Saturday, January 18, 2014

12-2 for January grade B-

Twelve winners, two losers for the January cycle, grade B-. The losers were the call side of a short strangle on GLD, and part of a short put backratio on SPY. Both were offset by other trades on the same underlying.
My theme for the year is trading ranges for all. I am doing more trades, and doing weekly reports, instead of day of trade reporting. Because I am doing so many more trades, it is a much larger chore to track and record each trade.

As always, before folks get excited about the high win percentage, keep in mind that most are high probability, low profit trades. A high percentage of winners is expected, but the profits tend to be quite small on each trade. An analogy is 10-to-1 long shots at the horse track. The person betting with a 10% chance hopes for the 10x payoff. The other side wins 90% of the time, but the payoff is tiny.

The stock market feels frothier, with big movers such as the Colorado marijuana stocks, and air pockets like Best Buy which reported only a slight decrease in sales. The AAII sentiment (link) is still okay at 39% bulls. A fundamental analysis sent out from Schwab has valuation in the middle range. So the market is in a okay place, though a +10 or -10 year is my expecation, with the bias towards the plus. The little old ladies at church are still afraid of the stock market. After the washout in 2008/2009, that skittishness might last another decade or more.

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