That was another superb month! Profit since June 8th is 57R or 172% for 3% risk per trade.
We are up 570% in the first 3 1/2 months of the portfolio, without compounding. All trades were posted live in the comments and in the portfolio and were simple calls or puts.

During the month we closed 31 trades. 21 (68%) of them were winning trades and 10 (32%) were losses.
Total wins were 65.18R
Total losses were 8.18R
Average win was 3.1R
Average loss was 0.82R

Expectancy is (68%X3.1R)-(32%X0.82R)=1.84R
This means that on average we should expect on each trade a profit of 1.84R.

We increased our expectancy compared to the previous months, and we did it while having more losers. That was our goal and we should be very pleased with this. 68% winning rate is a better reflection of what we should expect (we had a 90% winning rate in the previous months), but we still improved results because we let our winners run longer. Average win was 3.1R compared to 2R in previous months. That’s thanks to some very good trades with puts where stocks (retailers and COF mainly) kept falling day after day and we stayed with the trades. A very good run with CCJ as well.
Our biggest loss was 1.62R on GS, which is OK. Kept most other ones around or below 1R.
CLF was the one trade where a very nice profit that turned into a loss. But thankfully we only had 1/3 left when the stock dropped significantly and we got a nice exit on Thursday.

I want to thank everyone who has been participating in the comments. We have a great group going, focused on making money and exchanging some great ideas.
I am especially very happy to see so many of you making money and trading successfully in such a difficult market.

Happy 4th of July! Optrader

Quick notes on the markets this morning before I start drinking:

Our pals at GS decided today would be another good day to downgrade banks as their unrelenting attack on anything financial shifts back from insurance (yesterday it was AET and HNT) to EU banks; Swedbank, Carnegie/Bankinter, and Banco Santander, with a statement that " European banks could need to raise around 60 billion euros ($94 billion) in additional capital, or withhold dividend payments for a year."

This sent EU markets down over 1% on a light trading day, ruining what was an optimistic open after the US markets decent show ahead of the holiday weekend.  UBS had made people happy by stating the Q2 loss would be break even or very small and would have no need to raise capital (Meredith Whitney panicked the markets on Wednesday, saying they would lose $2.03 per $20 share and would need to raise capital).  Zero losses would be quite a bit less than the $6.3Bn Whitney "expertly" estimated they would lose on June 11th, helping to drive them as well as other financials targeted by her and GS, down almost 15% in 3 weeks along with 1,200 Dow points over the same period.

The loss of faith in the financials engendered by this fear mongering also led to a 10% rise in the price of gold, a 10% rise in the price of oil and 3% drop in the value of the dollar (which was on it’s way to a breakout that was bringing down commodity prices when Whitney and GS went on the attack).  Now I’m not going to say that these are evil, contemptible, manipulative bastards who have perverted the system in order to use their influence to drive the markets to whatever positons they have investments in - that will be for a court or a firing squad to decide after the revolution - I’m just pointing out the coincidences that continue to swarm around these particular "analysts."

Dealbreaker.com has taken to calling Whitney "Mistress W, the Dominatrix of Banking" and it would be funny if the markets didn’t take her outrageous predictions so seriously and cost people Billions of dollars, especially since dividend paying banks are the type of long-term investments held by many retirement funds and tend to be bailed out by the Fed, who should be demanding that the industry in general be held up to higher standards to promote financial stability, rather than letting yet another debacle of lies and innuendo like last week’s attack on LEH crush another financial institution the way BSC was disposed of (at OUR expense).

Meanwhile, Hank Paulson kicked the dollar while it was down, wrapping up his European trip where he has repeatedly emphasized that the US is more concerned about maintaining growth than fighting inflation.   As I detailed in last week’s article "Are You 67% Better Off Than You Were" the reason the Administration is willing to trade inflation for growth is that inflation is a highly disproportionate tax on the poor (and, with the elitist group we have in charge now, that’s anyone with less than $10M liquid) and that 75% of the "growth" in income in this country goes to the top 1% of all wage-earners with another 5% trickling down to the rest of the top 10%.  Supporting this status quo is, as I said in this morning’s post, a direct violation of the right to life, liberty and the pursuit of happiness for 90% of our population.

Over in Asia, the Nikkei fell yet again, making 12 days in a row, the worst streak on that index since 1954 and the Shanghai drifted another 0.5% lower despite a 1% pick-up on the Hang Seng.  All trading was light and uneventful with the US markets closed.

Oil was uable to hold yesterday’s highs in International trading as my simple plan to take down the price of oil goes into play.  Of course Obama’s advocacy of conservation has already spurred counter-attacks from the right, with Floyd Brown (President of the National Campaign Fund and the man who created the "Willie Horton Ads" in 1988)  promising "a regular series of ads exposing Barack Obama for the left-wing politician that he is…  Obama actually said that his solution is for us to eat less, drive smaller cars and keep our homes hot in the summer and cold in the winter."

