market speculation for October

[KTP]

I was just joking about quitting your day job.

I am curious though why you are not doing these trades inside a IRA account like I am? Even if you wanted the money before retirement, wouldn't it be better to not pay taxes for 5 years or so, then take the money out along with the 10% penalty? Rather than paying 33% every year in taxes? If you don't need the money (and with a medical degree, I doubt you do), then the IRA can just grow like crazy until you retire. If you could double every 2 years (and it looks like you have managed way more than that), you could have 20M or more in an IRA at 59.5. Maybe schedule a trip on Spaceship Two or something fun.

At the very least I would suggest starting a new IRA with $10K (5K now, 5K in Jan), park it at your favorite broker and go to town. Maybe keep an active thread on here with the monthly balance. I would be interested to read it.

If my play is really successful (I am having a bit more fear of a major pullback before msft can pop though) I will have $40K or so in my IRA, up from $1700 in about 8 years. If I could get to 100K in another 3 or 4 years I would be thrilled.

Edit: A little uptick happening in msft this morning...might just be a blip though. At least for a moment however, I am in a positive positon with my investment lol.

[KTP]

Hmm, can we get a few more downgrades like yesterday? Now I am $2400+

[gambler2075]

Hmm, can we get a few more downgrades like yesterday? Now I am $2400+

A hearty welcome to Eastern Contraristan, population 1

but remember it is not a profit until you sell

g

[gambler2075]

Just wanted to add an example of deep DD (due diligence) when it comes to biopharma investing... AVNR has a PDUFA (fda decision) on Oct 30th, and the stock has been all over the place recently (including today's bear raid down to 2.70). This example from gekkowire is a good example of what I consider "deep DD" which is far more in depth than what the average investor does. Personally, although I have been trading it (made 600$ on it today) I don't plan on holding any into/through the FDA decision.

Avanir Pharmaceuticals (AVNR) Approval Estimate » GekkoWire

g

p.s. it is kind of annoying how they have so many ads in the analysis, but the content once you get to it is good.

[gambler2075]

Usually I think Cramer gives out pretty bad stock predictions, (and that may have been true as he admits with ALKS and AMLN) and their recent drubbing, but he does bring out a good point with 'investing' in the biopharmas, and that is that the Obama version of the FDA is not NEARLY as friendly to the big pharmas, and is much more risk adverse (i.e. the recent Avandia issue) and they have been on a rejection/CRL warpath with the biopharmas. Which makes holding through an FDA decision now a very, very risky proposition.

News Headlines

...and as I read once (and totally agree with), the following quote:

"Professional day traders focus on limiting risk and protecting capital. Amateur traders focus on how much money they can make on each trade. Professionals day traders always take money away from amateurs traders."

Looking at the upcoming AVNR PDUFA on the 30th of October, I cannot hold through the decision, even though I think it, out of all the recent drugs up for FDA decision, has one of the best chances for success.

g

[KTP]

24 hours till e-day. msft closed above $26 on a down market day, which I find very interesting. Now my only concern is that they will announce they are buying Adobe or something silly before earnings.

Hey Gambler, did you see my response above asking why you don't do your trading inside an IRA so you don't have such a large tax bill? It is what I am doing. True you can't deduct losses, but you don't seem to have that problem anyway.

[gambler2075]

24 hours till e-day. msft closed above $26 on a down market day, which I find very interesting. Now my only concern is that they will announce they are buying Adobe or something silly before earnings.

Hey Gambler, did you see my response above asking why you don't do your trading inside an IRA so you don't have such a large tax bill? It is what I am doing. True you can't deduct losses, but you don't seem to have that problem anyway.

NJ on your calls, btw... up like 50% already? should be interesting

as far as trading inside an IRA, I guess I should have... my profits sneaked up on me fast enough that I couldn't just add them to an IRA at once. Yeah, it would have been a good idea if my 10K was in an IRA in 2008, but that is water under the bridge. Actually for a while I was thinking about electing to go to trader status and mark-to-market, but I never ended up doing that.

