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[Weekend Summary]
Dear Member,
Well, the market remains range bound. The Dow Industrials broke down through the 10,000 level again and look as though they may revisit the August lows around 9814. The overall trend has been down since February. Though the economy seems to be doing fairly well, oil prices certainly are not helping market bulls. Interestingly, the SP-500 held today at a recent minor support at 1102. Ditto the Nasdaq which managed to hold above 1900.
My Intel (INTC) '06 25 LEAPS calls have weathered a little storm and the stock remains in a modest uptrend. I also own the Jan '06 40 LEAPS on Broadcom (BRCM). BRCM is at an important intersection between a support and a short term uptrend line. If it continues up the uptrend line, I will consider adding to that position.
Harley Davidson (HDI) fell about $2 this week which helped the put leg of my Feb 60 straddle. As I've mentioned before, straddles often require patience and I've only been in this one for two months with four to go.
A little bad news, too, for me this week. I had to close my bullish Oct put spread on Avon at a small loss. I have found that money management is one of the most critical factors in trading. I never risk more than 3% of my trading money on any one trade so that the losers, when they occur, won't sink me. I also always try to exit a trade that is going against me before my total risk in that particular trade is reached. In this instance, I lost only 39% of what I had at risk IN THIS TRADE. In other words, I started by risking less than 3% of my trading money and then lost less than 40% of that or about 1%. Not bad and definitely worth the risk for me when I often have trades with very high returns in relatively short time frames.
If you are trading, keep money management in mind since each trade has risk. A stock has about a 50% chance of going up and a 50% chance of going down any day. If we risk only a small and equal percentage on each trade, we will be investing less when there is a draw down and investing more in each trade as the account increases. I never take the big risk by putting a large portion of my trading money in a single trade no matter how confident I may be. I really don't believe the market much cares whether I am confident or not.
I'm happy to be home from Cabo. The trip was great, but it still was awfully hot there. I lost 7 pounds one morning playing golf.
Hoping I can find some good trades next week. Have a wonderful weekend.
Sincerely,
Bill Kraft
CutLoss, Inc.
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