Archive for April, 2006

General Investing Strategy

Sunday, April 30th, 2006

Our general investing strategy is medium term – 1 week to 3 months. We aren’t day-trading, nor looking for long-term investments. Operationally, we strive to spend 15-30 minutes per evening prior to days when the market is open reviewing existing investments and searching for new ones.

Factors considered when searching for an investment:

  • Technical indicators:
  • Insider trading (what company insiders are doing as reported to the SEC)
  • Movement of industry group
  • Fundamental analysis (company financial statements)
  • News

Fortunately much of this can now be automated, summarized, and most importantly, searched for. We pay around $50/month for an online service to supply this data. Most of the above information for any given stock are typically available for free from sites like Rather than advertise here any particular paid service, if you want to know who we use, feel free to email and ask.

Option Purchase to Open MOTQE

Saturday, April 22nd, 2006

On Friday we bought a $25 May 2006 put option on Motorola (MOT) for $2.50/option. Their Q1 earnings report earlier in the week gave a very strong sell signal according to 4 technical indicators: price broke downward through 30-day average, macd turned negative, stochastics broke downward through the 75% mark, under very heavy volume (53M shares vs. a 52-week average of 20M). Though their company fundamentals aren’t too bad, their stock group Technology/Communications Equipment is on the down-turn, so this looked like a good opportunity for a 1-month put option play.

We’ll discuss exactly what a put option is on a non-trading day, but for now these are the steps that were taken for choosing the best option. We went to and copied and pasted the put option table that expires in May of 2006 into a spreadsheet. We then created an ROI (Return On Investment) table for the range of target prices from 20-25. This range was chosen because the stock has been fluctuating in the 20-25 price range for the past 9 months. Balancing safety with profitability, it seemed the $25 strike price was most attractive. If MOT closes at $22.50 on May 19, we break even (minus brokerage fees.) If it closes at $22, we make 20%. If it closes at $21.50, we make 40%, etc.

Our exit strategy is to sell all the options prior to the option expiration date of May 19 if the stock price hits or drops below $20.55. This price was chosen from observing price resistance at around $20.50 for the past 6 months. Our online broker conveniently allows an options trade to be triggered by behavior of the underlying stock. A trade trigger was set to sell all options if MOT hits or drops below $20.55.

Options trading can be very risky. For example if MOT closes at $24 on May 19 and we have not yet sold our options, we lose 60% of our investment. If it closes at $25 or higher we lose 100%. Today we are up 16%. Not bad for 1 trade in 1 day. But these tempting returns attract many investors into trades that will take the shirt off their back.


Stock Purchase of STKL

Thursday, April 20th, 2006

Today we bought some shares of SunOpta Inc. (STKL) for $9.20/share. This was identified as an uptrending stock in a rising industry group with solid fundamentals, was just oversold according to the stochastics and macd, and rising on heavy volume. Click the below image to see the stock and these indicators. On a non-trading day we will discuss these indicators in greater detail. We will keep an eye on this stock daily and follow the technical indicators for sell signals.
STKL 20 April 2006

Let’s Begin

Thursday, April 20th, 2006

Robert Kiyosaki says in one of his books that information is like wine – sometimes it takes time to age. I’ve done some heavy stock and options trading a few years ago after paying a good 4 figures for a class and inhaling a few books on the subject. I’m ready to take that bottle out of the cellar now and uncork it. Let’s see if we have something comparable to that unforgettable bottle of Côtes Du Rhône I had at a friend’s bachelor party dinner some years ago – or vinegar.