For all the complaining I do about working from home (especially in the winter), one fact I realized I'm overlooking is that I am far healthier at home.
I mostly eat lunch at home. Sure, it's often microwave meals, but they are certainly healthier than the fast food variety I used to plow down when I worked at the Chicago Board of Trade. For anyone who has worked in Chicago's Loop, you know the variety of fast food: heart-attack inducing meat sandwiches, grease dripped everything, super-sugary fountain drinks - not to mention the frequent "pop" after (and sometimes during) work.
The occasional trip out for lunch in my neighborhood is still far superior to the fare in the loop. There are plenty of nice cafes and restaurants near my house that serve up healthy and delicious dishes.
In addition to eating far healthier at home, I also have much more freedom to exercise. I have been prescribed a workout routine by my physical therapist which during my 9-5 days was really hard to stay true to. Now, I have plenty of time and no excuses NOT to fulfill my daily duty to myself. And when the weather is warmer (ie, NOT 5 degrees) I also can enjoy walking outside. I know, it makes me sound like an old man. But I much prefer a long brisk walk to running. It's still good exercise, and it allows me to clear my brain and focus on important things.
Thursday, January 29, 2009
Tuesday, January 27, 2009
Never Stop Learning
I was reminded of this old cliche last night as I attended an options trading discussion group, led by my broker thinkorswim.
I rarely make New Years' resolutions, and this year was no exception. However, I did promise myself that I would spend more energy on becoming an expert in my field of endeavor. I've been a Trader for nearly 11 years now, but I've never truly considered myself an expert. Or for that matter, ever truly competent - as some years' results might suggest.
As such, I've taken to reading more books on strategy, subscribing to other traders' blogs, seeking mentors, and attending free seminars or classes whenever possible. Already, I feel my efforts are slowing beginning to yield positive results.
The discussion group I attended last night was often times tedious due to an over-abundance of amateur traders who are still very new to options trading strategies and risk management (admittedly, the target market for this discussion). However, I'm glad I went because I was able to leave the meeting with a page full of useful notes - and more importantly - a good feeling that the strategies I've undertaken in my trading are a prudent and statistically favorable approach to generating consistent returns. It's one thing to have confidence in what you're doing, but it's even better when your suspicions are confirmed for you by someone else whom has made a very good living over 25 years in the market employing similar strategies. It nothing else, I left the meeting more confident, and more optimistic about the future.
Learning doesn't end when you graduate from school. It should be a lifetime commitment, and I have found that learning in the real world is far more rewarding and satisfying. For me, learning a new trading strategy and being able to immediately apply it to my day-to-day activities is exciting. And how learning should be. College is great, I'm not here to discredit higher learning. But learning theories in classrooms and writing reports about your theoretical finds is an empty exercise. You need to apply what you've learned to the real world to see how it truly functions. And in the trading world, there is no greater measuring stick to determine how smart you are than your ever-fluctuating, real-time, profit or loss. Cash money.
I rarely make New Years' resolutions, and this year was no exception. However, I did promise myself that I would spend more energy on becoming an expert in my field of endeavor. I've been a Trader for nearly 11 years now, but I've never truly considered myself an expert. Or for that matter, ever truly competent - as some years' results might suggest.
As such, I've taken to reading more books on strategy, subscribing to other traders' blogs, seeking mentors, and attending free seminars or classes whenever possible. Already, I feel my efforts are slowing beginning to yield positive results.
The discussion group I attended last night was often times tedious due to an over-abundance of amateur traders who are still very new to options trading strategies and risk management (admittedly, the target market for this discussion). However, I'm glad I went because I was able to leave the meeting with a page full of useful notes - and more importantly - a good feeling that the strategies I've undertaken in my trading are a prudent and statistically favorable approach to generating consistent returns. It's one thing to have confidence in what you're doing, but it's even better when your suspicions are confirmed for you by someone else whom has made a very good living over 25 years in the market employing similar strategies. It nothing else, I left the meeting more confident, and more optimistic about the future.
