Learning to Trade

[rc1989]

I decided to sell my 700 Macy's shares today, making a profit of $5,411.00 as the shares were up 18.05%. I had initially purchased the shares at a price of $42.81 but they were trading at $50.56 today.

[rc1989]

Due to the success of my call options in Lorillard, I decided that I would go ahead and take the risk of actually buying into the stock. The stock has been rising steadily with no large dips for nearly a month now. Due to this momentum, I decided to buy 1,000 stocks at a price of $51.85 and I will  monitor them closely over the next few days.

I also decided to sell my call options, which are currently up 128.43%, Even though I think the stock price will continue to rise further, I don't want to have call options and stocks for the same company, just incase the prices do drop.

I bought the Lorillard options at a price of $1.02 and they're now trading at $2.33, making me a profit of $655 as I had 5 contracts.

[rc1989]

Good things come to those that wait...apparently!!

I had purchased the futures when Cocoa was trading at $2,700 and then it dropped suddenly (to $2,631 at one stage) and my stop didn't kick in for some reason. After running serious loses for a number of days, I wasn't sure to sell out my position then and just take the loses or to hold on with the hope that the price would rise. I decided to hold on and luckily the prices jumped back up today!

I was able to sell them for a price of $2,729.

I could have held on further with the hope that prices rise even higher, but I didn't want to take the risk as they may drop significantly again!

[rc1989]

I decided to buy some put options in the New Jersey Resources Corp.

I originally was just looking to expand my portfolio so I randomly searched stocks with the New Jersey in their name as I grew up there.

When I saw that the company only had a Beta of 0.56 (which indicates it isn't too risky) and had a P/E ratio of 15.33, I was going to purchase some stocks in it. It was only when I looked at the chart that I decided to opt for put options instead and limit my losses. The stock's price has been fluctuating a lot over the last 3 months and I believe it has peaked recently, so may begin falling. 

Therefore, I opted to buy 8 contracts of put options in the New Jersey Resources Corp. The stock price is currently $46.14, but I purchased the options for $0.55 with a strike price of $45 and a December 21st expiration date.

[rc1989]

About two weeks ago, I purchased four contracts of put options for Teva Pharmaceuticals as I had a feeling that the price might drop due to the company announcing plans to reduce its global workforce. I purchased the put options with a strike price of $40.

However, the price didn't drop as I thought it would and even rose to about $41.50 during the last few weeks. It was only yesterday (Wednesday 30th) that there was an announcement that Teva's CEO resigned and the share price subsequently dropped.

The price is $37.70, so I'm going to exercise my put options (though, I think StockTrak only gives the option to Sell?) whilst the price is low. I'm tempted to hold onto them and see if the price drops further, but I'm not sure if the price will steady once the news settles. Therefore, I think I'll walk away now with my profits.

I bought the options at $0.88 each and they are now trading at $2.56, meaning they are up 190.91%.

[rc1989]

I don't know what happened to my December Cocoa Futures trade. :-/

I believed that I had made the purchase at a price of $2,698 ($2,700 by the time it went through on StockTrak). However, I had entered a stop price of $2,693, believing that my position would automatically be sold out if the futures price fell below this, so as to somewhat limit the amount of my loses. 

However, having checked my portfolio this morning, I still have the Cocoa futures and their last trading price was $2,648. So I'm making losses of $20,800.

Is this a glitch on StockTrak or a mistake I made that I do not understand? I have used a stop before on Natural Gas and it seemed to work when the price dropped and I though I entered the trade in the same manner?  

Now I need to decide if I should just sell now or hold on in the hope that prices rise again.

[rc1989]

Hershey's

So after selling my profitable Hershey's stocks, I decided to buy some call options in the company. I didn't want to get too greedy and hold onto the stocks and risk loosing my profits, so I decided I'd try to gain on any possible future price rises with call options.

I purchased 3 contacts in Hershey's with a $100 strike price and a December 21st expiration date, costing $2.39 each. The current stock price is $100.90

[rc1989]

So I decided to sell my Hershey's stocks today. They have been performing well and I'm currently up 8.4%, so I want to quit while I am ahead.

I bought the stocks at $93.08 each and I am selling them at $100.90 each, meaning I'm making about $7.82 on each. Overall, as I have 270 stocks, I should make about $2,111.40.

I am tempted to hold onto them further, but at the same time I am afraid that the prices might drop after Halloween. Maybe, I'll buy a call option just in case the prices continue to rise!

[rc1989]

Looking at my Buy and Hold account today, I was delighted to see how well some of my stocks are doing. Valeant and Lorillard in particular are up more than 10.3%.

I purchased Valeant in my Buy and Hold account on the 23rd September at a price of $103.66. The price increased after my purchase until it fell significantly around the 8th of October. The share price has been climbing steadily since. The stocks are now trading at a price of $114.37.

I'm tempted to buy some stocks in Valeant for my active account, but at the same time, I'm a bit worried that the share prices might decline soon. 