Left some on the table, made another K in the Bofa account (not posted)

http://img198.imageshack.us/img198/5440/20101027et.jpg

g

p.s. I thought I was in trouble yesterday as my profits added up to the mark of the beast... heheh

http://img822.imageshack.us/img822/4012/20101026signofthebeast.jpg

[KTP]

Nice trades...I especially like the 666 balance.

I actually purchased 80 jan 11 $25 calls at 1.21 the other day when the stock dipped down near $25, so my potential profits are getting pretty nice (something like +$6500 currently). I may sell those tommorow if the stock stays up or hits $26.50, then I could be left holding just the $27.50 calls at no cost. What would happen then is microsoft posts $0.70 a share and brags about how Kinect has sold out pre-orders at amazon and the stock shoots up 10% to $28.50 and I miss out on about $30,000. I keep telling myself be greedy, but then tell myself don't be greedy. Maybe I will just be half greedy and sell part of them.

[gambler2075]

Nice trades...I especially like the 666 balance.

I actually purchased 80 jan 11 $25 calls at 1.21 the other day when the stock dipped down near $25, so my potential profits are getting pretty nice (something like +$6500 currently). I may sell those tommorow if the stock stays up or hits $26.50, then I could be left holding just the $27.50 calls at no cost. What would happen then is microsoft posts $0.70 a share and brags about how Kinect has sold out pre-orders at amazon and the stock shoots up 10% to $28.50 and I miss out on about $30,000. I keep telling myself be greedy, but then tell myself don't be greedy. Maybe I will just be half greedy and sell part of them.

Hehehe... ahhh the dilemma. Sell now for guaranteed profits, or hold out for possibly 5X more

Are you ready for QE2? I will probably sit back and break out the popcorn...

Quantitative Easing: How Investors Can Prepare For The Fed's QE2 Announcement Next Week | Markets | Minyanville.com

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[KTP]

Are you ready for QE2? I will probably sit back and break out the popcorn...

g

No...

QE2 and the Nov elections scare me to death. I have zero idea what the market may do and no great expectation that even srong earnings from microsoft and good prospects for Kinect and Win7 mobile can offset a large (1000 point) drop in the Dow.

I am going to try *really* hard to be out of most of this position before QE2, possibly as early as this friday. If msft gets a bump instantly from the earnings report, I will sell to close if it is anything above $27. I may miss out on $30 a share, but I would like to lock in $10K to 20K of profits too.

this video by Marc Fabor talks about QE2 and the market's probable reaction. About halfway through there is mention that he likes microsoft (the reporter asks it as if she is incredulous lol)

Marc Faber QE2 to Drive Down Stocks - Blog Top Sites

[gambler2075]

I actually purchased 80 jan 11 $25 calls at 1.21 the other day when the stock dipped down near $25, so my potential profits are getting pretty nice (something like +$6500 currently).

Hmm... lets see... At 1.21, calls are 121$ each, and you bought 80 of them? so another 10K invested into calls. That means you have invested 15K$ into MSFT Jan calls? hmmm... and this is in a account of 30K$? Well, I hope you are right, because if MSFT decides to gap down, then that 15K$ would be worth 3 or 4K... but c'est la vie

g

p.s. remember that professionals focus more on what they can lose, and amateurs decide that that is irrelevant, and focus on only what they can gain. Be careful out there, especially considering that you said you were going to go 4K worth of speculative money. Now that looks like alot more than 4K$.

[KTP]

Hmm... lets see... At 1.21, calls are 121$ each, and you bought 80 of them? so another 10K invested into calls. That means you have invested 15K$ into MSFT Jan calls? hmmm... and this is in a account of 30K$? Well, I hope you are right, because if MSFT decides to gap down, then that 15K$ would be worth 3 or 4K... but c'est la vie

g

p.s. remember that professionals focus more on what they can lose, and amateurs decide that that is irrelevant, and focus on only what they can gain. Be careful out there, especially considering that you said you were going to go 4K worth of speculative money. Now that looks like alot more than 4K$.

