Mark Juviler - Short DIA -
Casey Allen - Long DIA - 2.07 avg range (14-day)
David Brandman - Long ETFC - open 2.38, 0.37 avg rg.
Randy Shapiro - Long Gold - long GLD - 86.42 open Jan 10th, 1.37 avg rg. Feb Gold crossed $900 Jan 11, GLD at 88.76. Entry therefore 88.76. If definition of "cross" is different, perhaps on a closing basis, then I can adjust, for now GLD only touched over $900 based on Feb futures.
Ernie Arnow - Buy POT - 135.16, avg rg 7.27.
John Wellbourne - Buy AEGG - 0.72 open/offering price, avg rg 0.13.
Jim McCarthy - Buy Crude Oil = USO - down 50c from 75.25 = 74.75 entry. 1.91 avg rg.
Herb - Buy Natural Gas = UNG - 39.25 open, 1.14 avg rg.
Rolf Olson - Buy MBIA = MBI. Open 12.99, avg rg 2.73. (Due to the extremely large average range = high risk = In order to risk $8500 in this stock, we only need to buy 3100 shares (8500/2.73 = 314 shs) or $43,000 (4.3% of portfolio). But we will discuss allocating 8.5% of portfolio as well as the much smaller 4.3% risk-adjusted portfolio position size.)
Peter Afif - Buy DBA (Commodity ETF) - 34.71 entry, 0.65 avg rg.
Ken McCue - Buy SPY on Jan 22. Avg rg will be reported at that time.
Tim West - Sell Short TLT - 94.87 entry. Avg rg 0.93.
-----------------------------------------------------
For position size, divide $8,500 risk per position by three times the average daily range. We do this so that our 12 positions have a total risk of 10% of our $1,000,000 portfolio. I'll use an excel spreadsheet to enter this data so you can see the position sizes.
-----------------------------------------------------
DIA -
DIA - 2.07 avg range - no position
Long ETFC - open 2.38, 0.37 a.r. = $8,500/(0.37*3) = 7657 shs = $18,225 (2% capital)
Long GLD - 1.37 avg rg. 88.76 = $8,500/(1.37*3) = 2068 shs = $183,566 (18% capital)
Long POT - 135.16, avg rg 7.27 = $8,500/(7.27*3) = 389 shs = $52,675 (5% capital)
Long AEGG - 0.72 open/offering price, avg rg 0.13. = $8,500/(.13*3) = 21794 shs = $15,692 (2% capital)
Long Crude Oil = USO - down 50c from 75.25 = 74.75 entry. 1.91 avg rg. = $8,500/(1.91*3) = 1483 shs = $110,885 (11% capital)
Long Natural Gas = UNG - 39.25 open, 1.14 avg rg. = $8,500/(1.14*3) = 2485 shs = $97,551 (10% capital)
Long MBIA = MBI. Open 12.99, avg rg 2.73. = 1037 shs = $13,481 (1% capital)
Long DBA = 34.71 entry, 0.65 avg rg. = $8,500/(.65*3) = 4358 shs = $151,300 (15% capital)
Buy SPY on Jan 22. Avg rg will be reported at that time.
Short TLT - 94.87 entry. Avg rg 0.93. = $8,500/(.93*3) = 3046 shs = $289,030 (29% capital).
-------------------------------
All summed up - we have 93% of capital contributed and we have only 9 of 12 positions on as 2 offset each other and the last gets put on January 22.
==========================================================
Now all of these calculations might make you think I have lost my mind, so I will also put the portfolio together utilizing equal capital per position and we'll see the difference. The key here is that volatility drives position size. If volatility reduces in each position, then position size can increase. If volatility increases, then position size should decrease. We will only hold a static position for this exercise.
======================
Comments? Questions?
Friday, January 11, 2008
Next Meeting - Wed, Feb 13th - BobbyQ's Westport
Greetings: We had another great meeting and discussed a variety of ideas from macro-economic to industry-trends to individual stock selections. Mark Juviler presented for the last 30 minutes of the meeting (we ran out of time at 8PM and were booted out by the poker players eager to throw their money on the table). Mark presented on "How to design a trading system" and showed the three month results of one intraday trading system in the Dow Jones e-mini futures. Six of us stayed to have dinner and enjoyed a delicious variety of BobbyQ's finest meals.
