'm going to reduce my stop-loss BTCs in order to take
smaller hits on losses like I did Friday and today. This probably means a
little more turnover in my portfolio but I'm hoping that it will be minimal
especially when compared with the vast decrease in turnover that extending
the time-stops will bring.
As always, everything I do is experimental and subject to change. But
changes should not be introduced willy-nilly. They should be the result of a
thought-out strategy that takes into account facts, desired outcomes, and
tactics to achieve that strategy. We can't eliminate risk and guarantee
profits. No one can! Not even Dr. Bernanke, unless he wanted to break the
law. But we can sure as hell try to optimize on both ends and I'm hoping
that's what I did a little bit of today.
Paper Profits Table
You look at the table. I was hoping today for a small bounce in the market
but it didn't appear. Maybe tomorrow. That should bring a little apple back
to my cheek!
Closed Transactions Table
Not only did the two options that I thought would stop-out today do as much,
but so did a third <ugh>. As mentioned earlier, there's still two more
positions in critical condition. But a market rebound tomorrow could take
them off the critical list.
Put Trading Activity for Report Date
Generally, we want STO Premiums to be as big as possible and we was BTC
Premiums to be as small as possible. This would give us
optimum profits. In other words, we want to buy low and sell high, but with
put writing its always in reverse order. Note that all Premium, STO, and
Profit/Loss Columns should be multiplied by 100 to get the per contract
numbers and that all positions we enter into will always be for as least two

but probably more contracts per position.
Abbreviations: STO-Sell to Open; BTC-Buy to Close; AROM-Annualized Return on
Margin; S/L Tgt-Stop-Loss Target

Sell to Open (STO)
Symbol Expires Strike Premium BTC Tgt S/L Tgt Sell By Date
None

I figured I wanted to see where the markets might be heading before I made
any more commitments. (Never try to catch a falling knife). A third day of
trouncing would not bode well; might indicate that we are entering into a
bearish phase of the market. This would make me consider lightening the
portfolio and remain in cash while the market sorts itself out. (Patience,
grasshoppa, patience!) <g>

Buy to Close (BTC)
Symbol Expires Strike STO BTC Profit/Loss
Days Held AROM
LM 05/19/07 $90 $0.77 $1.20 -$0.43 5
-322.0%
LVS 06/16/07 $65 $0.80 $1.30 -$0.50 6
-412.4%
ICE 06/16/07 $90 $0.90 $1.35 -$0.45 5
-263.1%

Administration
None
Disclaimer:
This is the fine print and is designed to protect me in these litigious
times, and until I get better wording for this disclaimer, you are under
notice that I am not selling my services nor any other product, nor am I
trying to induce you to trade along or independently, with me. I am merely
offering a journal, so to speak, of my portfolio's transactions and results
with the hope that you will glean information and educate yourselves in the
stock market in general and option trading dynamics in particular. Trading
in the stock market and in options involves substantial risk and much money
may be lost. Beginners, especially those with little or no understanding of
the stock market, lose most, if not all of their capital in a relatively
short time. In other words learn from me and my mistakes and if you want to
risk your money in the markets, that's your business and has nothing to do
with me. I am not your representative, broker, advisor or any other type
agent acting in your interests. As a matter of fact, if you want to invest
your money, I recommend you hire your own advisor other than me.
Copyright (c) 2007 Leonard Mednick, MBA, CPA (Ret); Managing Member LIME
Holdings LLC

_________________________________________________________________
Search for grocery stores. Find gratitude. Turn a simple search into
something more.

http://click4thecause.live.com/search/charity/default.aspx?source=hmemtagline_gratitude&FORM=WLMTAG

2007 02 09 NLV Portfolio Year to Date Results

February 9, 2007 Year to Date Results
--------------------------------

Commentary
When I was a little boy and some bad event occurred, usually in the form of
an economic hit to the family purse, my mother would say, "Better this
catastrophe than another". The expression had a more uplifting lilt in her
native Yiddish language, which she and my father always spoke when we were
at home. The result was that the listener received a spirit of hope and knew
that this calamity too would pass and that we all would survive. Since I
grew up during the Great Depression, she did seem to say it quite often.

<sigh>

Anyhow, today was such a day on the market. Between oil bumping up to $60
again, and two Fed Governors hinting, in separate speeches, that interest
rates might have to be raised rather then cut, there was general
blood-letting causing many, including the NLV to lose in excess of 1% of
their portfolio value today. To give a 1% per day loss some perspective, if
today's loss rate continues, you are plumb out of $$$ regardless of your
portfolio's initial size; $5,000, $50,000, or in BillGatesian terms,
$50,000,000,000!

