Speculative contrarian investing (Part II)

As I was working I placed some quick orders and lost $100 on an ordering mistake. By the end of day Friday I was alreay down $250-$300 on an investment $1500 for 10 call options at 107.

I waited patiently (actually I was nothing but patient). When you have your hard earned money on the block you can not be patient. The weekend was the worst (based on the investing emotions)I have had in my last seven year in the market. Even worst than that during the 2000 market crash time.

Monday I was again at the client site. By the end of business Monday market was 10747, but I was down $350 because my deadline (July 21st) was 4 days and fast approaching. Unless market goes above 10850, I will be in red on Friday evening. I held on for another day.

Tuesday was great, oil uncertainty was dying down and market close 10799 and I was in black. I made some stop loss orders and waited for another day. Wednesday afternoon I chekced hoping that my triggers woudl have materialized, instead market was way up due to Fed's comments. My original investment was worth $3200. Like any conservative (For the first time you hear the word conservative in these two posts!!!), I sold 5 options for $1600 and put a stop loss order at $1400.

For the first time I too a sigh of relief. I have made $70+ ($100 - trading cost) profit in 3 days and have a potential to make another $1400. By the end of the day, my other $1400 was filled and I made about $1450 on an initial investment of $1500.

I would let you take your own views on this experience, but personally I liked the ride..... and not just because I made money

Speculative contrarian investing

It's ironic. After explaining virtue of disciplined investing and portfolio diversification, I am doing an about turn.

I have not been tracking market actively since my May 21st posting. I would check my stocks once a week. As I already have my triggers set, I can be away and not worry about my stocks. On Friday the 14th July, I just checked the market and found that Dow was down from 11133 to 10750 in 3 days of trading because of Oil, Middle East and Alcoa . I checked the options prices and after doing some analysis, decided to invest in options expiring next friday July 21st.

This was very speculative bet. A safer option would have been Aug options as market would have come back by then for sure. What prompted me was that oil was temporary increase due to middle east. And I didn't see the conflict escalatiing to Iran and affecting world oil market.

1> Israel was already busy with it's operation in Palestine and Lebanon. So, there was no chance of Israel opening a third front. They have already spread thier air force and army thin due to this twin deployments.
2> Iran, needs oil due to the bad business climate and will not enter on it's own. Also, there was no need to get more attention of the world cummunity when they can persue their goals secretly through aiding south Lebanon fighters.
3> US was already taking the attack from international community for standing-by as Israel was bombarding Lebanon. They wouldn't want to get involved with Iran. If US was not involved in Afganistan and Iraq, they might be tempted to use this as an issue to tackle Iran.

So, I was expecting for things to normalized soon in less than a week. That means oil comes down and market booms. The other issues that had investors nervous like economy going in big thud are not a big concern for me. Though long term, I would be planning for a small recession this huge drop was an opportunity , at least to me, that I couldn't pass up.

Next issue what actually happened