For this reason, I've decided to buy some call options in Valeant. That way, I can trade on the movement of Valeant's share price, but the most that I risk loosing is the premium that I paid. I decided to buy 3 contracts with a strike price of $110 and an expiration date of 18th of Jan. 2014. I felt that the November 16th expiration date was a bit too early, considering the module doesn't end until December. The option's price was $9.69, compared to the share's price of $114.38

Similarly, I decided to buy some call options in Lorillard. Lorillard's share price has also been rising steadily since I purchased the stock on September 23. I purchased it at a price of $44.63 but it is now trading at $49.71. I purchased 5 contracts with a strike price of $50 and an expiration date of 21 December 2013. Each call option cost $0.85

[rc1989]

Looking at the Open Position of my stocks today shows a classic example of the higher risk associated with high growth IT companies compared to the more stable firms.

Hershey's and Macy's are performing very well for me, both up more than 4%. However, I'm currently making losses on my IT firms.

So now I need to decide should I sell my position in any of these firms? Take the profits now that I'm running on the Hershey's and Macy's rather than getting greedy and possibly losing it? Do I cut my losses now with the IT firms or hope that the price will rise soon?? Decisions.. Decisions.. Decisions..

[rc1989]

I decided to buy back into December Cocoa Futures today. 

This time, I decided to take a little bit more risk and up the amount of contracts that I purchased. I bought 40 contracts (with a multiplier of 10) at a price of $2,698 per tonne a. I put a stop of $2,693 on the futures,  so I should automatically close out my position of the price drops below this.

I'm hoping that that prices will rise again soon to yesterday's high of just over $2,770. 

[rc1989]

I sold my call options for Amazon today. I originally purchased them for $13.90 with a strike price of $320.The stock itself had been trading close to $321.

Unfortunately, the stock price didn't rise as much as I had expected and even fell to below $300 at one point. However, I held onto the options in the hope that the prices would rise before the exercise date and luckily that has happened.

When I checked the prices today and noted that the stock price was $326.44, I decided to sell my position. I sold the options for a price of $18.02, making a profit.

[rc1989]

I decided to sell my position with the Cocoa futures this morning. Yesterday, the price hadn't been reaching its highs of the previous day, so I decided now might be the time to sell.

Having bought 20 contracts at $2692 per tonne, I sold them at $2734 per tonne which made a profit of $42 per tonne. Overall, my total profit was $8,400!

[rc1989]

A Double Top is another common chart pattern, which consists of two peaks. This pattern usually indicates that the upward trend is weakening and that buyers are becoming dis-interested. Once the pattern has been completed, the security price typically declines.

The first part of the pattern is a peak that is created during and upward trend. Once this peaks, it faces resistance and is sold off until it hits the support level. Then, the price starts a run back towards the level of resistance in the previous peak, but again it is sold off and hits the support level again. The pattern is then completed when the security breaks the support line and begins a downward trend. The opposite is a Double Bottom pattern. This signals the reversal of a downward trend into an upward trend.

The pattern is created when a downward trend hits a new low with its price. This downward move will hit a support line and begin rallying to a new high, forming the resistance line. However, the stocks are then sold off, bringing the price down to the previous low. Again, the security hits the support line and starts rallying up. For the pattern to be completed, the price will move above the resistance line and continue moving upwards.

[rc1989]

I've decided that I want to start looking out a bit more for then well known chart patterns when conducting my stock trades.

One of the most well known patterns, The Head and Shoulders Pattern, is illustrated above.

The head and shoulders pattern usually signals an imminent price decline, so technical analysts usually execute a short sale.

The formation consists of a left shoulder, a head and a right shoulder. A line can also be drawn which represents the neckline. The stock's price rises to a peak and subsequently declines, forming the left shoulder. Then, it rises above the former peak and declines again, forming the head. Finally, it rises again but does not reach the height of the second peak before declining again. This forms the right shoulder. When technical analysts see the price falling towards the neckline, they view this as a buying signal because historical patterns have shown that the stock's price will rise shortly afterwards. However, once the pattern reaches the third peak, it is considered as a sell signal.

However, an Inverse Head and Shoulder Pattern, signals the opposite. Technical analysts see the inverse right shoulder as a buy signal and that prices will increase.

[rc1989]

Cocoa Futures

I have been watching the price of December Coco futures for a day or two now. At one stage yesterday, it was up $24 at a price of $2771 per tonne.

So when I saw that the price had dropped, I decided to buy in today. I bought 20 contracts (with a multiplier of 10) at a price of $2,695 on StockTrak. Though, my yahoo graph says the price is $2,708 now.

I placed a stop of $2,687 on the futures also, so it should automatically sell out my position if the price drops below that.

Hopefully, I can make some money on this though!

[rc1989]

So I made my first losses in the futures market today.

I bought a contract in Natural Gas recently, but unfortunately it hasn't been performing well since. I'd been holding onto it in the hope that the price of Natural Gas would rise. 

I certainly learned the importance of stops today though! I had bought the Natural Gas at a price of $3.83 and put a stop in place at $3.76. Therefore, my position was automatically sold out today as the price dropped below $3.74. If I hadn't of had the stop in place and if the price had of dropped a lot further, I could have lost a lot more than I did!