3:01 PM 26/03/2009

I wanted to check up on trades in my paper trading account after an hour and I actually did. At around 9:30 local time I checked with much satisfaction that one of my picks had achieved more than 1% nett gain. (nett means after commission, I do not know about impact of tax yet. I am in Canada and I am not liable to UK taxes. I guess since I have spent a lot of money on various deductible expenses and have suffered losses both in 2008 and this year, I guess I will be liable for some tax if I reap huge gains this year. At any rate it is bridge too far and I will bother about it later when I reap huge benifits from my trading activity around globe. I will also probably move my UK funds to an interactivebrokers.com account. I say bridge too far because my total income is yet to hit taxable range. I feel so embarrased saying that.)

I mentioned 1% nett gain. If I wanted to achieve 1% after commission gain then I can as well set up a limit order soon after I have bought shares. For example, I have 3230 shares of R266 bought at total cost of 1207.6 GBP. So to achieve I need to make it 1219.68. With commission it will have to be: 1232.18. Divide that by 3230 (shares I own) and I get my target price of GBP 0.3814786 or in pennies: 38.14786. I can setup a limit order to sell at 40p or 39p or 38.2p etc to capture nett 1% gain.

I intended to check at the end of 1 hour and every hour how my trades today fared but did not (a man has got to sleep). Yesterday I had checked and knew both picks did not do well. I should have liquidated those positions but did not and was hit by bigger losses as a result of overnight movements. Today I decided that those 2 picks generated from data downloaded half hour after open were too soon because remember that the data are delayed by 20 minutes, so half hour after open is really 10 minutes after open. So today I decided to change the routine. Start with download at one hour after market open. But surprise, surprise. Today at 5 AM Toronto time when markets have been open for an hour I found %Change figures all zeroes! And they are crucual for my number crunching program. I reported them and took some time off markets and by the time I got back many hours had passed. Hopefully from tomorrow they behave.

Let me first do computation of price targets for 1% nett gain and then I will check if these were achieved.

R266 3230 shares at cost of 1207.6 GBP, target: 38.14786p (achieved, sold at 39p)

R337 1299 shares at cost of 1207.58 GBP, target: 94.85418p (never achieved, sold at loss at EOD at 91p)

R321 7470 shares at cost of 1207.7 GBP, target: 16.49634p (achieved, sold at 17p)

R206 1422 shares at cost of 1206.98 GBP, target: 86.60688p (never achieved, sold at loss at EOD at 81p)

Let us assume positions did liquidate like these and recompute our cash position at the end of day. Much better this way. Never let an overnight position unclosed because overnight moves can be huge. I tentatively chose 1% nett gain, but if our losses are persistent we probably will have to set bigger targets and also see if there is any leading indicator which can warn us about possible losing share. We would like to use any help from indicators to avoid losses. Problem with higher targets is that they may not be achieved and we may end up with smaller gain or a loss if liquidate before EOD.

Calculations:

R266 3230 shares sold at 39p, got after commission: 1247.2 GBP
R337 1299 shares sold 91p: 1169.59
R321 7470 shares sold at 17p: 1257.4
R206 1422 shares sold at 81p: 1139.32
We had 1.38 in cash

So total at EOD today is: 4814.89

My today's 5 picks were (straight from my number crunching software's output file):

Barclays Call 2009/09 1.50 R266 1.30 +1.97 2.7 +16.35
Tesco Put 2009/09 4.00 R337 3.30 -2.84 1.1 +1.13
Lloyds Call 2009/09 1.00 R321 0.66 +1.68 6.3 +15.97
BP Put 2009/09 5.00 R206 4.80 -3.27 1.2 +0.01
BP Put 2009/09 6.00 R283 4.80 -2.67 0.7 -0.00

Of these we had decided to omit last one because its "Profitability Potential" indicator (the last quantity printed) is small negative number. This number must be really small because "fixed column" formatting of my software eats up significant digits and all we see is -0.00. I will amend my software to not to print such "negative pontential" prospects. Also please note that (Barclays, Call, 2009/09, 1.50, R266) had huge profit potential namely: +16.35. And it did make 1% nett gain today. Same with (Lloyds, Call, 2009/09, 1.00, R321) which also has this number huge: +15.97. May be we can omit shares which have this number small. For now I am continuing as I started. And let us have more evidence of this and then we will have a "cut off" point at which we remove a prospect from our pick list. Also we will probably set target higher. May be if we do that winners' profits may erase losers' losses.

Tomorrow is another day.