Personal Portfolio Update Archives

LEAP Options over Stocks

I was up over 10% this month, keyword of course being was. For those who follow my blog, you will see on a monthly basis I update with a “personal portfolio update,” letting my readers see where I stand in performance.

July +11.8%
August +12.88%
Sept: +4.54% (as of 9/20/12)

If you are a familiar with investing, odds are you will take a look at that recap and immediately identify that I am operating on a very leveraged scale. I mean 12% in a month? My account must be moving like a pinball, and honestly it really is.

But despite having up to 4-5% move on a daily basis, I still prefer trading with LEAP options over stocks. You may say that I’m playing with fire, but I see it as trying to get a fire going.

I have roughly $15,000 in my account as of today, a big step up from what I was working with at the start of this year, but relatively a small drop in the bucket when it comes to trading.

I believe that I can fairly easily hit a 10% a year return, but 10% on $15,000 ($1500) is immaterial in my eyes.

Because I am so confident that I can hit 10% a year, I want to amplify my return through leverage. With discipline I believe that LEAP options are the perfect vehicle. Highly leveraged securities but retaining a finite loss possibility.

If I had a bigger bank role, then 10% would be just fine, but I simply need to grow my account at a pace greater than 10% a year. As an FYI, Year to date I’m up 63.26%, which is insane.

The bottom-line is that to obtain such a crazy percentage, like all investments, I must take massive calculated risk.

Why am I being so Aggressive if it could turn against me?

  • I still believe I can outpace what I could do with traditional stocks
  • All investments have risk, you make the investment because you think the risks are worth it (article to follow about this)
  • My account balance is still small enough that I am comfortable taking this risk

Your “account balance is still small enough,” when will it be too large?

I believe that I will always have some port of my portfolio invested in the strategy I’m currently implementing. That being said, if I had for instances 100k in this account, a portion of my account would probably be in cover calls to take the edge off the volatility. I know this would hurt the return, but once I get myself established a little more, it will be best to mix up my portfolio into low risk/reward and higher risk/reward portions.

Why wouldn’t you just implement the strategy for the entire portfolio if you are so confident you can beat 10%?

I see cover call writing as the way the truly rich can obtain consistent lower risk returns. If my account was say $5 million, 6-10% return a year with lower risk would be the logical choice. I want to slowly work myself into a position where cover calls are obtaining a respectable return, so I will be able to ween off the high volatility. You never know when the next big crash is coming, it could be this year or 15 years from now and unless you are perfectly hedged (which tends to be a little tricky) you stand to destroyed. I would much rather lose 15% off a large amount than potentially 30+%.

Why are you writing this article?

To reaffirm myself. I am confident in my strategy, but I tend to get too caught up in the “Monthly Performance” number. As I said before, I was up a little over 10% and now I’m only up 4.54% for the month. So after taking this hit, I look at my investments and thought “I’m happy with my positions.” I still had the overwhelming desire to act, even though I don’t need to. I can’t say that each month will fall in the positive, but I still believe that my options (most of which expire in Jan 2014) will be good investments long-term.

Final Thoughts:

I plan on selling my house (Should net about $25-30k, hopefully), and I hope to have my account to roughly $50,000 by the end of 2013. If I can grow my account at a rate of 30% for 5 years, 20% for 5 years, and ultimately 10% for 10 more years, my account would grow as follows:

After 5 years – $185,646 (pre-tax and inflation)
After 10 years – $461,811. (pre-tax and inflation)
After 20 Years – $1,198,173 (pre-tax and inflation)

This implements my idea of “slowly weening off the volatility.” These calculations of course assume that I do not add any money into the account as well.

And to add contrast and really hit my idea of “trying starting a fire,” if I was just to aim at getting 10% a year:

After 20 years – $336,374 (pre tax and inflation)

Not bad, but not good enough.


QE3 Comes And the Market Pops, Now What?

If you were like many investors, you were waiting to see if Big old Ben Bernanke would release QE3. Sure enough the Fed agreed to buy $40,000,000,000 a month in mortgage securities.  Interest rates fall, securities go sky high, and all is well.. for today.

QE3 is a done deal, but how long will this rally last?

With the Dow Jones closing at 13,539 (around 2007 highs), it’s easy to think this rally has to give out sometime soon. In fact, if the rally continues, I’m going to be worried about some other macro picture things in my life (inflation).

I personally am under the opinion that if you want to be bullish pm about anything right now, it should be commodities due to threat of inflation. I personally invested in Silver (Symbol: SLV) and it has panned out nicely.

As of today, I am completely mixed on which way the market is going.

So I explore my options of straddling an index fund (taking options both up and down, hoping for extremely high volatility that will make 1 option worth enough to cover both options costs and profit.)

DIA (1/100th Dow Jones ETF) really seems to be fairly priced in it’s options risk/reward. A straddle expiring 8 days from now would run about $2, a straddle expiring 36 days more in the $4 range.

Translation to me: Do I think the Dow will go up or down more than 200 points in the next 8 days, and do I think the Dow Jones will go up or down more than 400 points in the next 36 days. Remember that with a straddle it doesn’t matter which way it moves, it just has to move a lot for gains.