Obama’s left wing energy policy includes the following bullet-points:

• Reduce Carbon Emissions 80 Percent by 2050
• Invest in a Clean Energy Future
• Support Next Generation Biofuels
• Set America on Path to Oil Independence
• Improve Energy Efficiency 50 Percent by 2030
• Restore U.S. Leadership on Climate Change

Hopefully McCain and Mr. Brown can save us from this madness!  Over in Israel, they have initiated a plan to make the oil-less nation energy independent in 10 years - no wonder Iran wants to wipe them out and no wonder McCain is drawing record contributions from oil interests, on a pace to out-raise President Bush, who raised nearly 40% of his campaing dollars from oil interests (not including additional millions of "soft money" contributions or the $50M he racked up in his first primary race).

Perhaps it is because Bush supporters got such a fantastic return on their investment that McCain is attracting so much interest.

So the results of today’s foreign trading are inconclusive and it remains, as it has all month, all about the price of oil as it is the "one thing" that is holding this economy down, not the banks, not the housing, not the manufacturing - just oil…  We have earnings next week and we’ll see how deep the damage has really run and I’ll have more to say on the markets over the weekend.  Hopefully we’ll have some good reasons to buy next week but we’re going to need a catalyst to kick the market back in gear.

Have a happy holiday!

- Phil

We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness.

That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed, That whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government, laying its foundation on such principles and organizing its powers in such form, as to them shall seem most likely to effect their Safety and Happiness.

That’s what we are celebrating today in America, about a year into the actual start of the revolutionary war, which was initiated when the first Continental Congress (the declaration was formed by the 2nd one) initiated a boycott of British goods (the Boston Tea Party) and a petition to King George III to repeal the Stamp Act, the Townshend Act and other nasty taxes and deprivations of the rights of the colonists in October,1774.

The response of King George was to march on Lexington and Concorde in April, 1775, causing the 2nd Continental Congress to be convened in which they signed the much lesser-known "Declaration Setting Forth the Causes and Necessity of Their Taking Up Arms," in July of 1775.  Like many Georges, this King George had foolishly started a war on the other side of the world looking to impose his will on an entrenched society and his army, well known to be the finest in the world, was humiliated by a rag-tag bunch of rebels, who received aid from George’s long-standing enemy (France) and the war ultimately ended up being the thread that led to the 100-year destruction of the British Empire.

Thank goodness we have history books or our leaders may repeat the mistakes of the past (those of them that read books at least!).

My favorite part of the Declaration of Independence is certainly the line that "whenever any Form of Government becomes destructive of these ends, it is the Right of the People to alter or to abolish it, and to institute new Government" - this is something we apparently just don’t do often enough these days!  Our founding fathers do indeed caution us "that Governments long established should not be changed for light and transient causes" but they go on to say that "when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security."

So it is not unpatriotic to question your government and your elected officials - it is, in fact, unpatriotic NOT TO!

Whether or not it is true that President Bush actually said "Stop throwing the Constitution in my face, it’s just a goddamned piece of paper!" to one of his aids, the fact is that even this Supreme Court has rebelled against the Administration’s loose interpretation of the laws.  Even if you are in favor of the Patriot Act and the treatment of human beings in Guantanomo Bay and Abu Gharib and even if you think we are fighting a just war in Iraq and even if you think that Bush purchasing over 250M barrels of oil for the SPR (using our money), which he has refused to release a drop of while the nation suffers (Clinton released oil 3 times to great effect) is just fine and even if you are comfortable with dozens of Bill of Rights violations under this Administration (oh wait, here’s 10 more) - you have to at least respect the right of others to want a change… It’s in the Constitution you know!

 You may not mind the fact that this Administration has overspent the national budget by $4.5Tn in 7 years, doubling our national debt and placing a future tax (without representation) on every US household of $45,000 and incurring interest payments of $225Bn a year, especially if you are wealthy and $45,000 means little to you personally.  You may not mind that the dollar has been devalued by over 40% since Bush took office, wiping out $18Tn of US household assets (while the top 10% of the country increased their assets by over 50%, keeping "even" as the rest of the country fell apart).  You may not mind that the value of US homes is down almost 20% from their peak in the past 2 years or that homeowner’s percentage of home equity has dropped to 46.2%, the lowest measure since WWII while home debt rose to a record $10.6Tn even as the value of those homes slipped by $3Tn.

Health care costs have gone up 400% since Republicans defeated the Clinton Health Care Reform Plan in 2003, outpacing costs in the rest of the world by about 200% as America remains the only industrialized nation on the planet that does not provide universal health care.  The "Misery Index" an official government measure of the happiness of the people measured with a combination of unemployment and inflation - even using the government’s BS low inflation numbers and BS low unemployment figures - has jumped from 7.35 in 2000 to 9.68 in May, before oil jumped $20 and before unemployment jumped 10%.

Happy 4th of July!