iceman5 the investor / trader

[k3nt]

[black_knight6]

No, I totally understand what your point was...but it's just like poker and EV: you "win" $X Y% of the time, but lose $V Z% of the time, and do the sums/products to work out the EV. Cuz really, worst case is that the market tanks 15% over a month and you can probably see that coming...or at least limit your losses.

[iceman5]

You can easily do some research to see how often the SP500 drops any significant amount in a months time. Its rare, but does happen.

Options expire on the 3rd Fri of each month. Here are the prices for each of the last 12 months,

11/17/06.....140.42
12/15/06.....142.34
1/19/07.......142.82
2/16/07.......145.73
3/16/07.......138.53
4/20/07.......148.62
5/18/07.......152.62
6/15/07.......153.07
7/20/07.......153.50
8/17/07.......144.71
9/21/07.......151.97
10/19/07.....149.67
11/16/07.....145.79
12/21/07......????? most likely more than 145

You can see that it doesnt move very much most of the time. During this past 12 months SPY is up about a little less than 7%. If you used my system, you would have a return of over 22%....when I say "return of 22%" its actually misleading.

Theres no way to actually figure the return because to do that you have to have invested some money. I dont have to invest any actual cash to do this so technically my return is infinite, but since in order to make a comparison, Im dividing the amount of premium I take in by the amount of money I would need to invest if I had actually bought the equivilent amount of shares that i am controlling by selling these puts.

In other words, if you bought 200 shares of SPY last year you would have a 6.8% return. If I continually sold 2 puts each month, I would have a 22% return when I divide the money I made by the $28000 you needed to buy your 200 shares even though I wasnt required to tie up my $28000.

There are ways to exit the trade when the market does go south on you.

In the months like 2/07 - 3/07 when the market does drop and you are required to buy the stock, you can either sell it right back and start a new put trade, keep the stock and sell call options against it, or you couldve bought the put back before the stock was assigned to you. You would lose money in that scenario, but you just move on and open the next months trade.

[black_knight6]

[iceman5]

I havent in the the past. Some spreads are set up to make a profit if the stock goes up, some make a profit it the stock goes down and some make money when the stock stays flat (or within a range). All of that assumes that you can predict which way a stock is going to move within a certain time period which puts alot more skill into play. Alot more skill than I have.

[black_knight6]

[iceman5]

[black_knight6]

It's a moneymarket, but I group moneymarket and bonds together.

I'm only really having bond/moneymarket as part of our portfolio only insofar as it's our 'emergency' monies (6months living)...we'll eventually have 15k for that, which will be moneymarket...so it's only really a 'nominal' bond/moneymarket content rather than diversifying into them because I'm being cautious.

It's hard to say what sort of international exposure we should have...it's been performing SO well lately, which kinda scares me, and the US has been doing fairly poorly (yay prez bush!) which suggests that we should look more to the US to outperform...but we'll see who wins in Nov. The first fund to get $$ after the moneymarket is the Vanguard 500, THEN the Total International then the Value index. We prolly won't be going into the international fund until a year from now anyway, so we'll see. I was initially for 60/40, so we'll see if I go back to that.

Thanks for the initial thoughts.

[T-Rod]

[iceman5]

[T-Rod]

[quote="iceman5"]3 more days after today until my Dec 145 Puts expire. SPY is trading for 145.33 as we speak. I was sitting very comforable just a few days ago, but the market took a turn as soon as T-Rod told me not to close out the position and lock in my profit [quote]

And so where is it going to come in at here on expiration Friday? Ah yes, way above 145 for the win.

T-Rod 1
Haters 0

[iceman5]

[black_knight6]

[iceman5]

[black_knight6]

You're predicting that over the next month (3weeks) that SPY will go up, or down...