Adding to the NLV hemmorhage was the fact that when I rejiggered my trading
method last week, I introduced a subtle error into one of the hundreds of
formulas I've put into Excel and SQL Server. That error, not a major one
mind you, still caused me to enter STOs on Allegheny Technologies Inc. (ATI)
when I should have just bypassed the opportunities. Had we not had today's
market hiccup, my error would have been insignificant, and we still would
have had a strong probability of profiting on ATI.

But the market did hiccup and both ATI positions were stopped out (BTC)
creating about a third of the loss we suffered today. Too bad, but at least
I found the error before it could wreak its damage throughout the balance of
the year and/or years ahead! In actuality, I discovered the error about a
half hour before the market began tanking and decided then that since I'd
already gotten into the positions, and the error did not significantly
affect the probability of profit, I decided to ignore it but made the
changes to the Excel formula before I STOed two more positions today. And
had I not corrected the error, I would have STOed (opened) another ATI
position today, the third day in a row, that's how good the probabilities
were on grabbing profits based on the rest of ATI's factors. ("Aside from
that Mrs. King, did you enjoy the speech?") <got tired of the Lincoln and
Kennedy allusions so I just made the Mrs. King question up.>

While I have two more positions that are hovering near their stop-loss
points, I'm not panicking yet. If the market continues to tank today, I'll
lose them and maybe others as well. That's what stop-losses are for. And so
long as we don't roll over into a bear market for the next few months, I
should be ok, hopefully even making up and surpassing the hit taken today.
This week there's a lot of economic data coming forth and Fed Chairman
Bernanke gets to say his piece in a two day q&a before congress. If he's got
any pity on the stock market, he'll ameliorate the words of the two other
Fed Governors spoken today. That would make the market hop to again, at
least until the next Fed Governor opens his mouth.

How wishy-washy we investors are, yes? <g>
--------------------------------

Paper Profits Table
Read 'em and weep. Both the S&P and the NLV are still showing marginally
fair annualized returns; oh how I long for those good old heady days
of...yesterday! Oh well, there's always tomorrow.
--------------------------------

Closed Transactions Table
Well we can still make a living this year if this is the worst day of the
rest of the year. Better today's catastrophe than another, so hang with us,
ma.
--------------------------------

Put Trading Activity for Report Date
Generally, we want STO Premiums to be as big as possible and we was BTC
Premiums to be as small as possible. This would give us
optimum profits. In other words, we want to buy low and sell high, but with
put writing its always in reverse order. Note that all Premium, STO, and
Profit/Loss Columns should be multiplied by 100 to get the per contract
numbers and that all positions we enter into will always be for as least two
but probably more contracts per position.
--------------------------------

Abbreviations: STO-Sell to Open; BTC-Buy to Close; AROM-Annualized Return on
Margin; S/L Tgt-Stop-Loss Target

Sell to Open (STO)
Symbol Expires Strike Premium BTC Tgt S/L Tgt Sell By Date
DO 06/16/07 $60 $0.80 $0.45 $1.15 03/09/07
WFR 07/21/07 $35 $0.60 $0.35 $0.90 03/09/07

Buy to Close (BTC)
Symbol Expires Strike STO BTC Profit/Loss
Days Held AROM
ATI 04/21/07 $80 $0.66 $1.05 -$0.39 2 -
855.8%
ATI 04/21/07 $85 $1.20 $1.79 -$0.59 1
-3,307.6%
HRB 01/19/08 $20 $0.60 $0.95 -$0.35 1 -
181.2%
GM 01/19/08 $15 $0.55 $0.35 $0.20 16
100.0%

And all this time I was worried about General Motors Corporation (GM). It
BTCed at my target price just fine and gave us our only bright spot of the
day.
--------------------------------

Administration

Disclaimer:
This is the fine print and is designed to protect me in these litigious
times, and until I get better wording for this disclaimer, you are under
notice that I am not selling my services nor any other product, nor am I
trying to induce you to trade along or independently, with me. I am merely
offering a journal, so to speak, of my portfolio's transactions and results
with the hope that you will glean information and educate yourselves in the
stock market in general and option trading dynamics in particular. Trading
in the stock market and in options involves substantial risk and much money
may be lost. Beginners, especially those with little or no understanding of
the stock market, lose most, if not all of their capital in a relatively
short time. In other words learn from me and my mistakes and if you want to
risk your money in the markets, that's your business and has nothing to do
with me. I am not your representative, broker, advisor or any other type
agent acting in your interests. As a matter of fact, if you want to invest
your money, I recommend you hire your own advisor other than me.
Copyright (c) 2007 Leonard Mednick, MBA, CPA (Ret); Managing Member LIME
Holdings LLC

