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Strategies & Market Trends : The Art of Investing
PICK 49.15+0.1%Dec 5 4:00 PM EST
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To: Sun Tzu who wrote (133)9/29/1998 3:51:00 PM
From: Sun Tzu  Read Replies (1) of 10659
 
O.K, I just took a long position in the market. I am not saying this to hype my position, rather enough people have been asking me about what I've bought and how I trade that I decided to use an active position as a way of discussing trading strategies. Before we go any further, I have not changed my mind on the overall market; it is still heading south, just not yet. I'd feel a lot better shorting the multinationals if the market had staged a big rally in response to the Fed move, but there is no need to rush; one can always make money in the market. Now onto my position.

I've bought 1000 TDFX and should Nov 15 calls on it for the total cost of $11.5. So my upside is 15 or 30%, which is close enough to what I see the short term target of $16. I sold the calls at the high price or 98 vol so I'm happy with that part of the deal. The short term down side for the stock IMO is 11 or loss of 7%. This gives me a better than 4:1 risk reward ratio which I consider good. I'd like to make money in at least 1 out of 3 trades, so I'm going to set my stop loss to one third of my hypothetical gains or in this case 10%. This means I'm setting my stop loss at 10 3/8 and leaving the calls naked. Incidentaly, these numbers correspond well to various TA points but that is not how I calculated them. Nor is it unusual for various methods to converge to the same numbers.

Now if you have any questions about any of the hows and whys of this trade, fire away; I'm all ears.

Sun Tzu
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