Virtual Portfolio Review

Just some quick notes on the virtual portfolios which should be published in the morning:

Short-Term Virtual Portfolio

Possibly over-covered as I guess I’m still thinking we stay in my range of 13,000 to 13,300 which, of course, means I feel we have a 300-point drop ahead of us.  Sometimes I’m not sure how I feel about the markets until I analyze my own positions as it’s one thing to say I like this and that on any given day but, when I review my own positions I get to see if I’m putting my money where my mouth is.

So for all my attempting to bargain hunt the last few days, the fact of the matter is I’ve been covering things, NOT buying back callers that are in the money and letting some pretty big puts ride, notably my BIDU Dec $420 puts, which dwarf my other open positions.

I have 700 DIA and SPY puts that are a little better than even as a group.  Ideally they were going to let me get very aggressive on a bull breakout as I’m still 80% cash but I haven’t even bought an index call against them since pre-Thanksgiving and that’s telling.

On the whole, out of $1.5M in market value of open positions (and that INCLUDES offsetting calls/puts sold) I’ve got $600K of naked puts.  Needless to say I won’t be riding that into the weekend but, as of Tuesday morning, I’m not feeling like changing it either.

The STP added 40% from the last time we looked a couple of weeks ago and, at this point, it’s time to start shutting things down and reconcile for taxes so between now and Xmas I will be ruthlessly killing positions I don’t really love as my goal is to start the new year with no more than $1M in this virtual portfolio.  Also, I like to be very neutral from Dec expiration until after new years simply because I’d rather have fun and focus on my family than worry about my positions.

Long-Term Virtual Portfolio

There’s a bunch of open calls in the LTP that needed protecting ($270K) so that’s part of the put imbalance in the STP.  I regret not covering BA, that was silly.  C is a reasonable gamble as is ISRG and AAPL is way, way ahead on the ’10 $150s so I can afford to indulge myself there.

Also, in both the STP and the LTP, most of the spreads are call spreads and the index puts are there to provide CATASTROPHIC protection, not just to protect us from daily wiggles.  Those of you who were heavily in the markets on 9/11 or many days in 2000 don’t need an explanation as to why that’s good to have and those of you who weren’t simply cannot imagine the value of the insurance until you actually need it but, like life insurance, it’s a little late to get a policy after the event!

It’s been a long time since we had a good run in the LTP as the market has gone up and up and up and forced us to make painful readjustments.  The LTP performs best when the market flatlines and the past two weeks have been great with a massive (for the LTP) 46% overall gain.  That’s because we’ve barely moved from where we sold our callers AND the VIX is down 10% from where we sold them, on the whole very painful for the short-term holders but really no trouble at all for the ’09 and ’10 positions we hold in the LTP.

The $10,000 Virtual Portfolio

The $10KP is brand new so there’s nothing to compare it to.  Since it’s been a terrible time to buy short-term calls it’s been a terrible time to start a short-term based virtual portfolio but we’re up $1,173 in 2 weeks, which isn’t terrible but it sure is dull.  I’m looking for some static butterflies or condors we can play, not one we move around like Applefly but something we can set and forget into expiration.

Please note that under type it now says LO, for "Long Option" and SO for "Short Option" which should make it much easier to follow even the more complex spreads!

The $25,000 Virtual Portfolio

Wow – we had a 74% gain in the past two weeks!  The gain on cash was "just" $17.600 but, out of a $25,000 basis, that’s a pretty steep percentage!  We were in slightly better shape on Friday as the open Apples turned rotten on us but I’m pleased with the overall balance to the point where I hate to touch it! 

We have $67K in cash so no real worries but I still want to watch the GOOG put spread carefully and the Apple put spread has probably run it’s course as well.

The difference between the $25KP and the $10KP is I’ve been willing to gamble with the $25KP as we can well afford a hit or two.  $10KP players need to be patient, once we get a little more ahead we can have some fun there too but Buffett’s Rule #1 is "Don’t lose money" and that applies triple to a small virtual portfolio as there is little margin for error.

Happy 100

Well this was simply the wrong time to start a bullishly biased virtual portfolio!  It was also the wrong time to cover IMCL with December $40s etc, etc…  I haven’t had a new pick from Happy in a long time so I’m just going to be looking to unwind this folder, now at $88,910 so I’ll be making some unilateral adjustments to see if it can be fixed by the week’s end.

Stocks Virtual Portfolio

I’m really pleased with this one as we only had the MU and FNF positions at last expiration and I dumped MU and added MRB, NAK, SCI, WM (puts sold) and FRO and made a quick 8% in two weeks.  That’s pretty good for boring old stocks I think!

I do still like MRB at around $5 (someone asked yesterday) and at first I wished I hadn’t sold calls against FRO and now I’m glad I did!

Complex Spreads Virtual Portfolio:

I should probably just call this the GOOG Virtual Portfolio as there seems to be no chance of it changing much from there (CROX is also a permanent resident).  Strangely, there are no Apples left as the Jan $170s stopped out and I got comfortable enough to buy Apples for the LTP and our complex Apple trade moved to the smaller virtual portfolios.

Thanks to Apple’s big run and the explosion of Google since Thanksgiving, this virtual portfolio shot up 121% in two weeks and is outpacing the STP, which is a pretty good trick for a virtual portfolio that was initiated on 4/28!  It’s good to have a couple of mo stocks that you trade regularly and get to know well.  Google and Apple have about 100 trades each and both have averaged about a 40% return so that’s close to a trade a day at 40% on the average.  If we have another good bottom, I’ll be happy to go back into both but, for now this will be another set that I need to reduce into the holidays.  We’re already 70% cash and just the GOOG Jan ’09 $680s are $195K so moving those to the LTP will effectively drop this set to 90% cash for the end of the year.

Closed positions:

On the whole, we’ve "only" closed 132 positions in the past two weeks but the average gain was 76% as we were very good about taking profits at the top and bottom of our expected range.  The gain on cash was a very nice 33% and, for the first time in a long time, very little came from the DIAs. 

27 Positions closed were Apple, reflecting the madness of running AppleFly plays in two virtual portfolios but, other than that it’s a pretty good mix as I’ve been aiming for balance, balance and balance as we move into the holidays: