by Phil Davis - July 27th, 2014 8:42 am
What a month May was!
Through May 23rd, we had 158 winning trade ideas against 29 that did not work out (as of the review) for an 84% winning percentage. As usual, we begin our reviews with the last week of the previous month – even though the last week of May didn't overlap into June – as last weeks often do into the new month (which is why we do it).
Still, 4 parts is plenty for one month, so it's time to move on! Our Trade Reviews not only let us know if we're on or off track but, by putting the trades in context, hopefully we remind ourselves what works and what doesn't work in vartious situations so that, when we see a similar situation, we are ready, willing AND able to pull the trigger.
As usual, we should never be at 100% because we WANT to have trades on both sides of the table (as hedges) and the profit or loss of the trades are as of today, so we look very closely at the LOSING trades – to see if we now have better entries than we had originally (assuming we still like our premise).
Monday, May 26th was a holiday, so we start this month off on a Tuesday:
Selling risk to others in our Member Portfolios has given us 10%+ gains for year (so far). In fact, the only strategy we agreed with from the above chart was gold, which we bet heavily(along with DBA) at the beginning of the year.
Remember, this isn't about making good picks, per se – it's about having a good strategy that gives you a high probability of success – even when you are wrong about a trade. BEING THE HOUSE and selling risk (through options) to others is the closest thing we get to
by Phil Davis - July 12th, 2014 8:30 am
Our streak continues!
The first 3 weeks of the month (Part 1, Part 2, Part 3) saw 142 trade ideas (almost 50 per week) with just 17 misses for an 88% win rate. Of course – it's a bit like shooting fish in a barrel when we call a bottom correctly and, as you can tell from the large volume of picks, we put all that sidelined cash to good use.
Not every call is bullish, of course, as I was saying in Friday's post, BALANCE is the most important aspect for your portfolios if you intend to be a trader for more than just the short run. So, in theory, it shouldn't be possible for us to get to 100% and, actually, 88% probably means we were a little too bullish and just got lucky! We have to watch out for that – and that's why these reviews are so important.
Our Trade Reviews not only let us know if we're on or off track but, by putting the trades in context, hopefully we remind ourselves what works and what doesn't work in vartious situations so that, when we see a similar situation, we are ready, willing AND able to pull the trigger.
Able is a very important aspect of our trading strategies we tend to ignore. My call to go to cash in late March left us with empty portfolios we were able to fill up in May and THAT is why we have such a fantastic winning percentage for the month – we made our selves READY and our mindset was WILLING because we were ABLE to take advantage of the market dip by going to cash.
Just because we are long-term investors – it doesn't mean we can't time our entries and exits when we reach the tops and bottoms of our trading channels!
This is one of the most important articles I've written in a long time.
by Phil Davis - June 21st, 2014 6:20 am
So far, in the first two weeks (through the 9th), we had 94 Trade Ideas for our Members and all but 11 (88%) were winners (see Part 1 and Part 2). Of course we use hedges, where we purposely bet the opposite direction in order to protect ourselves so it's not possible to be 100% and even 88% is strange – usually we're aiming for around 66%.
The trick isn't to be right ALL the time, but to control your losses so they don't counteract the gains. Usually, we go for trades that have a good chance of paying 200% or more within 18 months so we EXPECT to make 10% a month or more. When those work, we get huge wins – if we then keep our losses to 20% (of our allocation) or less – the statistics take care of themselves as +20%, -20%, +60%, -20%, 0% on 5 trades (for example) gives you 5 allocations that made an average of 8%.
When one of those allocations goes up 100%, you don't even need to get half of them right to have a winner – but ONLY if you control your losses AND maintain consistent allocations. That's what we practice in our Long-Term Potfolios – PORTION CONTROL!
By scaling into positions (something else we practice with our Members in our Long-Term Portfolios), even if we lose 100% of our initial position – it's generally only about 20% of an allocation. Since we can't lose more than 20% of an allocation and we usually try to make 200% or more on the cash we lay out for our long-term trades (which nets 40% or more for a winning allocation) – again, math does its work over time.
That being said, let's have a look at how week 3 went in May:
May 12: Just Another Manic Monday
While investors may not have learned anything from the last crash, the Banksters have learned that you can manipulate just a few key,
by Phil Davis - June 7th, 2014 8:24 am
What a rally!
While stocks certainly aren't "cheap" by any measure, we've been able to identify 20 that are still good values. We've been compiling this list and going over trade ideas for playing them in our Tuesday Webinars since May 13th and, of course, we've been posting them in our Live Member Chat rooms, so this is just a review to consolidate our trade ideas.
