Me vs SP500

Okay, so I have been trying to analyze myself versus the SP500 for some time now, and due to the fact that I've had a number of accounts, I'm constantly adding and removing funds, and some laziness, I've finally come up with some preliminary numbers. But these numbers do not give a complete picture. When I first started, I was playing with a much smaller portfolio than I am now. And there are some years where I needed to reduce my leverage. Actually, I consider myself very lucky in that during my worst year, I reduced my leverage the most. So even though the % loss that year was very high, it was a smaller (but still substantial) loss of my net balance.

Year  SP500%  Me%
1994 -1.56    -
1995  34.11  0
1996  20.3   7.2
1997  31     19.3
1998  26.7   0.4
1999  19.5   73.9
2000 -10.1   31.7
2001 -13.1   8
2002 -23.4  -19.6
2003  26.4  -42.5
2004  9      35.5
2005  3     -22.9
2006  13.9   41.6
2007  3.6    29.9

My First Call Option

My AMD trade was against my rules and I am losing because of it, but I have decided to try out the ability to sell calls with this position.

Basically I bought in at 9.34. I then sold the Jan 18th calls at $10 for $.47. What this means is I give someone the option of buying my shares on Jan 18th for $10, and they pay me $.47 per share for that privilege. What this does is bring my share purchase price down $.47 to $8.87. If the stock trades above $10 on exp day then I make $1.13 per share, but I lose any money above $10. Actually I dont really lose that money, but I lost the potential to have made that money. If the price is below $10 on exp day, then I keep the $.47 and my shares.

The drawbacks here are 2 things. I've essentially locked my shares until they expire (or until I buy the calls back) and I do not protect myself from any downside drops in the stock price.

But the way I look at it is like this: I was only looking for a small gain in the stock, so if the stock trades above $10 on exp day, then chances are that I would have sold it anyway and not made that potential gain. Also, I do not plan to sell this at a loss, as I believe this stock will not go too much lower.

So basically I am giving out a loan to somebody on these shares. At 9.34 a share, a .47 option results in %5 for 40 days. That is actually very good. This seems very simple, but at least I have made the trade, thus forcing me to start understanding this technique. I need to understand what portion of the amount is the time value, and what portion is the implicit value (I think this is all time value since the option is currently out of the money). Also I need to undestand the time decay to get an idea of how much the time value will decrease.

Lets see how this works out.

Ohhhh noooo FFOX, I mean AMD!

Those who cannot remember the past are condemned to repeat it.

I made the same mistake on FFOX that I did with AMD. Not researching and waiting. This is because I had cash available on my OSG exit. Now I am stuck as I dont want to sell at a loss.

Perhaps I need these types of trades to keep me in check and remind me of how I need to follow my rules.

Another trade that is setting up is RIG. This is another driller in the oil services group. It is one of the biggest drillers and recently acquired another driller making it the largest by far. The PE of this newly combined company is around 10. Before the acquisition, it was trading at a PE of 16 and the other at a PE of 12. Analysts prediction indicate that it should be trading now around a PE of 12. Also, they are estimating earnings next year of $14. That puts a price target (at PE 12) of 158. Currently it is trading at 126 (dropped 3 dollars today). It has just dropped a lot due to 1.5billion in notes it has offered to banks (that is another great scam the banks have going). If this thing retraces back to 130 I will get in, but I will put in a +3 dollar leading limit to buy (once I am able to get out of AMD). Lets see if it works out as se

AMD Anyone?

One of my very first trades was FFOX. This was before the internet explosion and I was calling in my trades, but I bought this stock simply because it had dropped over 50%. I knew nothing about it and bought assuming that it would have to back up after dropping so much. The company eventually went bankrupt and I lost my entire account as I used all funds to buy it (luckily I didnt start trading with too much money, but it was a lot for me at that time of my life).

Well I feel the same way about AMD. Down 30% this month alone. There is a lot of bad news associated with this stock, but I dont think that justifies that large of a drop. This isnt Enron. This company actually produces a real product, but they've had losses for the last few quarters as they are trying to combine a company they bought (ATI) and roll out a new processor.

