Monday, May 19, 2008

sold spread

Hey everyone

Today I sold the PBW June 22/24 call spread for a profit of 40 dollars or 47%. I'm going to go over some points on the trade just to get the information out there to use in the future.

Positive

- The money spent on purchasing the spread was not needed in any other capacity. But purchasing a spread allowed me to get into a trade.

- I had based my sell on the basis of the regular research done both technically and fundamentally on PBW and its components. This was key as the time to expiration came close because PBW had not moved up in the profit range since Feb.

- There was a clear buy signal during the market sell off where

- The fact that it was an ETF gave it a level of stability needed. The solar and alt energy stocks are extremely volatile and this type of trade (spread) is not compatible to a highly volatile stock (in my mind).

- I have a general interest and general knowledge in the alt energy market leaving any necessary research needing to be done easy to do.

Negative

- I should better clarify my selling strategy before entering the trade.

- I should have a larger profit N when determining the loss N

Overall

- I did well on this trade. I found a spot to enter with the market meltdown in Jan. I also found an unusual high up day to get out. I found a spread that was probable. I paid a price I could afford. I made money with not panicking or being that surprised at the result. I researched the companies in the ETF and understood what was coming. I could tell from the chart that there would be a blowout of the triangle formed. I have put a percentage from the profit into my base account to make my family wealthier. I will continue to try to find more trades to make:

1) That there is an edge (like the oversold point.)
2) Better identify my sell point
3) Identify my N and the ratio of loss to gain


- The price has since come down and might provide another opportunity to purchase a six month term spread. I like the fact that this ETF is better balanced with wind, solar, geothermal, and biodiesal companies. But I will step back today and wait until I find I have an edge before I trade again. I hope I do.

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