_________________________________________________________________
FREE online classifieds from Windows Live Expo – buy and sell with people
you know

http://clk.atdmt.com/MSN/go/msnnkwex0010000001msn/direct/01/?href=http://expo.live.com?s_cid=Hotmail_tagline_12/06

2007 02 08 NLV Portfolio Report

February 8, 2007 Year to Date Results

Commentary
------------------------
First, my apologies for the putative 2/8/2007 report sent to you a few
minutes ago. There are some unknown (to me) short-cut keys in Outlook and
I've hit them a few times these past two weeks with unexpected results
following. One of them is that Ctrl-Enter (I think) will send a message
merrily on its way. I'll try to be more careful in the future but this
nonsense should end once we have the blog up and running. Max confirmed that
he'll be here next weekend to do a major, major overhaul on all my computers
as well as upgrade all my software with the latest and greatest from
Microsoft you've been hearing about. What fun!

I hope you like the new look to the report. Basically, I've broken the one
big table into two because the two sides of the table, while somewhat
related really was showing two different phases of the investment cycle: the
Closed Trades are the culmination of the cycle, similar to when a business
sells its inventory to the public thereby increasing cash, and the NLV-S&P
comparison which gives a strong idea of where the portfolio returns are
headed prior to the "inventory" of options being closed.

I also expect to comment about the general market and conditions less except
if there is a particular extreme or unusual activity therein. I will try to
highlight my thought processes connected to my trades as I want this report
to be more like a trading journal rather than a magazine article. This
should result in a more stream-lined, and therefore easier to read, report.
I hope you like it and encourage you to email me your comments and
suggestions to help me make this report even better for you.

Finally, in an operational matter, the last few trading days have found the
NLV Portfolio working fairly close to "fully invested" as defined in my
trading approach. So now, each day I look forward to harvesting a few
"apples" from my option contract orchard, booking the profits (losses?
<groan>), and reinvesting in more potentially, high AROM contracts. And if
the market will continue to cooperate, I want to do this again, and again,
and again, and ag... <g>
------------------------

Put Trading Activity for Report Date
------------------------
Generally, we want STO Premiums to be as big as possible and we was BTC
Premiums to be as small as possible. This would give us
optimum profits. In other words, we want to buy low and sell high, but with
put writing its always in reverse order. Note that all Premium, STO, and
Profit/Loss Columns should be multiplied by 100 to get the per contract
numbers and that all positions we enter into will always be for as least two
but probably more contracts per position.

------------------------
Abbreviations: STO-Sell to Open; BTC-Buy to Close; AROM-Annualized Return on
Margin; S/L Tgt-Stop-Loss Target

------------------------
Sell to Open (STO)
Symbol Expires Strike Premium BTC Tgt S/L Tgt Sell By Date
AKAM 01/19/08 $30 $0.55 $0.35 $0.80 03/08/07
ATI 04/21/07 $85 $1.20 $0.70 $1.75 03/08/07
STJ 01/19/08 $30 $0.55 $0.35 $0.80 03/08/07

Buy to Close (BTC)
Symbol Expires Strike STO BTC Profit/Loss
Days Held AROM
WY 01/19/08 $0.90 $0.80 $0.10 8
62.8%
NIHD 03/17/07 $0.35 $0.20 $0.15 7
112.6%

WY has an earnings announcement scheduled for tomorrow. I really wanted to
get rid of it, yesterday but couldn't get a fill at my price. I knew I still
had one day grace before the announcement so I chanced waiting a day for a
better fill. The upshot. I could've sold yesterday at the same price thereby
releasing some margin funds and getting a better AROM as a result of holding
one day less. One never knows when an adverse "pre-announcement" leak gets
out and I wind up with either a smaller profit or worse, a loss where a
profit was due! Lesson learned: If I can't get my fill at the price I want
then by the end of a trading day, GET OUT at whatever the market price is.

