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The year 2011 came to close and, in December, my program trading has benefited greatly from the Santa Claus rally. Here is the result as of December 30:

Maximum cash reserve for this strategy

$248,400.00

Number of shares of DIA I own now

100

Net from trading, after commissions

$10,216.73 (from 8/3/2011 to 12/30/2011)

Return on the cash reserve

4.11%

Return on the cash reserve, annualized

10.4% (from 8/3/2011 to 12/30/2011)

Cash on hand

$247,707.78

Breakeven price for the DIA on hand

$6.92

Market value of portfolio

$259,892.78 (at the close of 12/30/2011)

Market value of portfolio over reserve

$11,492.78 (at the close of 12/30/2011)

The following is a chart of the history of the annualized return since this program trading started:

(Click charts to expand)

The annualized return got back up to 10.4% because of some extra trades I made this month. In this month, I made a total of 8 trades.

However, only 5 of them are from the regular retrace of the market. The other three is from the Santa Claus rally. In late November, in anticipation of the year-end rally, I bought 300 extra shares of DIA at $114.44, which I mentioned in my November report. Santa did come to town. Even though he brought with him only a meager gift, I netted handsomely by selling those shares on December 19, at $118.47. I would have gotten a lot more out of it if I waited until the last trading day before Christmas when DIA closed at $122.63. Still, I am happy that I made money on this deal.

Now, at the end of the year 2011, I am sitting on a pile of cash and I have only 100 shares of DIA on hand. I bought that 100 shares way back on September 30 at $109. If the market goes up further from here and when I cash it in, I would make a bundle.

What am I going to do with all that cash? The DIA chart below [from Charles Schwarz’s StreetSmart. You can see what all those lines and curves mean in my preceding article in this series] indicates that the market is not breaking away from the current trading range soon.

My planned actions are as follows:

  1. If the market continues to hobble at where it has been recently, I would continue to do the same trading. I may expand the top of the range to DIA=$120 from my past trading range of between $106 and $116. In fact, I have already placed some of the buy orders.
  2. If the market shoots up from here, I will sell off my last 100 shares of DIA and then I will see what to do next. Unless there is a good fundamental and technical reason behind such a movement, I will sit it out. If there is another QE declared by the Fed, I may do some buying at the start but I will sell them out before it officially ends.
  3. If the market goes down significantly from here because of some events in Europe or elsewhere, I would space my purchase of DIA so that I can stretch my cash hoard to as far down as possible.
Source: Poor Man's Program Trading After 5 Months