Joe Perez

iTrader: (8)

That's true, and I'm aware of the downside for those who use margin as a basis to expand their buying power. Consider, however, the parallel of a person who uses a credit card on a day-to-day basis because of the convenience and security features which the card provides, but always pays their bill in full at the end of each month.

I'm not terribly happy with that position, and let me explain why.

Yesterday evening, I closed my position in QID at just over 67, pocketing a roughly 6% profit. This morning, QID opened at 65.4 and slowly climbed up to 67.6, then dipped to 65.7, and is now on the way back up. If I had bought back in at market open, and sold at, say, 66.75 (I'm not perfect) I'd have taken 2%. If all my funds in that account ($57k) had been available, I could have made $1,100 between breakfast and lunch. If I'd have jumped on Jason's most recent recommendation (SKF) I'd be up nearly 2 grand. Instead, I'm forced to sit on the sidelines and watch.

True, there will always be another trading day. By that logic, however, I should be taking arbitrarily long vacations and unpaid time-off from work. There'll always be another working day.

This displeases me.



Now this is sound advice I can use. I will check them out this evening.

On a related thread however, I've been doing some reading into what does and does not peg someone as a pattern day trader, and the rules which apply thereto. If a person makes more than three in-and-out transactions in a five day period, then they are a pattern day trader. As a result, any cash transaction into the account (ie: liquidating a long position) cannot be used to re-purchase another security for three days. IOW, there comes a point at which you must utilize margin in order to function.


So, with this in mind, do I simply enable margin on my TD account, or do I move over to another brokerage? I'll have to decipher their free schedule to see how attractive it really looks. Decisions...


Hmm. Did some Googling, and from what I gather, the IRS has started taking a less permissive approach here. I'm already in red-flag territory, as my ostensible employer (guru.com) is not taking out withholding taxes (I'm working as a 1099 contractor) and frankly I've been too damn lazy to file estimated taxes.

Still, something to investigate. We may not always see eye to eye on political philosophy, but you, my friend, are a fountain of useful information.

JasonC SBB

Exactly right about being a "pattern day trader".
If you get into IB, there are big advantages to putting in enough money that you can use leverage and be more than a "Reg T trader" (I forget the term) and signing up as a "spculator". But with great power comes great responsibility ...

Also, IB does NOT have an investment bank, and so they can't take your brokerage money and bail themselves out for stupidity (AIG bailout bill Trojan Horse, IIRC).

JasonC SBB

The days of buy and hold are long gone. Since 2000.
Plot the S&P from 1982 to present. The bull run was from 1982 to 2000.

If you bought index funds in 1999, and held for 10 years, after inflation, you'd have lost money. After taxes? Fuhgedaboutit.

At the bottom, the stocks to buy will be Asian stocks.

y8s

iTrader: (8)

what are the chances that buying into the indexes long today will yield something worthwhile in 10 more years? 20? 25-1/2 years?

JasonC SBB

Not as good as buying Asian stocks after the final selloff.

Joe Perez

iTrader: (8)

For indexes, yes.

I started investing at pretty much the wrong time. Mid 2001, to be exact. Started out very simple, just putting some money into an S&P 500 index fund. So I got to enjoy the Sep '01 crash, the Jul / Oct '02 crashes, etc.

Shortly thereafter, I started looking into aggressively managed sector-specific funds. From 2003 until mid 2008, I enjoyed huge returns investing in REITs, Oil & Gas, China general funds, Utilities, and so forth. Things started to slow down in 2008, but even through most of 2009 I was seeing close to 20% a year returns simply by seeking out mutual funds that seemed to be ahead of the curve. I had no problem at all paying 1 or 2% management fees when they were making me ten times that in returns.

And frankly, this was easy money. I peeked in on my portfolio every month, just to fill out a wealth-tracking spreadsheet I've been keeping since the very beginning. A couple of times a year I'd spend a few hours looking at my short-term performance, investigating new fund possibilities, and maybe changing a position or two.

Life was grand until last October. I made the mistake of staying put in my positions rather than jumping ship when everyone else was. I could have doubled my money in a couple of months if I'd have jumped into the bear funds, which I'd vaguely heard of but didn't know much at all about.

But them's the knocks. I've learned some pretty expensive lessons, but for close to $100k I've gotten a PhD-level education in groupthink.



Advice from the guy who has made all the wrong moves of late:


I agree that right now isn't a good time to be going long with buy-and-hold mentality. Things are just way too unstable, and it looks like the overall trend is still downwards. If you've ever wanted to get your start in day-trading, shorting indexes, etc., now's a pretty good time.

But I expect this gravy train won't last forever. A lot of domestic sectors are experiencing downward over-correction right now, and the time will come when sector-index buy-and-hold is going to be in vogue again. I also wholeheartedly agree that Asia is going to be a great place to do it. They're suffering the same wallop that we are right now, so when things do turn around, they're probably going to find themselves in an under-valued position for a short period of time. The trick is going to be figuring out when that is. The sweet spot could be a year, a couple of months, days maybe.

