Today was one of my most profitable days as a trader. The market FINALLY got the news it needed to sustain a rally, and the value of my numerous call positions soared. This morning Citi came out with news that they were profitable, and then later in the day news that the uptick rule would likely be reinstated carried the market higher throughout the day.
On a side note, not to rant on an optimists day, and go against all of the analysts lining up to call the bottom on cnbc tomorrow, but WE HAVE NOT HIT BOTTOM. First of all, lets briefly analyze the fact that Citi is profitable. Well, of course they are profitable. If you borrowed money at 0% and lent it out at 7%, you would be profitable too. The issue isn't profits right now, its the muck and toxic waste they are carrying on thier balance sheet that their new found profits must carry. It has become apparent that the Fed's solution for the banks is for them to grow out of their problems. The plan goes like this: give the banks money so cheap, that their profits should be able to support their toxic assets until the market steadies and turns. However, I ask two very simple questions:
What happens when rates go up?
What happens if the economy does not improve, and we continue to be affected by deflation?
Ok, back to trading.....I made a lot of moves today. I took alot of profits on my call positions. Not to say that this rally doesn't have legs, but I think there will be better opportunities to buy into this rally if we sell off a bit.
Today I:
- Sold my IWM call position that was purchaseed yesterday for a profit
- Sold part of my SPY call position for a profit (these were March 69)
- Sold part of my SPY call position for a loss (these were March 72)
- Sold my IYR call position for a profit
- Sold 2/3 of my XLF call position for a profit. (I will focus on this trade in a later post. This was a great trade, and I want to analyze it further).
So you can see I lightened up my bullish stance quite a bit after today's rally. All of the calls above were March, so it was definitely time to sell with expiration approaching next week. I still have many calls with April, May and June expiration.
I did buy some puts today to even out my account.
- Purchased ADM puts
- Purchased QQQQ puts
- Purchased IYR puts (shorting commercial real estate is probably my favorite position. I am probably a little early purchasing these, but I had to jump back in after today's 13% rally).
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