Thank you everyone for your participation and I think that this month will be very interesting to see how our "Round-Table" ideas shape up.
Here are the guesses:
Mark Juviler - Short the DJIA - no reason discussed.
Casey Allen - Long the DJIA - market is oversold and due for a rally.
David Brandman - Long ETFC (E-Trade Financial Group) - They have cleared off $3 billion from their balance sheet.
Randy Shapiro - Buy Gold - based on front month Feb futures, buy on a cross of $900 OR on a drop back to $850. Risk $30 if buy at $850.
Ernie Arnow - Buy POT (Potash Corp) - It takes five years to develop a mine and they have the biggest mine operating now.
John Wellbourne - Buy AEGG (American Energy Group) - [If we had a poll from last meeting, then John would have won the contest with the gain in AEGG from last meeting to this meeting.] John updated us on the news on AEGG and what news would need to hit in order for the stock to advance. If the company gets a "reserve report" then it would be ready for a big move up.
Jim McCarthy - Crude Oil has been advancing on bearish news. This is bullish. Buy Crude Oil. 95.00 last basis March. Buy a drop of 50c.
Herb - Buy Natural Gas. Natural gas has lagged the rally in crude oil. (UNG is the natural gas e.t.f. that buys and holds various futures contracts) (USO is a crude oil e.t.f. that holds crude oil futures contracts)
Rolf Olson - Buy MBI (MBIA - Municipal Bond Insurance) - "I'm a sucker for catching a falling knife and I believe you should buy the news and sell the news. " With MBI in the news lately and the stock down from 76 to 13, there is an opportunity to buy. They cut their dividend to save $80 million and they have a $1 Billion line of credit established. Their goal is to maintain their triple-A rating. They have a bond issue that will take precendence over all other bonds issued. Also, Marty Whitman of the Third Avenue Value Fund is buying the stock. NOTE: Most responses/questions revolved around "Why not wait for the stock to bottom before buying?" or "Why not wait until the price moves back up over $20/sh?". Response: Rolf, feel free to post your reply to this question here.
Peter Afif - Buy DBA (Commodity e.t.f.) - Global warming is causing the price of food to advance at a time when we have a foolish policy in place to encourage corn consumption. Buy commodities.
Ken McCue - Buy SP500 on January 22nd close. Cycles are pointing lower until then and a low risk buy may present itself at that time.
Tim West - Sell Short Long Term Treasury Bonds - (use TLT for stock accounts, or USH8 for futures traders). The price of gold and the price of bonds generally do not move together but they are now. They are both benefitting from the move to "safe" instruments. However, the central banks have been injecting massive amounts of liquidity (over $2 trillion) into the system and this will turn into an inflationary spiral in the not-to-distant future. M3 is growing 16% yoy while the M2 is only showing 6%-7% annual growth. Inflation is likely running at 6%-9% and not the low 3% they are reporting right now. Interest rates will likely start rising sharply once people stop lending their money at these extraordinarily low, negative-real-rates of return. Gold is telling you to sell out of bonds - it is a matter of time until bonds come undone. I will be wrong if we go into a deflationary depression, so use stop losses equal to 3 average ranges. There were many questions relating to this position: "What if the Fed eases again? How will that affect your opinion?" "What about the deflation going on in housing?"
The next step for the contest is to collect the opening prices of each of the ideas above. I will post the symbol, price, etc, and 10-day average range. The 10-d.a.r. is the divisor for the movement in the market. Example. If Bonds fall 1.5 points and the average range is 0.75 pts, then my call would be correct by a # of 2. (1.5 correct movement/0.75 avg range = 2 avg ranges).
The next step is to build a portfolio of all of these ideas and give the same $risk for each position. We want to have each idea be equally-weighted, therefore, we will weight it according to its volatility. Our portfolio is $1 million and there are 12 ideas. If each idea were to move 3 average ranges against the portfolio, then we will design it so that we lose 10% or $100,000. So each position can risk $8,500. Therefore, we can put on whatever position size so that the risk equals $8,500. This may involve using some leverage, as you'll see.