Learning doesn't end when you graduate from school. It should be a lifetime commitment, and I have found that learning in the real world is far more rewarding and satisfying. For me, learning a new trading strategy and being able to immediately apply it to my day-to-day activities is exciting. And how learning should be. College is great, I'm not here to discredit higher learning. But learning theories in classrooms and writing reports about your theoretical finds is an empty exercise. You need to apply what you've learned to the real world to see how it truly functions. And in the trading world, there is no greater measuring stick to determine how smart you are than your ever-fluctuating, real-time, profit or loss. Cash money.
Friday, January 23, 2009
An appropriate letter as America jumps into ObamaNation.
I didn't write this letter. It was forwarded to me via the usual email mass forwarding. But if you haven't read this, I think It's very appropriate for the times. It is a sobering word of caution to overzealous politicians and a pliable populace that is eager to get snowed by their new Celebrity President....
(A Letter from the "Boss")
To All My Valued Employees,
There have been some rumblings around the office about the future of this company, and more specifically, your job. As you know, the economy has changed for the worse and presents many challenges. However, the good news is this: The economy doesn't pose a threat to your job. What does threaten your job however, is the changing political landscape in this country.
However, let me tell you some little tidbits of fact which might help you decide what is in your best interests.
First, while it is easy to spew rhetoric that casts employers against employees, you have to understand that for every business owner there is a Back Story. This back story is often neglected and overshadowed by what you see and hear. Sure, you see me park my Mercedes outside. You've seen my home at last years Christmas party. I'm sure; all these flashy icons of luxury conjure up some idealized thoughts about my life.
However, what you don't see is the BACK STORY :
I started this company 28 years ago. At that time, I lived in a 300 square foot studio apartment for 3 years. My entire living apartment was converted into an office so I could put forth 100% effort into building a company, which by the way, would eventually employ you.
My diet consisted of Ramen Pride noodles because every dollar I spent went back into this company. I drove a rusty Toyota Corolla with a defective transmission. I didn't have time to date. Often times, I stayed home on weekends, while my friends went out drinking and partying. In fact, I was married to my business -- hard work, discipline, and sacrifice.
Meanwhile, my friends got jobs. They worked 40 hours a week and made a modest $50K a year and spent every dime they earned. They drove flashy cars and lived in expensive homes and wore fancy designer clothes. Instead of hitting the Nordstrom's for the latest hot fashion item, I was trolling through the discount store extracting any clothing item that didn't look like it was birthed in the 70's. My friends refinanced their mortgages and lived a life of luxury. I, however, did not. I put my time, my money, and my life into a business with a vision that eventually, some day, I too, will be able to afford these luxuries my friends supposedly had.
So, while you physically arrive at the office at 9am, mentally check in at about noon, and then leave at 5pm, I don't. There is no "off" button for me. When you leave the office, you are done and you have a weekend all to yourself. I unfortunately do not have the freedom. I eat, and breathe this company every minute of the day. There is no rest. There is no weekend. There is no happy hour. Every day this business is attached to my hip like a 1 year old special-needs child. You, of course, only see the fruits of that garden -- the nice house, the Mercedes, the vacations... you never realize the Back Story and the sacrifices I've made.
Now, the economy is falling apart and I, the guy that made all the right decisions and saved his money, have to bail-out all the people who didn't. The people that overspent their paychecks suddenly feel entitled to the same luxuries that I earned and sacrificed decades of my life for.
Yes, business ownership has its benefits but the price I've paid is steep and not without wounds.
Unfortunately, the cost of running this business, and employing you, is starting to eclipse the threshold of marginal benefit and let me tell you why:
I am being taxed to death and the government thinks I don't pay enough. I have state taxes. Federal taxes. Property taxes. Sales and use taxes. Payroll taxes. Workers compensation taxes. Unemployment taxes. Taxes on taxes. I have to hire a tax man to manage all these taxes and then guess what? I have to pay taxes for employing him. Government mandates and regulations and all the accounting that goes with it, now occupy most of my time. On Oct 15th, I wrote a check to the US Treasury for $288,000 for quarterly taxes. You know what my "stimulus" check was? Zero. Nada. Zilch.
