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Jamin Chen's  Instablog

Jamin Chen
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A retired senior interested in the market.
My book:
How I Made Money During the Great Market Crash of 2008
  • Poor Man's Program Trading - 10 Month After 0 comments
    Jun 10, 2012 1:38 AM

    I did not report on this program for the past two months. DIA stayed roughly between $128 and $132 during most of March and April and I did not trade often enough to affect my portfolio with significance. Only in May, it dipped below $125.

    The performance, as of May 31, 2012, of the program trading is reported below.

    Date of inception8/3/2011
    Initial funding allocated for this strategy$248,400.00
    Number of shares of DIA I own now500
    Net from trading and dividends received, from the date of inception, after commissions and expenses$13,184.08
    Return on the fund allocated, from the date of inception5.31%
    Return on the fund allocated, annualized, from the date of inception6.77%
    Cash on hand$197,586.28
    Breakeven price for the DIA on hand$101.63
    Market value of portfolio$259,436.28
    Market value of portfolio over fund allocated$11,036.28

    During the past five months (January-May), only one trade per month was made.

    With a lack of trades, the return on the capital suffered, as shown below.

    Of the 500 shares of DIA I am holding now, 200 were bought at $128.56 on 2/8/2012 just in case if DIA soars above $135. It did not happen. It is a kind of insurance or hedging.

    The remaining 300 shares were bought 100 shares each at $125.00, $127.50 and $130.00. I bought them to sell at $2.50 above their buy prices. At the current level of DIA, I am still cautious and I am trading with an interval of $2.50. As shown in the figure below, at the close of the market on May 31, 2012, DIA was trading above its 20-month moving average. I intend to go back to $2.00 interval when it drops down below the moving average.

    (click to enlarge)

    With the recent downward movement of the market, the price of DIA has come down from the latest peak of $132. This is causing a slight decrease in the market value of my portfolio. This is shown below.

    So far, this strategy has made a 5.31% return on the allocated cash since it started ten months ago. At this moment, I have $197,586.28 of cash on hand.

    At this moment, the program trading is running almost on auto-pilot, with very little time and effort required from me. The program is generating an annual return of 6-7%. It is not great but it is quite decent under the present circumstances. For now, I am going to leave this strategy as is

    The program trading has generated more than $13,000 of earnings in 10 months so far. If it were my sole income, according to U. S. Department of Health and Human Services , it places me just above the poverty level in most states in the U. S. The capital for generating this earning is about $250,000. In other words, if you are going to generate enough income to provide a somewhat decent living from such a trading alone, you probably will need a capital of $500,000 or more.

    Disclosure: I am long DIA, T, GLD.

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