The next post will go into the finer details.
Please feel free to reply to any idea and add comments to your forecast or to post a question. I can try to answer any questions that come in or relay those questions to the correct person.
Happy Trading,
Tim 1:01PM EST Friday, Jan 11, 2008
Thank you everyone for your participation and I think that this month will be very interesting to see how our "Round-Table" ideas shape up.
Here are the guesses:
Mark Juviler - Short the DJIA - no reason discussed.
Casey Allen - Long the DJIA - market is oversold and due for a rally.
David Brandman - Long ETFC (E-Trade Financial Group) - They have cleared off $3 billion from their balance sheet.
Randy Shapiro - Buy Gold - based on front month Feb futures, buy on a cross of $900 OR on a drop back to $850. Risk $30 if buy at $850.
Ernie Arnow - Buy POT (Potash Corp) - It takes five years to develop a mine and they have the biggest mine operating now.
John Wellbourne - Buy AEGG (American Energy Group) - [If we had a poll from last meeting, then John would have won the contest with the gain in AEGG from last meeting to this meeting.] John updated us on the news on AEGG and what news would need to hit in order for the stock to advance. If the company gets a "reserve report" then it would be ready for a big move up.
Jim McCarthy - Crude Oil has been advancing on bearish news. This is bullish. Buy Crude Oil. 95.00 last basis March. Buy a drop of 50c.
Herb - Buy Natural Gas. Natural gas has lagged the rally in crude oil. (UNG is the natural gas e.t.f. that buys and holds various futures contracts) (USO is a crude oil e.t.f. that holds crude oil futures contracts)
Rolf Olson - Buy MBI (MBIA - Municipal Bond Insurance) - "I'm a sucker for catching a falling knife and I believe you should buy the news and sell the news. " With MBI in the news lately and the stock down from 76 to 13, there is an opportunity to buy. They cut their dividend to save $80 million and they have a $1 Billion line of credit established. Their goal is to maintain their triple-A rating. They have a bond issue that will take precendence over all other bonds issued. Also, Marty Whitman of the Third Avenue Value Fund is buying the stock. NOTE: Most responses/questions revolved around "Why not wait for the stock to bottom before buying?" or "Why not wait until the price moves back up over $20/sh?". Response: Rolf, feel free to post your reply to this question here.
Peter Afif - Buy DBA (Commodity e.t.f.) - Global warming is causing the price of food to advance at a time when we have a foolish policy in place to encourage corn consumption. Buy commodities.
Ken McCue - Buy SP500 on January 22nd close. Cycles are pointing lower until then and a low risk buy may present itself at that time.
Tim West - Sell Short Long Term Treasury Bonds - (use TLT for stock accounts, or USH8 for futures traders). The price of gold and the price of bonds generally do not move together but they are now. They are both benefitting from the move to "safe" instruments. However, the central banks have been injecting massive amounts of liquidity (over $2 trillion) into the system and this will turn into an inflationary spiral in the not-to-distant future. M3 is growing 16% yoy while the M2 is only showing 6%-7% annual growth. Inflation is likely running at 6%-9% and not the low 3% they are reporting right now. Interest rates will likely start rising sharply once people stop lending their money at these extraordinarily low, negative-real-rates of return. Gold is telling you to sell out of bonds - it is a matter of time until bonds come undone. I will be wrong if we go into a deflationary depression, so use stop losses equal to 3 average ranges. There were many questions relating to this position: "What if the Fed eases again? How will that affect your opinion?" "What about the deflation going on in housing?"
The next step for the contest is to collect the opening prices of each of the ideas above. I will post the symbol, price, etc, and 10-day average range. The 10-d.a.r. is the divisor for the movement in the market. Example. If Bonds fall 1.5 points and the average range is 0.75 pts, then my call would be correct by a # of 2. (1.5 correct movement/0.75 avg range = 2 avg ranges).
The next step is to build a portfolio of all of these ideas and give the same $risk for each position. We want to have each idea be equally-weighted, therefore, we will weight it according to its volatility. Our portfolio is $1 million and there are 12 ideas. If each idea were to move 3 average ranges against the portfolio, then we will design it so that we lose 10% or $100,000. So each position can risk $8,500. Therefore, we can put on whatever position size so that the risk equals $8,500. This may involve using some leverage, as you'll see.