We cashed in our Long-Term Portfolio last week at what we thought was a top but so far – so wrong on that call! Since it's up 19% in just 6 months, we're not going to cry about missing the last 400-point move on the Dow (2.5%) – we'll just have to look ahead to deploying our cash again, following the same strategy that was so successful in the first half of the year, which was, essetially, our "7 Steps to Consistently Making 20-40% Annual Returns" system:
As we did in building our Long-Term Portfolio, we're not going to rush in and buy everything. We will do exactly what we did in January where, following our Fall Buy List, we simply added stocks from our list whenever they became cheap. While our Members are able to pick up our trade ideas as they are released, we don't always add them to our virtual portfolios right away. As with the first half's Long-Term Portfolio, we will track every entry and exit in both our Live Weekly Webcasts, as well as in our Live Member Chat Room and alerts will be sent to our subscribers (you can join here, Basic and Premium Members get full access).
Our picks were originally grouped by industry sectors but, for reference purposes, I'm going to list them alphabetically below – these are the original trade ideas (the Webinar dates where we discussed our picks are next to the symbol), most are still playable but some have already taken off :
by Phil Davis - May 31st, 2014 8:44 am
May got off to a fantastic start.
In our first week alone (see Part 1) we had 47 trade ideas between our morning posts and our Live Member Chat room and, already, 42 of them (89%) are winners. Keep in mind the main purpose of these trade reviews is to look at the LOSERS and see if perhaps we have a better entry opportunity than we had before.
We missed on SDS (ultra-short S&P) but that was a hedge and we are still using it into June. We missed on PNRA and that's just a better opportunity to get in. We missed on TWTR and we already doubled down on that one and already cashed out with a profit in our Long-Term Portfolio (see our other review), not because we don't still like it but because we went to cash on our Long-Term Porfolio, since it was up 19% in 6 months and we decided to sit out the summer correction in CASH!!!
We don't know if our timing is perfect getting back to cash but even if we finish the whole year with the $98,430 gain we have now (out of $500,000) in the Long-Term Porfolio – we've certainly done our job. Can we do better? Of course we can – that's why we do these reviews – to see what's going right and what's going wrong so we can make adjustments along the way.
If CASH!!! turns out to be a mistake, then we can re-deploy it – that's not complicated, is it? I know that, as a trader, you feel like you are SUPPOSED to trade – especially those of us who are retired and, if we're not trading – we get kind of bored.
Well, we had 11 new trade ideas this Wednesday and Thursday alone (summarized in Friday's post) AFTER we went to cash – so it's not like we died, we just took adavantage of a positive turn in our portfolio to realize our virtual profits. After all, they aren't really profits until you take them off the table! Good poker players learn that the hard way…
by Phil Davis - May 29th, 2014 5:02 pm
And then there were 2.
Just two positions remain in our Long-Term Portfolio now, short puts we sold against HOV an EGLE that are "losers," so far. Of our other 29 virtual trades, which we finished closing today, only 3 have a loss, which gives us an 83% winning percentage – which is pretty much in-line with our usual performance for PSW Members (see our Trade Reviews).
If you want a quick summary of my reasoning for getting back to cash – it's the same one I had back in March, when we cashed out our Income Portfolio. I was interviewed on TV at the time, where I made my case for caution. Since then, the S&P is up from 1,890 to 1,920 and that rubber band is simply stretched too tightly for our liking now – so we cash out our more aggressive portfolio too.
Without further ado, here's our trade history in the Long-Term Portfolio, which died a sudden death on May 28th and 29th (there were a lot of positions to close) of 2014, at the age of just 6 months:
AAPL was our Stock of the Year pick, so that was a no-brainer and we were willing to allocate a much larger than usual block to it. ABX is one that can still work (and we will certainly be going back to this portfolio – in addition to our new Buy List, as we seek to redeploy our cash in the 2nd half of 2014) as are BTU, CLF and EBAY. EGLE is still open and the price is now correct, which is one of the reasons we ended up with more profit than we thought.
GLL taught us not to play GLL, the bid/ask spreads were ridiculous. HOV is our other still-open position, IRBT is new but we shut it down anyway (still playable) and LGF, LULU and RIG are still playable as new positions. We didn't shut everything down because we don't like them – we just wanted to be in cash through June 10th and, if the market is
by Phil Davis - May 26th, 2014 6:30 am
1,900 on the S&P, 16,600 on the Dow!
The month isn't quite over yet but we're up about 3% for the year now although, as Dave Fry points out, on record low volumes – which makes the whole thing sort of suspect.
It seems contrived but those that can engineer a new record SPY close were able to get the job done Friday.
To some extent, we've sat out this "rally" as we moved to mostly cash last time the S&P tested 1,900 and we're certainly not true believers just yet. Nonetheless, our virtual portfolios are well outperforming the market despite having very little of our cash committed. Our $500,000 Long-Term Portfolio is up a whopping 12.5% for the year ($62,500) with $499,650 of cash remaining, while even the more bearish $100,000 Short-Term Portfolio is up 0.7% ($700) with $83,840 left to deploy.
That's because we're teaching our Members this year "Don't Gamble With Your Investments - BE THE HOUSE – Not the Gambler" this year. Our key strategy where use options to sell risk to others, which gives us an excellent probability of making good money in up, down or sideways markets. Clearly, we've had a little of all of that this year!
