Oct 252011

Last month I explained why I started a swing trade. It’s like day trading, but you hold onto the securities for longer. Earlier today I sold the related holdings and made a profit. In my previous post on swing trading, I borrowed about $5000 to buy some undervalued stocks. I wrote back then that when the VIX drops back down to 30 I will sell. Yesterday it dipped below 30 but I didn’t realize it until the markets closed, so earlier today I sold the holdings and made an 11.8% gain, in just over a month’s time. Break down below.

Sept 22nd 2011
Borrowed $5027.70 from Bank at 5% interest rate
(SNC.TO) Buy  $42.42 x 60
(HAL.NE) Buy $33.10 x 75
Total Bought = $5027.70

Oct 25th 2011
(SNC.TO) Sell  $49.95x 60
(HAL.NE) Sell $35.76 x 75
Total Sold = $5679.00

Paid back loan -$5027.70
Paid expenses -$56.96
Total capital gain = $594.34
Or $594.34 / $5027.70 = 11.8% Profit

Expenses include interest, and trade commissions. That’s almost $600 in profit, all using other people’s money. The strategy is based on the fact that usually the VIX and the stock market index move in opposite directions. Historically it’s rare for the VIX to climb higher than 40 points and even when it does, it usually doesn’t last very long. So when the VIX inevitably falls, stocks should go up. Will the stock market go even higher in the next couple days or weeks? Did I sell too soon? Maybe, but I have to follow my strategy and quit while I’m ahead.
HAL.NE (Halliburton Co) didn’t gain as much as I expected, but that’s why I bought 2 companies in 2 different sectors, to diversify my exposure. The S&P500; grew by 8.8% during the same time, and the TSX Composite gained only 4.7%.  By choosing cyclicle companies we were able to beat both indexes in the last month with 11.8%.  Swing trading is a speculative activity and because of its risky nature, is not for everyone.  I was definitely lucky this time. Even so, would I do it again if the same opportunity arises? If I’m still fully employed, then yes. Because you only live once. If you want the reward you have to be willing to take the calculated risk.

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Michelle P
10/25/2011 1:46 pm

Wow good job!

Liquid Independence
10/29/2011 4:08 am

Thanks. I think most people are going to see a big boost in their portfolios for this month.


[…] expense. That’s a lot of profit without even using any of your own money. Reminds me of my first swing trade […]