When it comes to the Dow Jones, I’m completely split. All I do know is that I expect there to be a good deal of volatility from now till the end of the year, and I suspect very high resistance at 13,000 and at 14,000 (but that isn’t exactly a lot of oracle insight).

Look, my personal opinion? The Dow Jones is destine to go above and beyond 14,000, but I just plan on having a few corrections before a long-term growth above the 14k mark.

What am I in right now?

  • Short on JCP
  • Short on BBY
  • Short on GE
  • Short on FB
  • Long on F
  • Long on Dow
  • Long on Cat
  • Long on ESI (very small position)
  • Long on SWY (very small position)
  • Long on QQQ
  • Long on SLV

What am I eyeballing?


  • Seagate Technology PLC (STX) – Low P/E and growing revenues.
  • More Commodities
  • MetLife (Symbol: MET)
  • Citigroup (Symbol C)


  • Potentially how the market moves, DIA (Dow Jones Index)
  • Bank of America (But Odds are will just avoid)



Portfolio Up 12.88% for the Month – August 2012

I am happy to report that my Portfolio has finished up 12.88% for the month (+327% annualized).

I started out this year hoping just to finish up 10% for the year, but now I am shooting for 10% a month. I know that I will have my bad months, but as it stands now I am on track to potentially double my money by the end of 2012.

Why am I having such a good year?

I have traded about 13 years in my life, 12 of them resulted in positive returns (the 13th being a minor down year). The only issue was, I had hardly any money in the account, and earning 20% on $5k isn’t really anything to get excited about now a days.  I did grow about $1k into $8k from the age of 12 until 22, but now I’m really riding the lightning. Leverage via options amplifies all gains and losses. I’m currently operating a portfolio of about $13k in a high risk and high reward mentally.

I am operating like a hedge fund. I have longs, shorts, and even some silver Am I completely immune to risk? Absolutely not. Could this turn against me? Of course.

The simple fact is, you have to take risk to make money. Think about it. Buying rentals, buying precious metals, even buying your own home. You are assuming risk with everything you do that tries to promote growth. Your stocks, mutual funds, or retirement accounts can devalue or get hit by inflation, Your home can devalue 30% in the matter of years (as we have seen), and a bad tenant can destroy your profit margins for years on even solid positive cash flow rental property.

What went well for me this month?

  • Silver
  • Dow Jones Index 1/100th fund (post to follow)
  • JPM
  • CAT

What went poorly for me this month?

  • ZNGA
  • NFLX
  • ESI (ITT Tech)

Lessons learned: None.

I would tell you that I’ve learned my lesson with stocks like NFLX and ZNGA, but I continue to keep a small portion of my portfolio in high risk/reward securities.

Do I seen any weakness in my Portfolio as it stands for September?

Yes, I’ve become too long (about 65-70%). I justify it by saying I have silver, but frankly I’m too long on the market right now. I hope to correct this before potential adjustments.


I played around with Pandora (Symbol: P) when it was bouncing another $10, and I even bought into the stock (going long) and later took a loss. The stock has since gone to $12. This would have resulted in a large gain, but I got cold feet. I stand by my decision to sell Pandora 100%. I do not regret it even though it bounced up. I believe there is a very strong possibility I will be avoiding Pandora from here on out. More to follow on my options of these newer IPOs.

Something I called Right

Facebook. I said back during the IPO that I would be interested in FB when it was around $10 a share, and that $30+ was insane. FB closed around $18 today. I’m still 100% AVOID on facebook. They have earnings in October and I don’t think the market even understands how to process any information that comes from Facebook. This stock is a complete fire drill. Avoid.

Something I called wrong (but did not invest in)

Six flags, I thought this was a golden opportunity for a short, but I was dead wrong. The stock is operating with so little debt (because of their bankruptcy) that they are a very solid company right now.  I called a short at $53.58, but after earnings, this stock was off to the races. It got up to $62+ a share, before it came back down to $55.23. Very strong possibility I will completely avoid this stock.

Well there you have it, a very successful August.. one for the books. Now it’s time to reset, dig down and do it again in September. Monthly target is now 10% (knowing it is an ambitious goal).

I am at a 25% return on my portfolio YTD. In an effort to allow full disclosure, I want to show my actions taken since changing to Optionshouse (for lower comissions) in late April. Unfortunately, I am having some problems with E-Trade getting historical cost basis for some of my positions, one of which being a very lucrative Sprint position. I am only showing positions that have been bought and sold since going to Optionshouse.


My current positions have unrealized gains of $701 and unrealized losses of -$1010, for a net of -$309.

Overall my account has grown from about $11000 to $13,751 ($2,751 gain, +25.00% gain, 48.8% annualized) this year. Times have been good and Ill still be happy to finish anything over 10% for the year.

Note: Some transactions have not been reconciled due to Etrades lack of records after the transfer of my account to optionshouse (for better comnission rates).

Disclaimer: No investing should be made without consulting a professional. Nothing on this website should be used for decision making of any kind.

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