NIHD is the first bigger profit I've taken on a position opened after I
started integrating some of my newer trading rules. It was worth an
additional $5 PER CONTRACT.
------------------------

Disclaimer:
This is the fine print and is designed to protect me in these litigious
times, and until I get better wording for this disclaimer, you are under
notice that I am not selling my services nor any other product, nor am I
trying to induce you to trade along or independently, with me. I am merely
offering a journal, so to speak, of my portfolio's transactions and results
with the hope that you will glean information and educate yourselves in the
stock market in general and option trading dynamics in particular. Trading
in the stock market and in options involves substantial risk and much money
may be lost. Beginners, especially those with little or no understanding of
the stock market, lose most, if not all of their capital in a relatively
short time. In other words learn from me and my mistakes and if you want to
risk your money in the markets, that's your business and has nothing to do
with me. I am not your representative, broker, advisor or any other type
agent acting in your interests. As a matter of fact, if you want to invest
your money, I recommend you hire your own advisor other than me.
Copyright (c) 2007 Leonard Mednick, MBA, CPA (Ret); Managing Member LIME
Holdings LLC

_________________________________________________________________
Don't miss your chance to WIN 10 hours of private jet travel from Microsoft
Office Live http://clk.atdmt.com/MRT/go/mcrssaub0540002499mrt/direct/01/

2007 02 07 NLV Portfolio Report

February 7, 2007 Year to Date Results

Commentary
-----------------
Not much stirring in the markets, today. That's fine with me. Unlike
outright stock investments, writing (selling) options makes money in side
trending markets, as well. And a little of the moola was made again
yesterday, both on paper and in outright hard cash in pocket. More soon.
-----------------
Effective of NLV Portfolio Results

You'll notice that I've added a new column to the NLV Portfolio table. It's
the fourth column over; the one labeled Effectiveness. Think of it as really
meaning the effectiveness of the NLV Portfolio when measured against the S&P
500 index. Essentially, Effectiveness measures the same thing as the NLV vs
S&P column but gives us the information in a richer, therefore to me in a
more useful, way.

For instance, if NLV has a YTD return of 12% and S&P has a return of 10%,
the difference is 2% (12% - 10%). But what if NLV has a return of 22% and
S&P has a return of 20%, the difference in returns is still only 2% (22% -
20%). There's no weight given for the levels of return between the two
investments. Intuitively, the higher the levels of return the less the
importance we attach to the difference of the returns. 102% vs 100%? 1002%
vs 1000%? Effectiveness, however, spotlights the magnitude between the
levels of returns and that's why it conveys more useful information to me in
this setting.

For instance, using the example, above, with NLV at 12% and the S&P at 10%,
the Effectiveness number is 1.20 (12% / 10%). And at the 22% vs 20% level of
returns, the Effectness number is only 1.10. (22% / 20%). Now let's reverse
the returns in the example. With the NLV at 10% and the S&P at 12%,
Effectiveness is (rounded) 0.83 (10% / 12%). And at the 20% and 22% levels,
Effectiveness is 0.91 (20% / 22%).

Summarizing the four results:
12:10 22:20 10:12
20:22
---------------------------------------------------------------
Effectiveness 1.20 1.10 0.83
0.91

(Sidebar: Ya know, it strikes me now that "Effectiveness" is a mouthful and
awkward to type so henceforward, I rechristian it Eness. You'll know that
everytime I say Eness I mean Effectiveness.)

Looking at the above table, we see that anytime a number is greater than 1,
the NLV outdid the S&P. Conversely, anytime Eness was less than one, the S&P
outdid the NLV. But here is the additional information that Eness conveys:
at the smaller return levels (12:10 and 10:12), the absolute differences
(12% - 10% = 2%) and 10% - 12% = -2%) made a larger impact percentagewise
than did the absolute differences. Again, conversely, the absolute
differences at the higher levels (22:20 and 20:22) made less of an impact
on the portfolios percentagewise than simply taking only the 2% difference
in all of the return levels.

A bonus to the Eness column is that it is very easy to mentally convert the
Eness number into a percentage. Simply subtract 1 from the number and then
multiply by 100. Voila, you now have the percentage that the NLV is ahead
(more than 100%) or behind (less than 100%) the S&P.
-----------------