The question I have is this: Who is stimulating the economy? Me, the guy who has provided 23 people good paying jobs and serves over 2,200,000 people per year with a flourishing business? Or, the single mother sitting at home pregnant with her fourth child waiting for her next welfare check? Obviously, government feels the latter is the economic stimulus of this country.
The fact is, if I deducted (Read: Stole) 50% of your paycheck you'd quit and you wouldn't work here. I mean, why should you? That's nuts. Who wants to get rewarded only 50% of their hard work? Well, I agree which is why your job is in jeopardy.
Here is what many of you don't understand ... to stimulate the economy you need to stimulate what runs the economy. Had suddenly government mandated to me that I didn't need to pay taxes, guess what? Instead of depositing that $288,000 into the Washington black-hole, I would have spent it, hired more employees, and generated substantial economic growth. My employees would have enjoyed the wealth of that tax cut in the form of promotions and better salaries. But you can forget it now.
When you have a comatose man on the verge of death, you don't defibrillate and shock his thumb thinking that will bring him back to life, do you? Or, do you defibrillate his heart? Business is at the heart of America and always has been. To restart it, you must stimulate it, not kill it. Suddenly, the power brokers in Washington believe the poor of America are the essential drivers of the American economic engine. Nothing could be further from the truth and this is the type of change you can keep.
So where am I going with all this?
It's quite simple.
If any new taxes are levied on me, or my company, my reaction will be swift and simple. I fire you. I fire your co-workers. You can then plead with the government to pay for your mortgage, your SUV, and your child's future. Frankly, it isn't my problem any more.
Then, I will close this company down, move to another country, and retire. You see, I'm done. I'm done with a country that penalizes the productive and gives to the unproductive. My motivation to work and to provide jobs will be destroyed, and with it, will be my citizenship.
So, if you lose your job, it won't be at the hands of the economy; it will be at the hands of a political hurricane that swept through this country, steamrolled the constitution, and will have changed its landscape forever. If that happens, you can find me sitting on a beach, retired, and with no employees to worry about.
Signed, THE BOSS
Tuesday, January 20, 2009
What is "Prosperity"?
Prosperity is commonly associated with vast amounts of money. Wealth.
To me, it is much more than that.
Prosperity is freedom. Freedom to make choices. Freedom to live where you want, when you want. Freedom to act. Freedom from debt. Freedom from regret.
Of course for most people, to achieve the above mentioned freedoms, money is the key ingredient.
My goals are pretty simple, I think. I hope to eventually live a debt free life, beholden to nobody else to provide for our incomes (ie, working for someone else). I'd like to continue living in Chicago, but have a winter residence someplace warm near water. Ideally, I would have several residences, but lets not get ahead of ourselves....
An experience I've been wanting to have for some time now, is to rent a Winnebago and travel around North America for an entire summer. No schedule. No route. No plan. Ideally, I'd hit the road with a few friends. We'd wake up in the morning, look at a map, figure out what looks interesting within a 4-5 hour drive, then set off. We'd arrive in our new destination around lunchtime and we'd spend the entire day in whatever location it is, experiencing whatever it is to experience. If we like it, perhaps we'll stay a second day. Whatever. We have no plan. No schedule. The beauty of my job is I can do it from anywhere. A laptop computer and a wireless internet connection is all that's required. Who wants to join me?
P.S. Today is inauguration day for President Barack Obama. People are celebrating like we just won World War II all over again. It is indeed an exciting time for people in America, if they are willing to, in fact, change their behaviors. But if I put a nickel in a basket every time a politician made a promise to America for "change" or "transparency" or "bipartisanship" or "equal opportunity for all" or "equal access" or "affordable health care" or "fiscal responsibility" or "corporate governance" or "world peace," my basket would have been upgraded to a dumpster, and it'd be overflowing.
I can't help but worry that once the buzz wears off from America's new Celebrity Metrosexual President, that the Prosperity that America expects (and the one I hope for personally) isn't even further away than it is now.
Naturally, as an American, I wish Obama well. I hope he succeeds in his noble goals without sacrificing our security and our future as a nation. And as an ideal.
Barack, you've come a long way since you and I used to trade turns on the bench press machine at East Bank Club. Good luck.
