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.

13 September 2012

Thanks, Uncle Ben!

It's been a very long time since my last trading/investing post. I've continued to ride my CSMACO position (long SPY since May), and made a few covered call trades (Microsoft, Canadian Dollars were both good ones the last few months). And the Collaboration is Good trade has signaled an entry now and then in S&P Futures. Some I took, some I didn't, thanks to the distractions of moving across the country. I've also made some bearish bets on Salesforce.com (what is their revenue model really?) and Apple (haven't you hipsters run out of money yet?), which have not worked out too well. I trimmed back some of my poorly performing gold-related positions to offset some gains in other things immediately before the gold rally resumed - figures. But I still have a moderate stake in gold, so all is not lost. Overall it's been a tough but slightly positive quarter, but the trading has been pretty muted, and nothing interesting enough to write about.

But when it became clear, a few days ago, that the Fed was almost certainly going to announce a 3rd round of quantitative easing (QE3) in the September FOMC meeting, I knew I had to take a leveraged stake. Unfortunately real life kept me from finding time to enter a position until the last minute, but the market gave me the courtesy of a downtick on Sep 10th. This let me get a pretty good price on a sizable chunk of SPY calls, which I held through the announcement today.

Everyone knew QE3 was coming, and just about everyone was sure it was today. But there is a kind of gun-shy quality to this market: it reacts some to the rumor, but it prefers to wait for the actual news before making a decisive move. Call it what you will, but I like to think of it as a confirmation rally.

Going into the announcement, SPY was just about unchanged from yesterday, and random-walking market movements had already given me a small return on the calls. Sure enough Ben Bernanke announced QE3 and made a lot of meaningless bluster about "doing whatever it takes", etc etc, designed to give the masses confidences that he knows what he's doing and he'll make your life better. He doesn't, and he won't. But in the meantime, the entire financial system rallied: stocks, bonds, currencies (not the dollar, of course), commodities. Every single thing on my watch list is green today, except for the VIX. The S&P chart looks like a bottle-rocket going off.

I exited half the position at twice the entry price, meaning that I have my initial investment out and future proceeds are all profit. QE rallies usually take a few days to play out, so I'll hold the other half for a little while and see if I can improve the return a little.

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