Net Liquidating Value (NLV) Portfolio

Paper Profits Table
As you can see, both the NLV and the S&P are producing respectable
annualized returns YTD. How respectable? The markets have benchmarks for
just about everything. One of the benchmarks used for interest rates is the
LIBOR (London Interbank Offer Rate) which is the rate (even in America) that
banks charge each other when lending money overnight. Another short-term
benchmark interest rate is the 90-day U.S. Treasury Bill.
Much of the consumer interest rate structure is built on the LIBOR as a
base. I'll leave it at that, if you want to learn more about the LIBOR and
interest rates in general, I suggest you google it.
The LIBOR rate can change from moment to moment depending upon central
banks' policy (the Federal Reserve Bank or FED in America) and the supply
(of banks willing to lend money) and the demand (of banks needing to borrow
money). The changes, if at all, from day to day are usually measured in
basis points. A basis point is one hundredth of 1%! That's .0001 in decimal
terms and it amounts to only about $0.28 per day on $1,000,000.
As of today, the LIBOR was 5.36%. As already mentioned, investors often use
LIBOR as a benchmark; sort of a risk-free interest rate. This is the rate,
that an investor wants to beat in any riskier investment. The riskier the
investment, the more expectation of higher returns, otherwise why take the
risk? The foundation of capitalism is built upon this simple premise.
The Eness of the S&P when measured against the LIBOR is 4.01 (21.48% /
5.36%) while the Eness of the NLV is 4.71 (25.25% / 5.36%)! In percentages
the S&P beats the LIBOR by 301% [(4.01 - 1) * 100] and by the NLV by 371%
[(4.71 - 1) * 100]. Incidently, if we only had the LIBOR comparisons to work
with could get back to our direct NLV:S&P Eness number simply by dividing
the LIBOR comparisons like so: 4.71 / 4.01 = 1.17 which is as close 1.18 as
you can get taking round off errors into consideration.
-----------------

Closed Transactions Table
Not to shabby in this department, either. We improved in all the columns,
including the underlying number behind the Rating Column. We're now within
spitting distance from the next level which Deel characterizes as
"Excellent". Now if only the markets will cooperate. But usually, they must
rest (and even retrace a bit) before they continue the secular upward climb
they've exhibited for more than 100 years.
-----------------

Put Trading Activity for Report Date
Generally, we want STO Premiums to be as big as possible and we was BTC
Premiums to be as small as possible. This would give us
optimum profits. In other words, we want to buy low and sell high, but with
put writing its always in reverse order. Note that all Premium, STO, and
Profit/Loss Columns should be multiplied by 100 to get the per contract
numbers and that all positions we enter into will always be for as least two
but probably more contracts per position.
-----------------

Abbreviations: STO-Sell to Open; BTC-Buy to Close; AROM-Annualized Return on
Margin; S/L Tgt-Stop-Loss Target

Sell to Open (STO)
Symbol Expires Strike Premium BTC Tgt S/L Tgt Sell By Date
ATI 04/21/07 $80 $0.66 $0.40 $0.95 03/07/07
GILD 01/19/08 $50 $0.80 $0.45 $1.15 03/07/07
ICE 06/16/07 $90 $0.90 $0.50 $1.30 03/07/07
LM 05/19/07 $90 $0.77 $0.45 $1.15 03/07/07

Buy to Close (BTC)
Symbol Expires Strike STO BTC Profit/Loss
Days Held AROM
SHLD 03/17/08 $0.60 $0.45 $0.15 6
52.9%
-----------------

Administration
I've decided, for now, not to try to ascertain and make any more corrections
to past possible errors on the Closed Transactions side of the table. (See
my report of 2/6/2007). The changes would be insignificant and would not
have any effect on the numbers in the future as each day all the statistics
are calculated afresh. Besides, don't you agree with me that my time is more
valuable in creating, monitoring, executing my approach, or even sleeping?
<g>

Disclaimer:
This is the fine print and is designed to protect me in these litigious
times, and until I get better wording for this disclaimer, you are under
notice that I am not selling my services nor any other product, nor am I
trying to induce you to trade along or independently, with me. I am merely
offering a journal, so to speak, of my portfolio's transactions and results
with the hope that you will glean information and educate yourselves in the
stock market in general and option trading dynamics in particular. Trading
in the stock market and in options involves substantial risk and much money
may be lost. Beginners, especially those with little or no understanding of
the stock market, lose most, if not all of their capital in a relatively
short time. In other words learn from me and my mistakes and if you want to
risk your money in the markets, that's your business and has nothing to do
with me. I am not your representative, broker, advisor or any other type
agent acting in your interests. As a matter of fact, if you want to invest
your money, I recommend you hire your own advisor other than me.
Copyright (c) 2007 Leonard Mednick, MBA, CPA (Ret); Managing Member LIME
Holdings LLC