To me, it is much more than that.
Prosperity is freedom. Freedom to make choices. Freedom to live where you want, when you want. Freedom to act. Freedom from debt. Freedom from regret.
Of course for most people, to achieve the above mentioned freedoms, money is the key ingredient.
My goals are pretty simple, I think. I hope to eventually live a debt free life, beholden to nobody else to provide for our incomes (ie, working for someone else). I'd like to continue living in Chicago, but have a winter residence someplace warm near water. Ideally, I would have several residences, but lets not get ahead of ourselves....
An experience I've been wanting to have for some time now, is to rent a Winnebago and travel around North America for an entire summer. No schedule. No route. No plan. Ideally, I'd hit the road with a few friends. We'd wake up in the morning, look at a map, figure out what looks interesting within a 4-5 hour drive, then set off. We'd arrive in our new destination around lunchtime and we'd spend the entire day in whatever location it is, experiencing whatever it is to experience. If we like it, perhaps we'll stay a second day. Whatever. We have no plan. No schedule. The beauty of my job is I can do it from anywhere. A laptop computer and a wireless internet connection is all that's required. Who wants to join me?
P.S. Today is inauguration day for President Barack Obama. People are celebrating like we just won World War II all over again. It is indeed an exciting time for people in America, if they are willing to, in fact, change their behaviors. But if I put a nickel in a basket every time a politician made a promise to America for "change" or "transparency" or "bipartisanship" or "equal opportunity for all" or "equal access" or "affordable health care" or "fiscal responsibility" or "corporate governance" or "world peace," my basket would have been upgraded to a dumpster, and it'd be overflowing.
I can't help but worry that once the buzz wears off from America's new Celebrity Metrosexual President, that the Prosperity that America expects (and the one I hope for personally) isn't even further away than it is now.
Naturally, as an American, I wish Obama well. I hope he succeeds in his noble goals without sacrificing our security and our future as a nation. And as an ideal.
Barack, you've come a long way since you and I used to trade turns on the bench press machine at East Bank Club. Good luck.
January results are in.
January expiration took place on Friday, and as such, the net result of all my January options trades resulted in an 11.3% gain in my portfolio. This is in line with what I hope to continue in the months and years ahead. I had one losing bear call spread in Monsanto that I rolled up and forward to February for a credit in an effort to buy myself some more time to turn this into a small winner (so far, so good).
The market has begun a new leg down in this bear market. It started innocently enough just after the new year. However, the downside is accelerating and the previous lows set in November appear set to be violated in the weeks to come. The world is slowly starting to realize how severe the financial crisis REALLY is, how much worse it can get, and how the Obama administration's stated goals and initiatives will lead to vastly increased government spending (translated, MORE DEBT) which will further erode the buying power of the US Dollar. Hardly the stuff that makes investors optimistic.
As you can imagine, the existing February bearish positions in my portfolio are performing quite nicely. The offsetting bullish positions are starting to demand I pay a little more attention to them. JP Morgan's stock is getting hammered today (again) which is causing to me to roll down my bull put spread in that stock. The stock is currently trading around 19.35. I'm currently short the 20/22 put spread which I put on when the stock was at 22.00. I am attempting to roll down to the 17.5/20 put spread to improve my odds of success.
Which reminds me. If there are any other options traders out there who accidentally fall upon this blog who have experience managing a portfolio of vertical spreads, I'd love to bounce ideas of you. Drop me a line.
The market has begun a new leg down in this bear market. It started innocently enough just after the new year. However, the downside is accelerating and the previous lows set in November appear set to be violated in the weeks to come. The world is slowly starting to realize how severe the financial crisis REALLY is, how much worse it can get, and how the Obama administration's stated goals and initiatives will lead to vastly increased government spending (translated, MORE DEBT) which will further erode the buying power of the US Dollar. Hardly the stuff that makes investors optimistic.
As you can imagine, the existing February bearish positions in my portfolio are performing quite nicely. The offsetting bullish positions are starting to demand I pay a little more attention to them. JP Morgan's stock is getting hammered today (again) which is causing to me to roll down my bull put spread in that stock. The stock is currently trading around 19.35. I'm currently short the 20/22 put spread which I put on when the stock was at 22.00. I am attempting to roll down to the 17.5/20 put spread to improve my odds of success.