But I dont know the reason for the drop, but I cant help want to get in on it. At $9.34 with a volume of 21m shares, Im gonna break my rules and get in on this without much research.

Unfortunately this is often when I lose money, but I will put in a tight stop ($8.20?) to protect myself somewhat.

Out of OSG

After moving my protect to 70.75 I've been stopped out of OSG today. 9.4% profit - not bad for something I dont truly understand.

But from the message boards, Ive learned the runup has come from the rise in spot day rates for VLCC's. From some article it looks like the rates have increased 3X. This seems too large a move, so I must not understand the article correctly or I dont know the volatility of the spot rates. In any case there are some sites that show the spot rates like:

www.platou.com/Houston/Tankers/RealTimeInformation
www.braemarseascope.com/market_information/index.html
www.dietze-assoc.com/rates_d.shtml
www.crweber.com

I need to spend some time here and understand what this information means.

OSG,OSG,OSG!!!

I have been in and out of OSG for a few trades now, and considering I dont understand this stock, I have been pretty lucky. But as of last Wednesday (11/21) the stock was at 59 and is now trading at 69.25 - thats a 17% increase. I bought in much earlier at 64.75 so I was down until this last week. This time I put a protect sell order at 67.75 so I can at least realize a 4.6% gain (which is what I was hoping for, actually 5%).

But I dont understand the recent runup in the stock. Everything else in the commodities market is down a lot and there is no news on this stock.

The only thing that I found is that this stock has been upgraded by Analyst

2007-11-26 Omar Notka (Dahlman Rose & Co) from hold to buy

But the stock has started this runup before his upgrade. In any case, a search on this analyst resulted in a very high star mining rating for him with this stock. In not exactly sure what that means, but I wanted to log this info to keep track of it.

Lets hope this keeps running, because my other dogs are going downhill.

Figure out Ensco (ESV)

Okay, I have not done much on this board, and in this month I have given away much of my profits that I spent a lot of time trying to accumulate.

Anyway, I am holding a lot of ESV. This is based on a recommendation by a friend who does a lot of work and research. The stock is a very cheap stock with great management and growth and trades at a PE of 7. It is a Oil Drilling company specializing in shallow water drilling. I dont understand much about this, but the stock has been stuck at 53 for some time now after being in a downward trend (during the time which I bought in - funny how that seems to happen).

Anway, the yahoo message boards for this stock are filled with people who seem to know what they are doing, and the biggest explanation for the drop here is that the big money managers are selling these companies to generate cash to pay for the subprime mess. If there is truth to this then I should see a lot of institutional selling.

I plan on looking through the sec 13-f filings and see if I can see what the general trend has been for the last period (7/07-9/07). If this is true, then there should be a lot of selling by these large institutions. At the same time, I should be able to see what they are also buying. If there is a correlation, then this should be very interesting and I will try it on a couple of other stocks. If not, then Ill ask the guru's on the message board and document my findings.

Hopefully I wont wait another few months before I post again.

First Post

For the very first post, I will be adding the information from my first post on the Blog that I attempted to create before, but never fully completed.

In that post, I listed the following stocks on June 15th, 2006
Sym (type) - old price - new price - % diff
PD (copper) - 80.64 - 121.93 - 51%
BHP (steel) - 40.42 - 41.71 - 3%
X (steel) - 64.00 - 87.10 - 36%
RIO (steel, brazilian) - 22.27 - 34.64 - 55%
VLO (oil) - 60.21 - 55.30 - -8%
PBR (oil, brazilian) 78.47 - 98.60 - 25%
TRE (gold) - 7.10 - 5.26 - -25%

Wow, if I evenly split my money across the 7, I would have made 19%. 2% better then the S&P for 2007 in 6 months time (and TRE was a fools play for me, as I like the stock for no good reason and there are plenty of better Gold stocks out there).

This year I will put my money where it counts and make my goal of 40% (and help any others who may be following me)