_________________________________________________________________
FREE online classifieds from Windows Live Expo – buy and sell with people
you know

http://clk.atdmt.com/MSN/go/msnnkwex0010000001msn/direct/01/?href=http://expo.live.com?s_cid=Hotmail_tagline_12/06

2007 02 05 NLV Portfolio Report

February 5, 2007 Year to Date Results
------------------------------------------------

Commentary
-------------------------
Today was somewhat startling for me, but happily in a positive sense. I was
busily shaping up my new approach and so paid little attention to the minute
by minute market gyrations. It was only about an hour and a half before the
market close that I noticed the Dow was up slightly but the Nasdaq and the
S&P were down. What surprised me most was that the NLV Portfolio was having
one helluva fine day as you'll soon see. It is near a record high of its own
since its inception on October 5, 2006.

Meanwhile, the S&P keeps jumping up and down all over the place. First
behind the NLV a couple of points, then ahead for a couple of days, and now
behind us again. So, I'm thinking, should I really be "tampering" with my
trading approach? Especially when today in my system testing my computers
spat out four likely candidates each promising a better than 95% chance of
making money; that's better than 19 to 1 odds! However I deemed the amount
of profits attaching to these candidates, in absolute dollars, was too small
when compared to the amount of margin I would have to tie up.

The new candidates were offering less that $0.25 premiums for only a few
extra points on the probability of making money P(win). Thanks, but no
thanks. I passed. Tomorrow, I'll resurrect some of the benchmarks I chucked
just a couple of days ago to see if I can get a better balance between
premium size and probability of profits. That's what experimentation is all
about. Tweaking benchmarks, monitoring results, comparing them with prior
results, deciding whether it's worthwhile to accept or reject the new
results. It's keeping me quite busy, thank you, but I love it!
As for the market indicators, oil is up again, threatening to hit the $60
mark. That's a baddie. Interest rates are down slightly. That's a goodie.
And half-way through the earnings season, average corporate earnings are
still over 10% (that's good) but just barely (that's bad). I've already
mentioned the mixed signals the major indices gave us so all this is leaving
traders in a somewhat apprehensive mood. From a technical standpoint, many
are saying that the markets are over-sold and due for a pull-back; maybe 4%
to 7%. And the fact that many Fed biggies are due to speak this week adds to
the nervous mood even more.

But fundamentally, all seems to be pretty much ship shape so where does that
leave me? While I'm still optimistic for the intermediate and long-term, I
gotta remember that I trade in the short term. (30-days or less), so I'm a
bit nervous, too, not because I think the market's going to tank badly, but
because I think there are so many more nervous nellies out there that they
might just become stampeding bears which will affect my bullish postitions,
negatively. So I'm probably going dump a couple more positions than I
planned to tomorrow before the stampede starts and wipes out their paper
profits. I also don't think I'll be looking to add any positions again
tomorrow, unless some gem really sparkles its existence before me. I tell
you this, it ain't gonna mean no steenkin' two-bit premium even if it shows
a 99.99% probability of making dinero! If an overall rush to unload starts
with my luck, I'll end up with that 0.01% chance of losing money all over my
face.

Anyhow, that's my tentative Tuesday pre-market take... unless, of course,
the market starts winking her seductive charts and flashy tickers at me,
then all bets are off. I'm so weak! <g>

-------------------------
Net Liquidating Value (NLV) Portfolio
-------------------------
Paper Profits Table
Lookit dat, lookit dat, wudja? On a lackluster market day our NLV Return
bounded to a sizzling 24.94%; within striking distance to our 4th quarter
2006 results. Meanwhile the S&P dropped to 20.55% so that now it trails us
by more than four points. Another way of looking at these two number the NLV
would have returned 21.4% more income YTD than the an investment in the S&P
(24.94% / 20.55%)! Only 329 days to go 'til New Year's. <sigh>

Closed Transactions Table
None

Put Trading Activity for Report Date
Generally, we want STO Premiums to be as big as possible and we was BTC
Premiums to be as small as possible. This would give us
optimum profits. In other words, we want to buy low and sell high, but with
put writing its always in reverse order. Note that all Premium, STO, and
Profit/Loss Columns should be multiplied by 100 to get the per contract
numbers and that all positions we enter into will always be for as least two
but probably more contracts per position.