Which reminds me. If there are any other options traders out there who accidentally fall upon this blog who have experience managing a portfolio of vertical spreads, I'd love to bounce ideas of you. Drop me a line.
Monday, January 19, 2009
Let's Try This Again, shall we?
I've lost count, but I think this about the 6th day in a row of barely leaving the house except for quick little errands or to hop into a car. It is January in Chicago and the temperature hasn't risen above 10 degrees Fahrenheit in over a week. I'm beginning to feel like a hermit. I can go on and on about how much I hate this. But I'm going to focus on the good that's come out of it.
This forced home incarceration has provided ample opportunity for introspection.
One thing that I've centered on and have become consumed with is the building inventory of projects started, but never completed. This blog being at the top of my list. The second blaring example is a bookshelf littered with books that I have made halfway through, but never finished.
I'm reminded of a phrase uttered by coaches in every sport: "...it's not how you start, but how you FINISH."
With this in mind, I am now attempting to finish many of the things I have started - starting with this blog. The paradox with this blog, however, is that you can't "finish" a blog that is supposed to be documenting a journey that theoretically has no finish line. I am attempting to achieve Prosperity. But when you've achieved it, the journey doesn't end. It's a way of life - of living.
During my time of reflection, I've become agitated with myself for not keeping up with this blog. NOT keeping this blog current completely flies in the face of what I was hoping to achieve. As such, in an effort to keep me more interested in keeping this current, I've decided to broaden the focus. This blog will not solely focus on my occupation - Trading - although I suspect it will be heavily peppered with it, as my chosen career is a major part of who I am and is the vehicle that can transport me to the places I want to be.
This being said, I should point out that one major point of attraction to making your living as a self-employed Trader is the ability to change your mind and change your course on a moments' notice. If something isn't working, I don't need to prepare a proposal, run it by a focus-group, get management approval, and beg for funding from the finance department. In my world, I can make a decision and implement my new strategy immediately.
As such, I've changed my trading focus since my last posts back in July.
I essentially manage two trading portfolios. One is my retirement account that exists in a tax-advantaged Roth IRA. In this account, I will be following the same fundamental principles listed in previous posts (see below), however, my positions will be more concentrated. Meaning, I'll only hold up to 5 or 6 stock positions at most - though in the short term, I'll probably focus on one or two positions. And will often be in cash - as I am now until the markets provide a reason to wade back into the waters.
My second account, and the one I spend the most time on, is my "discretionary account." It is in this account that I am trading stock and index options. The strategy that I'm employing is designed to capture option premium (ie, shorting options) in risk-defined trades. My portfolio is designed to minimize market risk as much as possible by staying as close to delta-neutral as possible. Meaning, I have an beta-weighted equal balance of bullish and bearish positions so as to protect myself from a runaway one direction market. Of course, this isn't a fool-proof method, and adjustments have to be made frequently to readjust the portfolio to its neutral stance.
Options are decaying assets - they lose a fraction of their value every day (kinda like a car). They lose their value most rapidly in the final 30 days before their expiration. My strategy is to short out-of-the money options and take advantage of this phenomenon while hedging each position in case I'm wrong.
In this portfolio, my goal is to achieve monthly returns in the neighborhood of 10%. This might sound aggressive - and it is. But through proper risk management and timely adjustments to wayward positions, I believe this is possible. Only time (our friend) will tell.
Ok - for those who couldn't care less about the specifics, thanks for making it this far.
Mark Cuban is a business man whom I greatly admire, and I read his blog (www.blogmaverick.com) religiously. His views of business and achieving success are inspiring and he is living the dream. The man built many businesses from the ground up. One in particular he was able to sell to Yahoo at the height of the internet stock bubble (1999) for a ridiculous amount of money. He could have sailed off into the sunset, but instead he goes and buys his favorite basketball team - the Dallas Mavericks. In doing so, he's made the team into a perennial force. Man...that is living. I hope he can pull that same trick with the Chicago Cubs - if MLB will let him.
