Trade Update - DXO, DIG, FAZ

It's been a long time since I've updated this blog, but I actually haven't done any trades until recently anyway.

Yesterday I sold most of my DXO at $4.85 and the rest of my DIG at at $30.24.

Oil is up to $74 and I decided to get out. I made about 15% on the DXO trade - not very much, but I had a LOT of money in that trade.

I'm a little disappointed. I said that holding DXO would be an easy 100% gain, and it should've been (DXO went below $2 a couple of times and is now about $4.85). I bought too much too early on the way down and had no more money left to buy when it was really low. Even with not timing it well, I still actually made about 30%, if we're just talking in US dollars. What really hurt me was the change in exchange rate. Most of my DXO was bought when the Canadian Dollar was at a low $0.78 to the US dollar, and now it's at $0.93. So I "lost" over 10% in gains due to the Canadian dollar skyrocketing. Due to "the constant leverage trap" with leveraged ETFs/ETNs, DXO did not perform as well as it could have if it didn't drop so low at the beginning. It also switched over to using the July 2010 futures contract as its basis, which has way more premium built in to it, meaning it wouldn't perform as well as near-term contracts assuming oil only moves up slowly.

So why'd I get out? Oil recovered nicely to $75 as expected, but I don't see reason for it to go much higher right now. The economy still sucks and the markets are irrationally optimistic -- the markets have been in a huge extended rally, so I thought I would get out while things are good before the next "storm" hits. I'm not saying oil won't keep going up. I just don't want to bet on it doing so. I think Oil will do really well long-term, but short-term, I'm too scared and so I'm taking my profits. I would consider re-entering if oil drops to $60.

FAZ - let's not even mention that. Worst trade ever. I'm still holding some of it which is pretty much worthless right now. Again, FAZ/FAS are only for day traders. They both lose money over the long term and are too volatile for non-day-traders to be playing. Luckily I didn't put much money into that, so my gains on DXO still far exceeded those loses.

On DIG, I believe I made just a couple of percent on the last 1/3 of my position that I sold. So I've averaged about a 25% gain on my full DIG position.

What's next? I'll save that for my next post.

Trade Update - DIG

Guess I didn't need to worry. Sold a lot of my DIG off today at $36 and $37 today, for about a 37% gain on those trades!

Trades:
Account 1: sold all the DIG bought at 26.07 for $36.02 (+38%). So I need to start looking at what to buy next.

Account 2: sold another 1/3 of DIG (bought at 27.20) for $37.00 (+36%). I'll probably hold onto the remaining 1/3 longer term, maybe selling off around $50.

Today

The markets were up again today -- especially energy stocks. I wasn't able to watch the markets at all today, so in the morning I just put in a sell order for DIG at 36.00, hoping it would get hit, but it didn't quite make it. It was up to the low 35's, up over 15%, near the end of the day, and then everything dropped in the final few minutes, with the DOW and S&P actually ending up in the red.

Tomorrow, Exxon Mobile (XOM) has it's 3rd quarter earnings release. XOM makes up about 30% of DIG, so it could really have an effect on it (and all energy stocks)... which is why I wasn't sure if I still wanted to be holding lots of DIG at this point. The earnings are going to look stellar because oil was between $100 and $150 during that time period; however, everyone is expecting this and thus the price has been pushed up in advance. After the last 2 days of great gains, it could easily be sold off tomorrow. I'll just have to wait and see what happens.

Trade Update - DIG

Monday was a bad day, with DIG down 10%, but today (Tuesday) the markets took off in the last 2 hours of the trading day, with the DOW having it's 2nd biggest point gain ever -- 889 points, almost 11%. DIG followed suit, although 2x the gain of course, closing up almost 22% at 30.10. I decided I would take some profits near the end of the day. Since it was skyrocketing towards the close, I just waited and waited until the final 2 minutes, before finally selling my portion at 30.27, pretty much the day's high.

If DIG continues to rise, I'll probably look to sell at least 1/2 around $36, and the remainder at $40+, if it looks like it will get that high.

Trade Status:
Sold 1/3 of the DIG I recently purchased at 27.20, sold at 30.27 (+11% gain).
Note: Still also holding the original DIG I bought in another account at 26.07.

Freaky Friday

Well today was interesting. I woke up early only to find that the overseas markets had plummeted again, oil dropped from $68 to $63 after OPECs decision to cut 1.5 million barrels per day -- about the expected amount (so I guess it was buy on rumour sell on news... bah!) -- and Pre-market futures had dropped so low they hit their max limit for the day (-550 points for the DOW), and of course another load of bad news was released. People were panicking and there was speculation of the DOW opening down 1000 points and how it was going to be complete anarchy. It turned out to be not so bad, considering the oversees market performance and dismal news, and the DOW ended down only (yes, "only") 300 points.

On open, Energy stocks were down the most at about -10%, meaning DIG opened about -20% in the $23-$24 range. The markets didn't open as low as everyone expected and started rising. I was a little freaked out of course (I shouldn't have woken up early to see the news) and I had my finger on the trigger to sell. As I saw the market rising a bit, I was considering just trying to get out of DIG at a small loss around $26, especially when it finally hit that. I was nervous about the market tanking mid-day.

But then I imagined I wasn't invested in anything right now and thought about what I would be doing in that scenario. And I realized I would probably be wanting to buy DIG immediately while it was low, and I wouldn't be that nervous about it. After all, oil was down to $63 now, the markets were way down and starting to rise, and it was at the same price I had previously purchased it at when everything was higher. I realized that I quite commonly tend to freak out when I've bought something that goes up and then comes back down to the price I bought it at, even if I would be happily buying it again if I had never bought it.