Abbreviations: STO-Sell to Open; BTC-Buy to Close; AROM-Annualized Return on
Margin; S/L Tgt-Stop-Loss Target

Sell to Open (STO)
Symbol Expires Strike Premium BTC Tgt Sell By Date S/L Tgt
None

Buy to Close (BTC)
Symbol Expires Strike STO BTC Profit/Loss
Days Held AROM
None

Administration
None
-------------------------
Disclaimer:
This is the fine print and is designed to protect me in these litigious
times, and until I get better wording for this disclaimer, you are under
notice that I am not selling my services nor any other product, nor am I
trying to induce you to trade along or independently, with me. I am merely
offering a journal, so to speak, of my portfolio's transactions and results
with the hope that you will glean information and educate yourselves in the
stock market in general and option trading dynamics in particular. Trading
in the stock market and in options involves substantial risk and much money
may be lost. Beginners, especially those with little or no understanding of
the stock market, lose most, if not all of their capital in a relatively
short time. In other words learn from me and my mistakes and if you want to
risk your money in the markets, that's your business and has nothing to do
with me. I am not your representative, broker, advisor or any other type
agent acting in your interests. As a matter of fact, if you want to invest
your money, I recommend you hire your own advisor other than me.
Copyright (c) 2007 Leonard Mednick, MBA, CPA (Ret); Managing Member LIME
Holdings LLC

_________________________________________________________________
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2007 02 02 NLV Portfolio Report

February 2, 2007 Year to Date Results

Commentary

Have made, and been making, lots of changes to our trading approach. I hope
I'm not destroying our core strengths by doing so -- the point of the
changes is to shore them up. I'm simply not satisfied running, as it were,
about neck and neck with the S&P. The rub is, in order to increase our
returns we have to take on more risk. That's the way it is with life and it
certainly is the way with investing. For example, in life you may be faced
with the prospect of a new, higher paying job but it is in a different
state. How will you and/or your family adjust to your new environment and
will the new job work out?

In investing we face the same dilemmas, only more frequently. As frequent as
each position that we enter and exit. If I increase my time-stops, say from
21-days to one month, I face the prospects of allowing my option to ripen a
bit more for more profit, but at the same time expose it to some sort of
adverse surprise such as an oil-well blowing up in Nigeria, a competitor
announces a break-through making my company's main product virtually
obsolete, or just that the CEO of my company and his secretary have
disappeared. Somehow I have to balance all this and that's where I'm hoping
probability theory helps and that I don't find myself on the wrong side of
the probabilities, abnormally too frequently. Btw: one of the changes
implemented is that I did increase the time-stops to one month. Here's why.

Time-Stops
Since options always expire at a certain date in the future, and since I
write/sell options, this means that if the stock doesn't move much up or
down by expiry date, I will have earned the entire premium that was paid to
me at the outset. In effect we can consider that the option kind of
decreases in value day by day until it reaches zero at the expiration date
and since it is worth nothing, I get to keep the 100% of the premium paid
me. It's sort of the same concept as depreciation on you car, which attempts
to measure the decrease in value it suffers from the moment you drive it off
the dealer's lot. Another word for that decrease could be "Decay". But...
With options, the decay is very small the first day, but increasingly gets
larger and larger each day until expiry day when it becomes 100% of whatever
value remained. Here's a picture of what I just said (double-click icon,
below, for picture):

Notice how QQQQ (ticker symbol for the Nasdaq 100 ETF) chart shows an option
decay line that curves upward.. We're looking at the chart from the eyes of
the buyer of the put option. From my eyes, I would see the chart flipped
along the (imaginary) horizontal line passing through 0.00 in the upper
right hand corner of the chart. Therefore, from my eyes I would see the
decay going downward. In either case, the option was opened on 2/2/2007 and
is due to expire on 2/16/2007 on the chart.
The curvature is small in this example because we are dealing with an option
that's about to expire in about two weeks. The curvature is more pronounced
in longer term options In this example the buyer had to pay me (as the
writer of the option) $0.44 per contract ($44 in real terms). He/she hopes
to make money if the value of the option increases beyond $0.44 faster than
the decay can reduce it. (e.g. he/she would like to see the value go to,
say, $0.88 by expiry date so that their investment would double. This can
happen for assorted reasons not the least of which is that the value of the
underlying ETF (QQQQ), decreases in value by expiry date. But if nothing
happens, or QQQQ increases in value, I can look at the chart like it was
money in the bank. (which it is, in this example, by the way).

