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Monday, May 10, 2010

Monday Challenge Project Summary: May 10, 2010

Previous $500 Challenge Project Balances:

"The Three Sisters":

Investing "Sister" Balance: $814.29
Trading "Sister" Balance: $1,776.47
Interest Bearing "Sister" Balance: $425.30
Total Challenge Project Funds: $3,016.06

Introduction:
The original video explanation of the Challenge Project that began with $500, is to be found here. The Challenge Project is basically a demonstration of a model that anyone could at least follow along with on a weekly basis. It is my attempt without cost, to help out the 'little guy' when it comes to investing and trading by providing an example, a 'model' as it were ... as run by myself as a professional trader with real money, in sub-accounts that I own; following my own three sisters portfolio management system; albeit modified a bit to operate with low funds. From time to time, I provide snapshots of the broker statements.

Rule No. 2 of the Challenge Project states that each month, we can divvy up $100.00 as we wish between the various challenge project accounts. We split up Rule No. 2, into weekly segments; or $25.00 a week.

For this week, the $25.00 weekly deposit is being transferred to the Challenge Project TRADING Account.

Trading Account:
Ok.

That whole mess that I was in with the puts last week during "The son of '87"?

I'm not sure if you watched the "Happy Hour" video were I fully explained what happened to me on Thursday and Friday, but those trades, quite accidentally, were in the challenge accounts.

As I said, things can and do go nuts. Now the fill on the puts was horrible, as I have explained; but I decided to hold on and wait to see if we could have a moment of panic on Friday. We did, and as soon as I was profitable past that horrendous fill, I took my $20.00 and went home for the week.

So quite accidentally ... we've had a trade in the Challenge project, and yet another profitable trade this year. We are now up in the trading account 14.12 %.

Now let me say ... that if I thought the capital levels for the Challenge project were adequate to take a trade at the current time; in it's tiny phase? I more than likely wouldn't take it. There is one commodity etf that I may play either today or tomorrow, in the form of an option. I'll have to watch, wait and see. But overall, I'm moving over to the sidelines for my own personal trading; which will naturally carry over to any trading relating to the challenge project as well.

Investing Account:
Now, turning to the dividend 'investing sister' account ... You'll note that Thursdays damaging action didn't hurt me too bad. My capital is still positive, I still have cash available to average down on these great companies if I so choose, and the drawdown that I've experienced is not even 1% (The account levels posted below are as of Friday's close).

Not too bad.

I believe this highlights the need for sound strategy, planning, money management, and portfolio management. After Thursday? Look at the overall balances for the Challenge Project as a whole. As I often say: "It's not how much money you have, it's how you manage it"

At this point, I'm weighing my options. Believe it or not, to my mind, there is more to do on the dividend investing route at the moment, than the trading route. I could average down on the stocks I do own and then start a small hedge at the same time. If I did do this, I'd have to start applying rule no. two to the investing account right away, to build back up our ability to dollar cost average those stocks in the future. At this point, I'm just weighing my options.

Here are the new balances for each of the Challenge Project accounts ...

Challenge Project Balances After Rule No. 2 Deposit:

Investing Account Balance: $807.16
(YTD the account is up +1.005% YTD Return is about -0.2373% Yield is approximately +6.28% in dividends and additional shares of stock)
  • 5.1665 shares of KO (DRIP on for 4.1665 shares)
  • 3.1014 shares of JNJ (DRIP on)
  • Cash: $336.94
-$60.00 of this cash I reserve to D.C.A. KO
-$140.00 of this cash I reserve to D.C.A. JNJ
-This leaves $136.94 cash available
  • Additional $106.00 available from slush fund
Investing Account Balance Since Inception
(Can be Enlarged):


Stock / Futures Trading Balance: $1,821.56
( YTD cash contributions, equity and return up about 14.12 % )
  • 2% risk tolerance gives us $36.43 'at risk' levels
  • 3% risk tolerance gives us $54.64 'at risk' levels
  • Additional $106.00 available from drawdown / slush fund
Trading Account Balance Since Inception:
(Can Be Enlarged)

Savings Balance: $425.30
(YTD cash equity up about 112.5 % Return on Capital is 0 %)
  • $106.00 for a Slush fund / Drawdown Kill Switch fund
  • $213.30 for a Base Savings
  • $106.00 for Emergency Savings
Savings Account Balance Since Inception:
(Can Be Enlarged)


Total $500 Challenge Project Balance: $3,054.02

Total Challenge Account Growth Since Inception:
(Can Be Enlarged)


We'll be back to the Challenge Project next Monday.

* * *

Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have over 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.


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