Anyway, his blog has inspired me to dust this one off and attempt to keep it current. Hopefully you'll find my posts at least interesting, and at most inspiring and entertaining. Afterall, this post should be a reflection of its author, and I like to tell myself that I am all three of those things :)
Stay tuned for what I hope will be close to daily posts.
Sean
Chicago, IL
This forced home incarceration has provided ample opportunity for introspection.
One thing that I've centered on and have become consumed with is the building inventory of projects started, but never completed. This blog being at the top of my list. The second blaring example is a bookshelf littered with books that I have made halfway through, but never finished.
I'm reminded of a phrase uttered by coaches in every sport: "...it's not how you start, but how you FINISH."
With this in mind, I am now attempting to finish many of the things I have started - starting with this blog. The paradox with this blog, however, is that you can't "finish" a blog that is supposed to be documenting a journey that theoretically has no finish line. I am attempting to achieve Prosperity. But when you've achieved it, the journey doesn't end. It's a way of life - of living.
During my time of reflection, I've become agitated with myself for not keeping up with this blog. NOT keeping this blog current completely flies in the face of what I was hoping to achieve. As such, in an effort to keep me more interested in keeping this current, I've decided to broaden the focus. This blog will not solely focus on my occupation - Trading - although I suspect it will be heavily peppered with it, as my chosen career is a major part of who I am and is the vehicle that can transport me to the places I want to be.
This being said, I should point out that one major point of attraction to making your living as a self-employed Trader is the ability to change your mind and change your course on a moments' notice. If something isn't working, I don't need to prepare a proposal, run it by a focus-group, get management approval, and beg for funding from the finance department. In my world, I can make a decision and implement my new strategy immediately.
As such, I've changed my trading focus since my last posts back in July.
I essentially manage two trading portfolios. One is my retirement account that exists in a tax-advantaged Roth IRA. In this account, I will be following the same fundamental principles listed in previous posts (see below), however, my positions will be more concentrated. Meaning, I'll only hold up to 5 or 6 stock positions at most - though in the short term, I'll probably focus on one or two positions. And will often be in cash - as I am now until the markets provide a reason to wade back into the waters.
My second account, and the one I spend the most time on, is my "discretionary account." It is in this account that I am trading stock and index options. The strategy that I'm employing is designed to capture option premium (ie, shorting options) in risk-defined trades. My portfolio is designed to minimize market risk as much as possible by staying as close to delta-neutral as possible. Meaning, I have an beta-weighted equal balance of bullish and bearish positions so as to protect myself from a runaway one direction market. Of course, this isn't a fool-proof method, and adjustments have to be made frequently to readjust the portfolio to its neutral stance.
Options are decaying assets - they lose a fraction of their value every day (kinda like a car). They lose their value most rapidly in the final 30 days before their expiration. My strategy is to short out-of-the money options and take advantage of this phenomenon while hedging each position in case I'm wrong.
In this portfolio, my goal is to achieve monthly returns in the neighborhood of 10%. This might sound aggressive - and it is. But through proper risk management and timely adjustments to wayward positions, I believe this is possible. Only time (our friend) will tell.
Ok - for those who couldn't care less about the specifics, thanks for making it this far.
Mark Cuban is a business man whom I greatly admire, and I read his blog (www.blogmaverick.com) religiously. His views of business and achieving success are inspiring and he is living the dream. The man built many businesses from the ground up. One in particular he was able to sell to Yahoo at the height of the internet stock bubble (1999) for a ridiculous amount of money. He could have sailed off into the sunset, but instead he goes and buys his favorite basketball team - the Dallas Mavericks. In doing so, he's made the team into a perennial force. Man...that is living. I hope he can pull that same trick with the Chicago Cubs - if MLB will let him.
Anyway, his blog has inspired me to dust this one off and attempt to keep it current. Hopefully you'll find my posts at least interesting, and at most inspiring and entertaining. Afterall, this post should be a reflection of its author, and I like to tell myself that I am all three of those things :)
Stay tuned for what I hope will be close to daily posts.
Sean
Chicago, IL
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