So I decided to hold on. DIG rose quite a bit (thanks to Exxon Mobil doing a little better than the average energy stock) and finished -8% today at 27.56, above my average purchase price.

Gold also hit a low of around $680 and then shot up to $740, ending up in the 730's. I really think $680 is the bottom for gold. I'm hoping that with it so low and people finally being spooked enough with the continued selloff of the markets and bleak outlook, they'll finally start to flock to gold again. I don't think the rise in the US dollar will last much longer, and then gold should shoot up to the $800's.

Trade Update - DIG

With the cash from selling SSO, I loaded up on a lot more DIG today at 27.20. Oil is sitting around $68. This is somewhat of a gamble if I'm not willing to hold long-term, because it could move way down tomorrow depending on what OPEC does tonight. But again, the potential short-term upside is huge too.

Edit: DIG shot up 10% at the end of the day, closing at 30.00, on expectations of OPEC's cut. Let's just hope this isn't "buy on rumour, sell on news".

Trade Update: SSO, DIG

The market plummeted today, and energy and gold stocks got hit the worst. I got stopped out of the rest of my SSO at 29.02 today, which was right around my break-even, for an average of +7% on that trade. I never did end up placing a stop on DIG like I said I would to lock in 30% gains, and now it's only about 3% above where I bought.... oh well. Stops are great, and I really should start using them on all my trades since I can't pay attention to the markets throughout the day, and even if I could, I have a tendency to not be able to force myself to sell :)

I have no idea what's going to happen tommorrow, but I'll probably hold on to DIG even if it drops more, because I don't have too much in it, and I believe the upside potential to be huge.

Trade Status:
SSO - stopped out of the rest at breakeven, with first half +15% = +7% average gain over 5 days.
DIG - holding on...

Up-to-date

Okay, I'm finally caught up on this blog. I've given a brief overview of my investments over the last 5-10 years or so and can now finally blog "real-time".

It's Monday, and 3 days after my purchases of SSO and DIG, things are looking pretty good. DIG is up an astounding 41% and SSO is up 17%. Today I sold half of my SSO at a 15% gain. I just wanted to lock in some profits in case things take a turn for the worse tomorrow. I'll be setting a stop-loss order to make sure I at least break-even on the remaining half; but otherwise, I'll let the profits run for a bit if the rally continues.

The reason things could take a turn for the worse is because, as my brother brought to my attention, all the CDS's are being unwound this week from the Lehman bankruptcy. As my brother puts it:

All the people who sold credit default insurance on Lehman now have to pay up because Lehman defaulted. Most of the people who sold this insurance are other financial companies, so they could take a huge hit. This is how it cascades. If even one of these companies can't pay out on the insurance, then they go bankrupt, thus defaulting, thus causing all the companies that wrote insurance on them to pay, on top of what they already have to pay for Lehman, which causes others to default, etc.

The settlement for these payments is supposed to begin tomorrow, Tuesday. So who knows what will happen this week.

I would've sold some of my DIG, but I own so little that I didn't want the transaction costs taking away from my profits (since RBC still charges $29 per trade. I'm just too lazy to open up an account with a cheaper online brokerage and having everything in one place is nice). On Oct.24th, if OPEC announces only a 1 million barrel per day cut, oil could drop to $60, but if they announce a 3 million barrel per day cut, oil could go to $90. If oil continues to rise up to the meeting date, I plan to sell the day before as expectations could be too high, otherwise I'll probably hold with a stop-loss order in place to lock in at least 30% gains.

Trade Status:
SSO - bought 2008/10/16 @ $28.63, sold 1/2 on 2008/10/20 @ $33.00 (+15% return)
DIG - bought 2008/10/16 @ 26.07, still holding, currently at 36.83 (+41%)

Jumping in

So it's Thursday, October 16th and I've been itching to get into something. The markets have double-bottomed and all signs point to a temporary rally. Yes, Sprott still thinks we're just in the 4th inning and is still extremely bearish on the general markets long term, and bullish on gold and energy.

I don't want to borrow more money to invest, and I don't want to sell any of my Sprott gold and energy as I believe it's at the bottom. So what do I do? Well, lo and behold I happen to have some cash in my investment accounts that I was unaware of. I thought I was fully invested and never check my account details since I know exactly what I hold and roughly what is happening with it. But this last Thursday, I happened to look more closely and noticed the cash sitting there. It wasn't much money to trade with, but it was a start.

Since my brother believed in a market rally and was buying SSO (and call options on it), I bought into this 2x leveraged ETF too. I agreed it looked like a temporary market bottom.

Also, that day oil had dropped to $70 (from a high of almost $150 3 months ago). Energy stocks had come down so much and were sitting incredibly low this whole week -- about 60% off their highs! It seemed almost too obvious:

• Most oil predictions are around $80-90 for 2008, with Sprott and Merryl Lynch and others still predicting $150-ish oil in 2009-2010. Oil could go to $50 short-term due to lower demand, but that could not last long with the depleting oil reserves and continued increase in world-wide energy needs due to China and other emerging economies.
• OPEC moved their emergency November meeting up to Oct.24th as they are panicked about the crash in the oil price. They are predicted to slash production by $1-$3 million barrels per day to stabilize/increase the price. The market doesn't seem to be reacting to this yet.
• There are many energy companies that will be profitable even at $50-70 oil, and they seem way oversold right now.

I figured there was a potential for big gains here, but I didn't have much money to invest, so I looked for a leveraged ETF and found the Ultra Oil&Gas ProShares (DIG), which I bought on Thursday as well. The only thing I didn't like about this ETF is that Exxon Mobil makes up about 30% of the index; I don't like indexes that have such a large percentage in one stock.

Trades - Oct.16, 2008:
Bought SSO @ 28.63
Bought DIG @ 26.07