Not bad, not bad. Could have been better, but I did spank the S&P 500 thanks to last week’s downer. I had two trades out of nine that went bad on me, and they took a nice chunk out of money out of the total. My bottom line ended up +3.17% at $2,627 and the S&P 500 was -1.96% (see my Closed 2009 tab for all the details). Since all trades for October were Credit Spreads, you might be asking “where is the 10% return you were talking about?” Even though I spent 3 months testing and tweaking my trading plan, I still have a lot to learn.
First, I need to lean how to manage many positions. Because the reduce margin (or B/P Effect as TOS likes to call it) compared to Covered Calls and my 5% position size limit, I need to have as many as 10 or more trades pulling in 10% or more.
Second, if I am only ‘allowed’ to use 50% of my account balance, at a 10% return the total effect is 5% on the entire balance. Am I tempted to go over the 50%? I sure am, but resisting temptation and using rules and managing risk is what success is all about. So I will work real hard at ignoring that little devil on my shoulder.
I mentioned that I had two losing trades last month. They were very poor decisions on my part – and again I didn’t follow my plan to the letter. Of course, if I had I wouldn’t have even entered them and I may have had more successful trades. As they say, hindsight is 20/20. The important thing is getting out of these losers before I had to take the maximum loss.
Market Comment
Normally I don’t like to do this – I mean, if I did I would be posting all the time. Besides, there is plenty of ‘comment’ to be had out there. But, I just wanted to point out a few things.
Overall, earnings reports are pretty good and I think when the season started, everyone was expecting the market to react positively to the good news. But, I don’t think the guidance is all that good and after all, stock prices are based on potential, not what a company is worth today. Additionally, a lot of companies are reporting record profits but generally this is because of cost cutting, not increased revenue.
Then there is unemployment, deficits, increased government spending, unpopular wars – you name it; there isn’t much good news out there.
What does all that mean? I suspect there will be a correction and I think we are on the first leg of it now. I’m not saying that this will happen, but watch for a head-and-shoulders pattern on the next rally. If the SPX hits the 1078 major support/resistance level and pulls back, look out below. A strong Bear move could put the index back to the 950 level before it stops and figures out a new direction.
Thanks for reading and your comments/suggestions/corrections are always welcome.
- Jeff
