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发帖数: 2026 | 1 Apple Trading From 90 to 200 - Lessons
发信人: eric717 (eric), 信区: Stock
标 题: Apple Trading From 90 to 200 - Lessons Learned
发信站: BBS 未名空间站 (Wed Jan 2 23:21:53 2008)
I closed out all my January Apple options at the opening this morning
including 500 Jan 150 calls and 200 Jan 180 and Jan 200 calls as planned to
delay tax payment to this year. In addition I closed all my Jan 100 and Jan
130 RIMM calls. All of them made money except Jan 130 RIMM call, which lost
about 80% of value. 2007 has been a wonderful year to me and it surpasses my
previous record year 1999 in terms of percentage gain when I rode YHOO and
CMGI options to my first 1 million. I traded my call Apple positions three
times and Apple alone is more than a 10 bagger for me. I would like to take
this opportunity to look back my trading using Apple as an example and
discuss the lessons learned. Most of them can be applied to general stock
investment.
I have been trading my core Apple options three times this year. First on
the week of Iphone announcement, I bought Jan 120 call when the stock is in
90s and sold all my position on the first day of Iphone sale in June when
Apple reaches high 120s. I reentered the position of Jan 150 call the next
week and sold them when Apple reaches high 140s. The last set of Jan 150,
180 and 200 calls entered mostly in August crash and I added some positions
in November when Apple dropped to 170. I will discuss in detail the rational
of how decisions were made for each round of trades and some strategies I
used.
To understand my trading style you have to be aware of the compliance
restrictions on my trading. I have to wait xx days after submitting a trade
request to execute trades. In another word I have to be able to predict what
will happen xx days before, which is almost impossible. For all three
rounds of enter and exit my positions, round one buy and sell, round two buy
and round three sell can be planned ahead of time since we all know the
events before they announce. In terms of timing on round two sell and round
three buy I have to admit I am a little bit lucky. Due to this trading
restriction I can only make intermediate to long term trades. So far the
total compensation package I got from my current firm still worth this
sacrifice.
First topic I want to discuss is related with the use of FA and TA in
trading. For me FA will decide which stock I play. In Apple’s case, after
doing intensive research on Iphone I am convinced that it will be a
breakthrough product and will have huge impact on its earnings in next
couple of years. I missed stock run-up on iPod launch and I am not going to
miss this time again. That’s the reason I entered my initial Jan 120 call.
But it doesn’t mean stocks with strong fundamentals will go straight up.
Quite often it may get overbought on momentum and get ahead of itself. Under
this scenario, TA can help you make sell decisions. Personally I like to
use the following TA indicators to predict the direction of the overall
market: index put/call ratio, NYSE and NASD overbought/oversold oscillator
and VIX. In my case I want to capture macro-cycle of market movement instead
of micro-cycle movement and combine that with TA of individual stock to
make decisions. This is partly due to my trading style and partly due to my
believing that no one can predict each small movement accurately as I see
first-hand example of many professional traders over the years. Conversely
we can also make buy decisions on individual stock with strong fundamentals
when overall market is oversold. In general it’s a good bet in the past for
me the stock reaches bottom if it has a big reversal day with huge volume,
down big at open and come back gradually and close in positive. The stock
like Apple with strong FA and momentum usually bottoms before overall market
bottom out and rebounds before overall market start recovery. There are two
ways to buy, some people want to confirm it’s already bottomed out and on
the rise or you decide the price is good enough to pick up the shares even
if it may have more downside to go. Too often people are either scared to
buy and always try to pick up the exact low which is impossible. In case of
Apple, if you believe it will reach 200 by the end of the year in November
crash, pick up shares at 170 is not bad at all. That’s exactly what I am
doing when I entered some Jan 180 calls when the stock is around 170. The
sign of recovery I use to judge is if the stock keep making higher high and
higher low with increasing volume.
Second topic I want to discuss is how to take advantage of being a small
investor. Buy and hold strategy for a stock like Apple is fine as long as
fundamental are not change and you don’t have much time to follow the
market. For small investors if you have time to follow the market and are
good at it you should take advantage of quickness and flexibility. In the
word of Deporre, noted stock market investor and writer for realmoney.com,
the key of maximizing assets is shark investing – protecting capital while
aggressively pursuing profits. I would recommend you to read his book ‘
Invest Like a Shark’. As long as you can capture each macro-cycle movement
over the year (usually there are three or four of them) in long or short
side or both you will make good amount of money. Obviously some people can
even capture most of micro-cycles like PSP in this board but it’s very
difficult to do that for most of people. I would suggest being good at
trading on large movement first.
Third topic I want to discuss is about trading options. I have written one
articles in the past to emphasize risk management. It’s so important and I
can emphasize enough. In November crash my 500 Jan 150 call lose value of 1
million in a week (option price dropped from 40 to 20 when stock drop from
190s to 160s). The reason I am not panic is first I used the gains I made
early of the year on APPLE and FXI, LFC to open this position and second I
opened position in a relatively low price (6-7). What I emphasize here is
two things: first only use the money you can lose to play the options;
second if you miss the entry points don’t try to chase it just wait until
next opportunity. Another thing I want to emphasize again is that you don’t
put a lot of money to play short-term options. Only open the positions
three-or four money down the road or even longer. In this way if something
unexpected happens you still have time to recovery.
Fourth topic is about FX option trading. I allocated small part of my
capital to trade FX options. In FX trading the margin can be as high as 200:
1. I made some long term bet on USD/EUR, USD/CAD and USD/JPY move and it’s
quite rewarding. If you have time and money you can consider to trade small
capital on different asset class not just stocks. Obviously you have to know
what you are doing.
Some predictions for 2008, it will be a roller coaster. I am considering the
following stocks to trade: AAPL, RIMM. AMZN, CME, MA, FSLR and PCLN so far
. It could be in long side or short side. In terms of Apple, here’s my
prediction: I don’t think it will drop significantly from here giving MAC
conference and Jan earnings. Any significant drop is a chance to pick up
shares and sell on the day before MAC conference announcement. I think it
will drop like the past couple of years after announcement. I would pick up
the shares and sell after earnings announcement. I think significant
correction will not happen after earnings run-up. I opened some April 210
calls today to play this event. In terms of Apple price for 2008 I think it
will have the chance to reach 250-300 range considering ultra-thin notebook
and 3G Iphone release. I may be wrong. Trade at your own risk.
Finally I want to wish happy and prosperous New Year to everyone! |
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