Friday, December 05, 2008

Investment Plan

Today I decided how to handle this investment idea in the future.
(Part I, part II, part III, part IV)

1. I won't trade 10 cars (as I did last month, when I sold a great UYG long for a meager 30% gain instead of holding it for possible 120%, just because the position was affecting my daytrading).

I start with 2 cars and add to them. That way, my positions initially will be just take and forget positions, which is exactly what I want them to be in the start.

2. I will open a second account with IB, where i will park these position trades, so I'm not always tempted to daytrade them, something I just can't stop myself to do.

3. I will look for these extreme beaten down Ultra ETF's and start long positions in them. As I said I will start with 200 shares of the selected ETF and sell 2 in the money puts into the next expiration.

4. I will add to my position every 5.00, 2.50, 1.00, 0.50 or 0.25 USD down depending on the initial price I got for my position.

5. I plan for a maximum holding of 1000 shares in any selected ETF and will plan my add-on strategy accordingly. Regularly add-on's shall be made monthly by being assigned the shares against the in the money put's I sold. But I'm not prohibited to add to my position if an opportunity arises.

6. If prices go up, I will buy back my put and sell the next in the money strike to the upside, to make sure I get my add-on at expiration.

7. I will never add twice within a day.


I started this plan today with

200 DXO at 2.59, the 2 x Ultra long Crude Oil ETF (no options available on that one) and

200 UYG at 5.53, the 2 x Ultra long Financial ETF and

I sold 2 UYG Puts Strike 6 at 0.90


My homework over the weekend will be to identify other likely candidates for my investment plan. A list of available ETF's was recently published by Leavitt Brothers and can be found here.