Sunday, September 30, 2007

Networth Update

It's the end of the month, and as I prepare for my move, I need to be more sure than prior months that my finances are together, so that during the frantic atmosphere around a move, nothing falls through the cracks.

This month has been a great month for me in terms of following my budget. At the end of the month, I was only over by budget by about $2. However, I am still trying to recover my overages from prior months, so I will continue deducting from my discretionary budget.

So compared to last month's networth update, 0.33% increase in my networth, or about $3,300. This is inflated a little bit, since I haven't paid for next month's rent, even including that, my networth has increased by about $1,000.

I am very happy that I am back on track with my finances.

Overall, my networth is -$17,431.62 or about -1.74% away from my goal.

Friday, September 28, 2007

The week, moving, and reader questions

This has been a hectic week. In my trading, I caught a great dagger in USU last week and made about $1000 from the trade. I thankfully dumped it about 3 hours before it started crashing two days ago.

While I was very excited about this, I also had other things on my mind. Primarily, I have been looking for a new job since I believed I had no real future career at my current position. I resigned this week, and I will write more about this subject over the weekend.

To reader questions who are curious about how I learned to trade and want to learn to trade, I will try to run a series next week.

For now, I need food and drinks or else I will go crazy.

Monday, September 24, 2007

How to profit off your credit card

I know in the near future, I am going to have a few large expenses. One, I may be moving, and two, I want to get a nice sized LCD for the new place. While I have the money to spent, there are also really nice short-term rates out there in the form of high-yield CDs that many banks are offering.

How do I take advantage of this?

Well, consider that the total expenditures I expect to make are about $5000 (shocking that this is the same amount as the minimum at most banks for said high-yield CD). Instead of spending it, I went out and got a high limit credit card with a 0% APR offer for 6 months.

That way, I can charge the expenses to the credit card, paying the minimum balance to avoid any fees, and since there is no interest involved, by the time I have to pay, the balance would be $5000 - 5 x minimum payments. Considering a minimum payment of 2%, that's about $100 a month. So I would have to pay a lump sum of $4500 by the sixth month.

At the same time as the purchase, I put the $5000 in cash into a 6-month CD at about 5.30% APR. That's about $22 a month in interest, or by the end of 6-months, about $134!

And there you go, if you plan it correctly, you can eat your cake and keep it too!

Thursday, September 20, 2007

-10% to +12% gains in 3 days (that story is in the 3rd paragraph)

There has been a whirlwind of interesting events that have transpired in the last week. Some I can't talk about until I know for sure. But in terms of my finances, and mainly my trading, I can.

Finance-wise, I have been managing to stay within my budget. This has been helped by a combination of seeing the parents more during meal times, and just general life busy-ness preventing me from spending much money. One large upside though was a visit to the casino, which netted me about $400 in extra spending money.

On the trading side, I had been down about 10% on this past Monday. I had hoped for a 25bps decrease in the Fed Fund rate to help out my portfolio, and when a 50bps cut was announced, by portfolio roared back. I started unwinding my portfolio Tuesday, and by yesterday, I was completely out of all my long positions by around 11:30am. Selling had netted be a positive 12% gain on my total investment.

Not bad. And what a relief.

But then I started to think. I knew that the rally had really been artificial, because after all, what does a 50bps rate cut mean? Realistically, nothing much different from 25. Around noon I started buying short positions, and the market started to dip. By the end of the day, by short positions were ahead by about 5%.

The market continued its down slide today, and my shorts are looking better and better. My play here is to sell around the end of the day tomorrow, and then go long again, since I think by Friday, the market well have corrected itself past the Fed cut's temporary boost.

Tuesday, September 11, 2007

Learning to Trade... the hard way

So the last week of ups and downs have taught me two lessons I really should have known:

  1. Use bracket orders to set sell points, both at profit-taking and loss-prevention points.

  2. Gold used to be a hedge against the stock market. Now, it mirrors the stock market.
(1) I realized because the market has been making huge swings, and obviously, trading at work prevents me from watching the market constantly. I ended up missing great selling points and then getting really screwed on the way down, as everyone jumped on the profit-taking wagon.

I now have a pricing rule for my options (using + to indicate profit percent and - to indicate loss percent):

25 cents or less: +40,-25
26-50 cents: +25, -20
51 cents to 150 cents: +15, -10
151 cents or more: +10, -5

If you consider options in general, you will see these price points make sense, as early on, the out of the money options tend to swing a lot and have lower prices. Closer to the money options are also more expensive, but this also prevents huge swings.

(2) I did manage to sell my gold options for a 5% profit, but for a good 3 days, they were down 20%. Why did this happen? I thought perhaps when the market was down, people would rush to a safe commodity, gold. Instead, as a co-worker explained to me, gold has been mirroring the market in recent years because the same money being put into the market is also put into gold. So when investor confidence is low, and the market is tanking, that same money is not being reinvested into gold. Instead, its probably being pulled out of the market altogether.

Sunday, September 9, 2007

Networth Outlook

After last week's networth update, I was pondering why I had managed to save nothing last month, and then it hit me. I had waited one day too long to check my bank account, so my rent for this month had been sent out my electronic payment already!

So last month, I actually did save $1000, but it was hard to see it, since I haven't been counting rent paid as an asset. Oh well.

This month I am working hard on keeping my expenses down, and at the very least, within budget. I started this process by writing off $100 of my discretionary budget this month to offset the $520 I have spent over budget this year.

Wednesday, September 5, 2007

Networth Update

This one is a bit late, but the Labor Day weekend got in the way of regular blogging duties.

Comparing to last month, I have gotten a much better grip of my financial situation, staying close to my budget, although I was still off by about $100 by the end of the month. I am accounting for it by decreasing my discretionary budget (ie. entertainment) by $100 for the month of September.

Compared to last month's networth update, I have made a 0.06% increase in my networth by about $500. Unfortunately, this $500 is primarily from a readjustment of my student loans, suggesting that I made no real changes since last month.

This is to be expected though, since I was way over budget last month, and I had to pay the bills this month.

Overall, my net worth is -$20,723.85, making me -2.07% of the way to my goal.

Saturday, September 1, 2007

"Long"-term market thoughts

It is important to note the difference between a "Trader" and an "Investor". A trader profits in the short-term (a few days), while an investor profits in the long-term (over years). This difference in time necessitates different strategies.

Right now, I am a trader when it comes to my brokerage account, but I have also invested a portion of my salary into a 401(k). When I blog about my accounts ups and downs, I refer to my brokerage account, in which I am short-term.

So as a trader, long-term for me is probably about 2-3 weeks. In that time span, I expect the market indexes to continue pressing upward, spurred on by a Fed Rate cut on Sept. 18th, as well as improving home sales and mortgage environment.