Commentary
If you're keeping up with the news at all, you know that the stock markets
have, to put it gently, not been friendly to investors, me included, as the
tables below will attest. Yet, as I'm writing this report (2:20 a.m.
3/5/2007) the latest news headline from the AP, about 30 minutes ago was:
Asian Markets Plunge Across Board
Nikkei Tumbles for 5th Day; Europe Opens Lower
So this is what investors will be waking up to in the next few hours. Last
week it was China's 9% fall that had us (globally) all atwitter. This
morning it'll be Japan (Nikkei is the name of the main index for the Tokyo
stock exchange, akin to our DOW or S&P 500 depending upon your point of
view) that'll probably knock us for a loop, again.
All this hullaballoo seems so senseless to me. China's index fall last week
was because of some internal edict given by the Chinese government, since
ameliorated. The Chinese stock market, with all deference to a country four
times our size, is worth less than a tenth of our markets. Yet when China
sneezed last week, not only us but the whole world caught cold!
And Japan? Their issue is kinda esoteric. Basically, it has to do with the
fact that the Japanese central bank raised its interest rates from 0% (you
read that right, 0%) to ½%. That caused a lot of speculators in the Japanese
Yen, who had been able to sell Yen they didn't own (selling short) and buy
(going long) Euros, Marks, Dollars, Francs or whatever. In effect Japan for
several years has been financing traders at little or no cost to carry
foreign currencies in the traders' hopes that the foreign currencies would
appreciate with respect to the Yen. Now because it's going to cost a trifle
more to continue what has been a fairly profitable practice, you've got
these traders committing financial hara kiri and many in trading universe
following suit in lemming-like fashion, dragging down everyone else who, for
the most part, are baffled by these violent reactions.
>From an economic point of view, nothing has changed since two weeks ago! Our
economy, and the world's too as a matter of fact, is plugging along nicely.
Former Fed Chairman Alan Greenspan even remarked last week that as far back
as he remembers there has never been a period in time where there was no
recession in any part of the world simultaneously. And that's where we are
right now: no recession anywhere on the planet!
So I should be happy, right? Not really. That's because if these Negative
Nellies keep harping on the glass half-empty, and they keep marching off the
cliff in lock-step, they're going to drag guys like me along with them.
Option portfolios can only bend so much before they break under the
pressure. True, the bend is considerably more than a portfolio in outright
stock ownership possesses but unless the market finds its footing sometime
early this week, I will be forced to start liquidating positions rather than
take the chance on holding "just one more day" risking the total
annihilation of my account.
What it boils down to is that when aggregate investor psychology flips back
to a more normal level, all will be at one with the stock market universe
again. Then we can get back to the piddling issues like terrorism, global
warming, world hunger, rising oil prices, inflation, a collapsing housing
market, world peace, etc. These issues have been but a mere bagatelle when
up against the strongest financial engine ever giving us rising living
standards and greater economic opportunities: the American economy. And
"it's the economy, stupid" that should be driving markets not the
willy-nilly natterings we've suffered of late.
Paper Profits Table
Closed Transactions Table
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: 51.6%
Account Balance less Margin and Voluntary Reserve requirements available to
invest: 21.6%
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
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 © 2007 Leonard Mednick, MBA, CPA (Ret); Managing Member LIME
Holdings LLC
_________________________________________________________________
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