Net Liquidating Value (NLV) Portfolio

Changes
First, lets explain a couple of changes in the table. All of the January
rows have been removed except for 1/31/2007. Since end of month numbers
reflect YTD standings, we retain them in the table for comparison purposes.
We change the background color for historical month ends to yellow to help
the eye distinguish a month end set of numbers from a quarterly (background
in orange) from current month numbers (background in white).
Second, I've added a column at the end of the Closed Transaction side on our
actual wins and losses to give us a feeling of how we've been doing YTD as
measured by the "cash register" rather than the S&P. In the longer run, our
paper profits & losses should correlate with the Closed Transactions side.
So we can think of the Paper side as a predictor of sorts of the Close side.
I'd been trying to figure out a good way to summarize our work when I ran
across an article in SFO Magazine (stands for Stocks, Futures, & Options) by
Robert Deel. I'd never heard of him but a quick google check showed that he
had some gravitas in the options field. His article will need a closer
reread by me as there are some other benefits besides the rating, that may
be able to help me pinpoint other areas in my trading approach that need
improving. The only change I made to his numbers is that I translated them
into English so that you don't have to keep flipping back and forth to
another table to determine what they mean.
So the underlying numbers are his but the English translation is mine. Deel
says that "You should strive to achieve a score of at least [Good]." As to
my Rating description of "Rare and 'Cosmic'", I derived that from his
statement about ratings in excess of a certain number when he said: "Over
time a score of [Rare & 'Cosmic'] will be a rare occurrence. Hence I added
the word "Cosmic" to connotate we might break open a bottle whenever (if
ever) we attain that rating again. (but make my bottle V-8, please <g>). To
read the other possible ratings, read the header description, above.

Paper Profits Table

Well, the NLV Return broke the 20% psychological barrier, today (Friday).
But the scampy S&P bolted ahead to 23.47%, a little less ahead of us than it
was Thursday. Frankly, if our tortoise has got to lose to the S&P Hare, let
it be in the 20%+ region or more. But I don't want to LOSE!

Closed Transactions Table

We did fairly well across the board. Our Avg Win, P(win), and Avg Prof/Trade
all leapt forward. Another few days like today and we might just be able to
advance our Rating to Excellent.

Put Trading Activity for Report Date

Generally, we want STO Premiums to be as big as possible and we was BTC
Premiums to be as small as possible. This would give us
optimum profits. In other words, we want to buy low and sell high, but with
put writing its always in reverse order. Note that all Premium, STO, and
Profit/Loss Columns should be multiplied by 100 to get the per contract
numbers and that all positions we enter into will always be for as least two
but probably more contracts per position.

Abbreviations: STO-Sell to Open; BTC-Buy to Close; AROM-Annualized Return on
Margin; S/L Tgt-Stop-Loss Target

Sell to Open (STO)
Symbol Expires Strike Premium BTC Tgt Sell By Date S/L Tgt
None

Buy to Close (BTC)
Symbol Expires Strike STO BTC
Profit/Loss Days Held AROM
PRU 06/16/07 $80 $0.80 $0.50 $0.30 11
118.2%
ANF 02/17/07 $72.5 $0.24 $0.15 $0.09 2
220.0%
ANF 05/19/07 $60 $0.55 $0.41 $0.14 3
228.5%

Administration
In addition to increasing our time-stops, we've loosened our BTC stops. This
means that we'll be waiting for bigger profits per trade but exposing us to
the same surprises described in the commentary, above. But keep in mind, you
must risk more to make more. Want risk-free returns? Get U. S. Government
Bonds. The return? Around 5.0% per annum. About a quarter of what we are
doing to date. The trick is to control risk and that's a trick devoutly
wished by me. <g>

Disclaimer:
This is the fine print and is designed to protect me in these litigious
times, and until I get better wording for this disclaimer, you are under
notice that I am not selling my services nor any other product, nor am I
trying to induce you to trade along or independently, with me. I am merely
offering a journal, so to speak, of my portfolio's transactions and results
with the hope that you will glean information and educate yourselves in the
stock market in general and option trading dynamics in particular. Trading
in the stock market and in options involves substantial risk and much money
may be lost. Beginners, especially those with little or no understanding of
the stock market, lose most, if not all of their capital in a relatively
short time. In other words learn from me and my mistakes and if you want to
risk your money in the markets, that's your business and has nothing to do
with me. I am not your representative, broker, advisor or any other type
agent acting in your interests. As a matter of fact, if you want to invest
your money, I recommend you hire your own advisor other than me.
Copyright (c) 2007 Leonard Mednick, MBA, CPA (Ret); Managing Member LIME
Holdings LLC

_________________________________________________________________
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