Sunday, May 2, 2010

Bookkeeping: 2 Transactions from Friday

I had 2 transactions Friday...

First, Netlogic Microsystems (NETL) triggered a long held stop loss ... the idea when I placed it was to lock in my profits by having a stop loss in the $31s. That meant at worst I would have a 7%ish gain on the stock. Unfortunately as the stock had moved up (and up... and up) I had not moved the stop loss higher. Although with the stock opening "gap down" on earnings Friday morning (around $33) it would not of locked in the profits from prices in the $34s and $33s. However any price higher would have been better than $31s. Hence, I was stopped out about half the position at a price not too far above where I'd like to buy it back (closer to $30). Therefore, not a transaction price I like.

If I were on the ball, I should have had my stop loss right around the 20 day moving average (and kept moving it up every few days).... say in the $32.70 range and then I would have been taken out of my position at a price that made more sense and with more profit. Especially if I wanted to buy back nearer to the 50 day moving average about $2.50 lower.


Second, later in the day when the S&P 500 broke support (20 day moving average) I once again went by the textbook and added some short exposure via SPY puts. When this break of support happened Tuesday last week all it gave bears was pain since the market experienced a "V shaped bounce" despite a break of support. So following precedent only led to pain. That broke the traditional relationship of what was supposed to happen but all you can do is go with probability and hope the market begins to act normal at some point. Due to that experience my SPY put position is smaller than normal (about 3.5% exposure), but I wanted something to hedge to the downside in case the market reacts as it has done historically. It was a very whippy week.

Long Netlogic Microsystems, SPY Puts in fund; no personal position


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