The next post will go into the finer details.
Please feel free to reply to any idea and add comments to your forecast or to post a question. I can try to answer any questions that come in or relay those questions to the correct person.
Happy Trading,
Tim 1:01PM EST Friday, Jan 11, 2008
Thursday, January 3, 2008
Next Meeting - Jan 9th - 5:30PM - BobbyQ's
Greetings and Happy New Year!
BobbyQ’s is ready for us to meet next Wednesday, January 9th at 5:30PM for another intriguing get together.
Last month turned out to be an opportunity for us to hear about American Energy Group (bulletin board symbol AEGG – stock price was $0.54 bid, $0.60 ask at the time). The CEO Pierce Onthank of AEGG was invited by one of our new group members John Welbourn to present his case for buying the stock of this royalty-stream-based Pakistani natural gas company. Given the recent headlines out of Pakistan with the murder of a Presidential candidate – the opportunity may be even more important to review and consider. Pierce had a persuasive argument for the company going forward and we appreciate John for inviting Pierce to speak with us.
AEGG info at Marketwatch
http://www.marketwatch.com/quotes/aegg
The balance of the last meeting was reviewing previous monthly ideas and collecting a portion of everyone’s new ideas. Unfortunately we didn’t collect everyone’s ideas and therefore there is no contest for this month – sorry or apologies to anyone who had a terrific idea that didn’t get exposure at the meeting.
The big winner of the contest for Nov-to-December was David Brandman who chose China Finance (JRJC) as a short-sale. The stock had its exact high on the night of the meeting and tumbled from the $38 area to below $17 before rebounding into the meeting. An amazing call indeed. Congratulations David. Can you do that again for us next month? I know we are all interested to know David’s ideas regarding his January Effect strategy. David mentioned some picks at the meeting, perhaps Krispy Kreme Doughnuts among others. I’d like to know what he likes now.
Mark Juviler was great to bring his laptop computer running QCharts software with live data (of course the markets were closed) so we could pull up charts of each stock or market we were discussing. It was a key element of the meeting to have Mark provide this for us and allows us to discuss whatever ideas or technical indicators we would like to. Thank you – thank you Mark.
I look forward to seeing all of you in the new year and please reply if you know you can make it.
Best regards,
BobbyQ’s is ready for us to meet next Wednesday, January 9th at 5:30PM for another intriguing get together.
Last month turned out to be an opportunity for us to hear about American Energy Group (bulletin board symbol AEGG – stock price was $0.54 bid, $0.60 ask at the time). The CEO Pierce Onthank of AEGG was invited by one of our new group members John Welbourn to present his case for buying the stock of this royalty-stream-based Pakistani natural gas company. Given the recent headlines out of Pakistan with the murder of a Presidential candidate – the opportunity may be even more important to review and consider. Pierce had a persuasive argument for the company going forward and we appreciate John for inviting Pierce to speak with us.
AEGG info at Marketwatch
http://www.marketwatch.com/quotes/aegg
The balance of the last meeting was reviewing previous monthly ideas and collecting a portion of everyone’s new ideas. Unfortunately we didn’t collect everyone’s ideas and therefore there is no contest for this month – sorry or apologies to anyone who had a terrific idea that didn’t get exposure at the meeting.
The big winner of the contest for Nov-to-December was David Brandman who chose China Finance (JRJC) as a short-sale. The stock had its exact high on the night of the meeting and tumbled from the $38 area to below $17 before rebounding into the meeting. An amazing call indeed. Congratulations David. Can you do that again for us next month? I know we are all interested to know David’s ideas regarding his January Effect strategy. David mentioned some picks at the meeting, perhaps Krispy Kreme Doughnuts among others. I’d like to know what he likes now.
Mark Juviler was great to bring his laptop computer running QCharts software with live data (of course the markets were closed) so we could pull up charts of each stock or market we were discussing. It was a key element of the meeting to have Mark provide this for us and allows us to discuss whatever ideas or technical indicators we would like to. Thank you – thank you Mark.
I look forward to seeing all of you in the new year and please reply if you know you can make it.
Best regards,
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