StockTwits for Idiot Retail Investors: Week #1
Okay, one week into my StockTwits experiment and two trades closed out.
Closed out about half of $NDAQ exposure
First, despite @alphatrends‘ chastisement expression of concern (see my mea culpa for why chastisement was mischaracterization) in last week’s comment thread about not paying close enough attention to his reportage, I managed to turn that failed trade into a good trade by selling all my $NDAQ put options on Thursday’s drop for a ~24% gain. In at cost basis of $2.47, out at 3.10.
The funny story here: I got props from @howardlindzon for the trade, but he said it was too early, teenager:
Only I spent half the day incorrectly thinking he was calling me a teenager. I prefer grasshopper. Or idiot retail investor. I was chagrined. Damn, I missed the insult @howardlindzon day earlier, when I wanted to give him crap about his inability to use apostrophes appropriately in his tweets, and here he was, bagging on me bailing out too soon. Schvitz-behavior-critiquing mofo.
Then I realized about lunchtime that he was talking about $NDAQ as being a teenager (meaning: eventually trading in the teens).
God, I’m a dork.
So I’m still sitting on my $NDAQ short with a cost basis of 23.50. I tried closing it out Friday at a $21 bid, but it didn’t hit. I’ll let this one ride, teenagers.
Sold Some $SRS Premium
Okay, this one worked out—sorta. I sold calls on half my $SRS position. The half (lol) with the $60 cost basis. $70 calls at $1.95 premium. My overall cost basis is $86, so if this gets called, I’m okay (although my cost basis will rise on the overall position to $101 counting these profits.) Not a huge position, so not a lot of premium, and not a lot to write home about.
The one thing I heard this week that intrigued me (on NPR’s Marketplace): commercial property owners are proactively giving retail tenants lease discounts in order to keep them as viable lessors. One example was a top-down mandate to a commercial real estate concern to slash in-progress negotiated leases by 20% to try to keep the retailers from folding. I’m not smart enough to know the best way to play this. It seems like there’s some long-term arbitrage opportunity here. It feels like this is a case of “we all go down together” and the play is to short $RTH and go long $SRS, but I haven’t thought through the game theoretical issues here. Intuition says that it is $SRS that gets hosed no matter what. They lose either way. They give concessions, and margins go down; they don’t, and retailers bail and close stores and they hurt. So despite being way underwater on my $SRS position, I’m liking my 5-6 month chances on turning this one around. The commercial real estate industry is panicking, and they’re counting on retailers of all people to save them. Show me some consumer sentiment and I’ll cover.
In other news: $COST, $AAPL
I just about covered my $COST (Costco) puts this week. They’re good to the tune of about 22% on paper, after Wal-Mart’s fade on Thursday. I’m letting these run a little bit more. While I haven’t disclosed position size yet on any of these trades (waiting for some of last year’s trades to close out before setting that up), if $COST drops to around $48 this upcoming week, I will bank a 45% gain on the puts and the profit will be roughly equal to my $NDAQ put sale this week. This is about 11% of my trading account (and the trading account is in turn is about 16% of my overall brokerage position), so you get the sense of how I view a lot of these trades as tuition in my learning process. In the big picture, I’m trying to stay too small to fail.
I’m still negative on $AAPL with the puts (April 80s at 16.86 cost basis) despite my household buying four $AAPL products over the holidays to the tune of about four grand. Win or lose, I’m going to need to close out this position soon due to the time factor. Right now, I’m down about 6%. While in the long-long term I’m bullish on $AAPL, in the short term I believe it is range bound between $80 and $100, with all the trends pointing to it hitting $65-$70 before it hits $110 (based on lack of transparency around Jobs’ health status). If you’re buying stock for your kids’ college fund, go long. If you’ve got a 12-month time frame, short it north of $90. They have quality management, they have an incredible coherent strategy and management team (second only to $AMZN), but they have the problem in 2009 of a down economy (which will cause them to hold back major innovations) and the doubt around Jobs health. At some point this year, all the bad news will be out (it’s not yet) and AAPL stock will fall and then you can safely load up. Just not at $90. (I expressed similar sentiment in the comments over on Fred Wilson’s blog, with additional info on $GOOG. Great post and comments all around.)
On this trade, the time factor is getting me, so I will look to cover soon and will take whatever profits I can find should it drop to the $85-$86 this week. Hoping for lots of volatility prior to expiration.
What I’m Watching This Week
If you want my play of the upcoming week, it’s going to be this: let’s assume that $PALM ascends another 10-20% Monday/Tuesday based on the announcement of its new Pre platform. And let’s say that $AAPL falls 5% because folks think it’s a zero-sum game and the iPhone is hurt because of this. Then then trade is to cover your $AAPL short on the dip and immediately flip into a $PALM short (or put) situation. I know jack about technical analysis, so I can’t tell you about support, but I sure like $AAPL’s management over $PALM’s, and it should be pretty straightforward to know who the platform winners are going to be. $AAPL and $RIMM we still talk about in a few years; $PALM is just delaying the inevitable. There’s maybe only a 1 in 5 chance this will happen or that I’ll actually go through with the trade, but it’s one thing I’m watching. I like to trade overreactions and irrational exuberance, and any love of $PALM to me oozes irrationality.
What I Owe
I really need to give you the blow-by-blow of my September through December experiences in the market (including my schooling in $SPY and $USO calls), as well as the long-term history of my trading experience and use of online intelligence sources. I’ll sneak those in as posts over the next couple of weeks. It’s important background if you’re trying to judge whether I’m a voice worthy of catching in your filter. And since my day job makes being a day trader (with the requisite attention span needed) impossible, I’ll detail how I trade with a limited attention span and time.
Who I’m Tuning Into
This week I’ve begun to follow @alphatrends blog more carefully, as well as @fortune8 (appreciate the rationality of another part-timer) and @BuyOnTheDip (because I’m bearish as well). Haven’t decided yet on @mandelbrot though—love the art but not sure I can read the correlations between free text tweets and stock prices.