We have the modest goal of making 20% a year, which keeps us on track to turn $250,000 into $5,000,000 in 15 years - allowing us to retire in style.
We have also been constructing a new Buy List (part 1 and part 2, so far) for our Members, our 20 favorite post-earnings bargains. Those are our "official" trades but, at Philstockworld – we're all about teaching our Members HOW to trade – using the principle of "Give a man a fish and you feed him for a day but teach a man to fish – and you feed him for a lifetime." Not only does it benefit our students but many of our students become masters themselves and enrich our trading community over time.
by Phil Davis - May 14th, 2014 1:33 pm
$25,000 Portfolio Review ($25KP):
Not much to report here, GMCR burned us but now we can turn that into a nice winner if it comes back down. Since we made $5 on the short puts, our break-even is $14.50 and we're almost there already. USO not going to well but not worth adjusting either. I'd like to roll up to the $39 puts, now $1.99 for .50 or less if oil goes higher (now $102.45). NFLX we just added today.
Butterfly Catching Portfolio:
I cannot stress enough how great this portfolio is for the conservative investor. We're using just 1/6 of our buying power and generating 20% profits on the whole portfolio. That means that 1/6th that's working is up 120% so far! You never want to go more than 50% invested – just in case one of your positions blows out and you have to adjust but we have plenty of room to add more – when we identify another stock with options that are priced more volatile than we expect the stock to be. It's a rough criteria but we seem to find them often enough. The low VIX makes it rough at the moment. Still, up 5% since last month – not too shabby!
- BTU – That one has been a wild ride and we'll need to roll the May $16 caller ($3.15) to the Sept $17 calls ($2.70) for net .45. We're getting more confident in the long story here, so we'll spend $450 to move up $1,000 in strike on our 10 contracts. Don't forget, these trades don't terminate in 2016 – we'll simply roll our long positions out to 2017 or 2018 when the time is right and keep on rolling the short positions - RAWHIDE!
- CZR – This one is like a little cash machine. Looks like we're on the nose this month and that means we're profiting almost all of the $3,200 worth of puts and calls that we sold on 3/31 (45 days) against our $6,600 long position, so that's 48%
by Phil Davis - March 15th, 2014 7:46 am
We got off to a hell of a start.
Part one of our trade review was a very busy week where we went bottom-fishing with 46 trade ideas (mostly bullish) in just one week and only 7 of them were misses for a very nice 84% success rate to start off the month.
Of course bullish trade ideas are like shooting fish in a barrel when the market goes up and up like this – the smart part is that we had 46 of them and that we went heavily bullish in the last week of January, right when we were bottoming – giving us the best possible prices.
That's why these channels are so important to watch, we trade inside of them, playing the odds that the tops and bottoms will hold and we try to catch the turns. That's why, at the moment, we are BEARISH – until and unless we break over the tops of our channels – at which point we can go back to betting on new highs.
Most of the trade ideas we review here are from inside the daily PSW Member Chat Room (and you can join here) but some are right in our morning posts, which you can have delivered to your mailbox via our Report Membership, while it's in progress, at 8:30 ALMOST every morning (some mornings I miss the mail-bot deadline). In fact, today I'll put a couple of **'s next to trade ideas that were in the morning post – just to see how well those work out.
At the moment (7:50 am) our Futures are doing what they usually do in the morning – rising on very low volume. We went long in Member Chat already (6:44) because you don't have to show us the same move 10 times in a row before we finally get it. Already we picked up a nice move off the bottom with our /NKD longs up 50 points already ($250 per contract) and the Dow (/YM)
by Phil Davis - February 27th, 2014 6:52 pm
What an interesting month this has been!
It will be even more interesting as we begin our trade reviews with the last week of the previous month and, when we left off in our January Trade Review, on the 24th, we had been shorting like crazy on the way down. Despite the massive flip-flop in the market, we caught it pretty well and came up with 118 winning trade ideas in January against 27 misses for an 81% success rate.
Always keep in mind that it's fairly arbitrary when we do the review vs. when we initiated the trade – especially in a market that fluctuates as wildly as this one. As long as you follow strategy rules for stopping out, stay balanced and portion your trades appropriately, all you need to do is pick a few more winners than losers and the money should take care of itself.
January 25th was the day we began our January Trade Review (Part 1 here) and we were thrilled with the drop at the time. It's always a good exercise to go over the month with the benefit of hindsight – aside from seeing which premises played out and which did not – you also may find some trades that are real hidden gems – ones that we still like but are cheaper than our original entries. Here we go:
What a lovely correction!
As noted in our Weekend Trade Reviews, we saw this dip coming from a mile away and, from the outset, we were never expecting more than 10% at most. We're not even close to 10% so far but is it already time to fish the bottom or should we maintain a "Cashy and Cautious" stance?