Now would be an excellent time to start researching mutual funds that focus on China- both domestic services and manufacturing / export. Don't start buying, but have a general idea who you will buy when the time comes.

JasonC SBB

Joe,

If you get into IB, the term I was looking for was "Portfolio Margin" and not "Reg T". The former allows its software to recognize that certain options are correlated and so won't liquidate your holdings and call in your margin just because one position takes a crap. IIRC you need to have a certain minimum $ in your account to avail, and you need to check "speculation" when you open it. The latter is a CYA thing for them.


If you want to get into Asia, also check out the "BRIC" funds - Brazil, Russia, China, India. This assumes Russia has the potential to start growing again after being decimated by <$50 oil during this crisis.

Oppenheimer's ODMAX was stunningly good for my 401k from 2001 to 2007. I got out late 2007. Alas the cash in my 401k is gonna get eaten by inflation ...

Joe Perez

iTrader: (8)

Hmm.

Portfolio Margin accounts require $100k. At the moment I've only got about $57k in my TD account, and given my current situation (it's complicated) I'm trying to keep at least $50k in cash-on-hand. I could pull together the balance after I bill out the job I'm working on right now, but that's going to be a while. I wonder if I can convert a RegT account to a Portfolio account later on? The benefits are appealing. Still, even RegT recognizes sale proceeds immediately, which is the major problem I'm having right now.

Been playing with the demo version of the trader workstation, and I quite fancy it. Even on the shitty connection at the hotel I'm staying at it's astoundingly responsive. The layout is pretty intuitive, too. Options, Futures, Stocks, Portfolio, everything in easy to use tabbed format with the basic interface for each page.

I'm probably going to go this route. Gonna sit on it until I get back home next week.

Trent

iTrader: (11)

Joe Perez

iTrader: (8)

... and falling.

Kinda kicking myself right now. Reading the paper on the subway this morning, I got to thinking about SKF again. Watched it during the pre-hours activity. Looked like it was going to be a bargain at 192-194. I hesitated. Went and did some real work. Looks like it's in the process of peaking around 213.

And to add insult to injury, TD finally enabled margin on my account last night, so my BP is $114k right now. There goes ten grand I could have made...

Ok, I said I wouldn't abuse margin. Five grand.

gompers

iTrader: (4)

After all, the market has risen 10% every year, so why should we think it would ever change?

ScottFW

iTrader: (4)

I've been looking at the leveraged ETFs as a way to play the down market since I don't have a margin account. Being a short-term pessimist, maybe today's rallies have produced opportunities to buy.

The Chinese govt announced more economic stimulus, which sent their markets higher, and the double bear FXP down 20%. Does anybody really think a Chinese recovery is imminent? I'm thinking of getting in, and betting against the Chinese would feel good.

JasonC SBB

Economic stimuli don't work.

Turning Japanese: The Audacity of Reality (Part 1 of 3) -- Seeking Alpha

The government meddling will lengthen the recession.

JasonC SBB

And then that's when you short it. Or sell calls at 270. SKF always peaks sharply after a multiday market dump, then it plummets.

Joe Perez

iTrader: (8)

I tried to short 250 at around 1pm yesterday- not available. (I love TD)

Can't. (♥ TD again)

Eyeballing Oscar's rather interesting recommendation at the moment. I don't have access to Emini yet, but VXZ looks to be a roughly equivalent ETF. I'm thinking I may throw some play money at that today to see what it does.

JasonC SBB

Frightening new lows.
And I still hear people bleating the same bleat since October.. "We're in it for the long haul, it'll come back"

Get ready for a bounce.
Then Cramer will say, for the umpteenth time, "We've passed the bottom, folks, get in now or you'll miss it".

What a dick.

Joe Perez

iTrader: (8)

Interesting day.

Bought 250 of VXZ first thing at 107.5, expecting a little action. Nothing dramatic, and sold at 108.4 at day's end.

I'm sounding like a broken record, I know, but SKF is just mesmerizing- it's up 100% over the past WEEK (life must really suck in the finance world right now.) Watched it jump after the open, figured it'd slump, and it just kept going. Bought 100 at 231.9 at 11am. It T-stopped out on me at 237.5 while I was at lunch. Got back and saw that I was out and it was pulling an Energizer again. Decided to stay out, only to watch it hit 250 before the bell. Lesson: don't be too much of a chickenshit about where you set your T-stop orders. Oh well.


I've got absolutely no ideas for tomorrow.

JasonC SBB

Remember that double bears and double longs lose value whenever there's any up-down-up-down component to the underlying security.

You can take advantage of this by shorting both sides ...

y8s

iTrader: (8)

I have one stock that's doing great due to a potential buy out. it is not offsetting the rest of the market however!

DNA

ZX-Tex

iTrader: (15)

Boy am I glad I got out of the market back in March. Not. I stayed in. Big gains on my 403(b) funds over the last year.