Disclaimer: I am not an investment advisor. When I describe my own trading activities, it is not intended as advice or solicitation of any kind.

15 December 2010

Now I Can Afford That Operation

The CiG trade, which bought Eurodollars on an entry signal a week ago, finally gave an exit signal on Monday at the close, so I exited the position by selling GEH1 at 99.59.  That gives a $75 profit.  Since I trade this in paperMoney, I wasn't paying a great deal of attention to how much I should trade, but this one really brought that home.  The risk of one Eurodollar contract is not equal to the risk of one S&P contract - not even close - and the margin requirements reflect that.  Eurodollars carry a margin requirement of $877.50 per contract, while S&P futures require $5625 per contract.  In order to take the same amount of risk, I should be trading 6-7 Eurodollars for every contract of S&P I'm willing to commit margin for.  If I had, this $75 profit would have been $450-525... very similar to the $500 I made on the S&P signal.

In other news, one of my Iron Condor exiting orders also filled on Monday, closing out my remaining 660/650 put spreads.  This leaves my protective debit put spreads on with nothing to protect, and it also tilts the delta into the negative territory again: -20.  With December expiry coming this weekend, and with implied volatility near its 52-week lows, it seems best to close this one out.  I'm working orders to close the two call spreads - the original 810/820 and the kite-component 830/840, the naked long 820-call of the kite, and the protective 630/640 put debit spreads.  Since my current position still has positive theta, though, I see no reason to rush things.  Either way the market moves it will approach my exiting limit orders, so hopefully over the next week or two we'll get a little end-of-year waggle so I can squeeze out a few cents per contract on the way out.  If not, I have a month before I have to make a final decision.  Once theta goes negative, or if delta gets uglier, the pressure will be on to make that decision a bit sooner.

I've had a limit-sell order working on Microsoft for a few weeks now, and it filled today.  I'm still a believer in the stock, but I bought quite a few shares of it when it was depressed, so I'm just rotating some capital out to bring my position value back down where I want it to be.  Readers of my facebook notes will recall that I had 5 "units" of capital in Microsoft.  This sell brings me back down to 5 units of capital in position value.

I'm expecting another increasingly bullish (for me that means bearish) sentiment survey this week, released tonight sometime.  If that's true, CS|MACO will still stand by and watch the Fed Cheerleaders... er, I mean Stock Market... without getting involved itself.

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