Yes yes, I know...I am still am amateur, but I couldn't resist.

Didn't buffet say be greedy when others are scared? I am scared and greedy.

[gambler2075]

Yes yes, I know...I am still am amateur, but I couldn't resist.

Didn't buffet say be greedy when others are scared? I am scared and greedy.

Just a word of caution... you do remind me of, well, "me" when I was a few years into trading. I had ironed out the kinks a bit and had eliminated the ridiculously dumb trades, mostly, and I felt that I might have an edge for the first time. What I didn't have, though, was good money management. Meaning that even if I had gotten my win rate up to 80%, if every 5th trade went horribly wrong, then it didn't matter what happened in the first 4 trades.

Let's take an example of, well, MSFT calls
Let's say you have an edge and you win 4 out of every 5 trades. Now lets say you get it up to 9 out of every 10 trades. So, for the first, say, 5 trades, you are doing awesome... but when you get to that 10th trade (yes, I know that winning 9/10 trades does not mean that it will happen on the 10th trade exactly, but bear with me) and your money is, say, 5X from what you started, then you LOSE, you LOSE all of your money. And it doesn't matter how big your balance was going into that trade.

IMO, holding MSFT calls through earnings is essentially that all or none bet... I may be blunt here, and unpopular (but as a contrarian that is my job ) but I don't really care how confident you feel that you know what is going to happen... because I believe if YOU feel that confident, then EVERYONE probably feels that confident... and that means that it is mostly already priced in.

So, not to be a wet blanket here, but just had to point out that the best trading skills in the world will eventually suffer a debilitating loss if you do not have proper money management skills.

g

[gambler2075]

... oh, and just to reply to my own post here, one lesson that I learned the hard way in trading is that, due to the effect that 'chance' has on trading, it doesn't matter about the outcome of an individual trade. One winning trade does not make you a pro, and neither does one losing trade make you doomed to fail. But what is dangerous is that a winning trade, even if it was entered for the wrong reasons, has the potential to win... and if one DOES win that trade, it can reinforce bad habits, which will eventually come around to bite you in the butt...

Essentially, to make myself completely clear, I would consider a 15K options bet on MSFT (if held through earnings), well... gambling

Ok. off my soapbox now.
Back to biopharma DD

g

[KTP]

Just a word of caution... you do remind me of, well, "me" when I was a few years into trading. I had ironed out the kinks a bit and had eliminated the ridiculously dumb trades, mostly, and I felt that I might have an edge for the first time. What I didn't have, though, was good money management. Meaning that even if I had gotten my win rate up to 80%, if every 5th trade went horribly wrong, then it didn't matter what happened in the first 4 trades.

Let's take an example of, well, MSFT calls
Let's say you have an edge and you win 4 out of every 5 trades. Now lets say you get it up to 9 out of every 10 trades. So, for the first, say, 5 trades, you are doing awesome... but when you get to that 10th trade (yes, I know that winning 9/10 trades does not mean that it will happen on the 10th trade exactly, but bear with me) and your money is, say, 5X from what you started, then you LOSE, you LOSE all of your money. And it doesn't matter how big your balance was going into that trade.

IMO, holding MSFT calls through earnings is essentially that all or none bet... I may be blunt here, and unpopular (but as a contrarian that is my job ) but I don't really care how confident you feel that you know what is going to happen... because I believe if YOU feel that confident, then EVERYONE probably feels that confident... and that means that it is mostly already priced in.

So, not to be a wet blanket here, but just had to point out that the best trading skills in the world will eventually suffer a debilitating loss if you do not have proper money management skills.

g

I agree with you 100%. I have been running a few simulations and I think I am going to lock down 12K by selling the 27.50 calls tommorow before earnings and 30 of the 80 $25 calls. This will leave me with $3K invested in 5000 options at $25 that I can hold through earnings. My sell price tommorow is 26.40, and I will dump the 5000 on friday or monday if there is a good bump ($28 is the number in my head). That should get me about $17,000 profit on my $15K investment with only $3K at risk through earnings.

At least this is the plan I have come up with right now.