The Two Week Time Frame

I mentioned something yesterday that I would like to explain a bit more here.
It's the notion that making 20% in two weeks is better than 40% in four weeks (or one month).

Mathematically, the formula for calculating compound interest at a specified rate and time frame is:

where

P = principal amount (the initial amount you borrow or deposit)

r  = annual rate of interest (as a decimal)

t  = number of years the amount is deposited or borrowed for.

A = amount of money accumulated after n years, including interest.

n  =  number of times the interest is compounded per year 

Yes. I copied that from the first page of googling "compound interest formula"

So. In our case for the sake of illustrating the point, we'll put 1 as the principal amount. 

The rate we want to achieve in the two week time frame is 20%. Converted to a decimal that's 0.20

For simplicity's sake we'll go with 1 year for t

Since it's being reinvested (compounded) every two weeks throughout the year that's 26 for n.

Plug and chug simplified it becomes 1.2^26, which equals about 114.5

The same thing for the four week time frame with a 40% rate means 13 for n and 0.40 for r.

Plug and chug simplifies it to 1.4^13, which equals 79.4

What this means is that if everything goes EXACTLY AS PLANNED (40% GAIN) and EVERY SINGLE PENNY is REINVESTED EVERY FOUR WEEKS, your initial amount invested will be MULTIPLIED BY 79 by the year's end.

And if everything goes EXACTLY AS PLANNED (20% GAIN) and EVERY SINGLE PENNY is REINVESTED EVERY TWO WEEKS, your initial amount invested will be MULTIPLIED BY 114 by the year's end. 

That's a SIGNIFICANT DIFFERENCE.

If we reduce the time frame to just the first four weeks (meaning n is 2 for the two week time frame), the results are 1.44 versus 1.4. This still shows that a two week frame at 20% is better than four weeks at 40%.

Now that I've bored you with all that math, let me show you what happened today.

If you remember, the combined MU and VZ call cost $283.96. I sold the MU call today for $0.10 as you can see and the VZ call for $3.00. This means that $283.96 turned into $597.98 (a gain of 110%).

After the sale, I bought new options. The AAPL Aug 16 97.14 call @ $2.31and two AA Aug 16 16.00 calls @ 1.15 for a total cost of $472.99. Yes, I saved some cash from the gain this time around. The aim is to turn that into $567.59 in two weeks.

Here's what the account looks like after the market closed today:

I've gone from an account value of $319.74 two weeks ago to $620.49 today.
Obviously things turned out better than expected but it's just proof of the potential behind this system.
I'll continue to aim for modest gains (20% in two weeks) but will accept whatever gain comes.
I'll be occupied till Friday, so till then, have a wonderful week!!!

Proof of Concept

This will be a pretty long post so bear with me.

Today after the market closed:

The plan was to wait till Friday before getting rid of MU, but at this point it doesn't matter so I'll sell it tomorrow. The combined cost of the MU and VZ call was $283.96. Even with the loss of the MU call, the combined worth is now $348.00 ( a 22.5% gain in two weeks). At least the $10 it's now worth will cover the commission costs. The picture you're looking at shows two things.

One: Don't expect a win for every call you make.
Two: Your winnings should cover your losses if the system is followed.

Let me explain what just happened.

This shows what day I bought the options ( "Date Acquired" column ):

Now compare the following two pictures that show the stocks on the days I bought them.

If you spotted a difference then you already see why the MU and VZ calls turned out the way they did.

This system hinges on two things. One is what's called the Williams %R indicator and the other is the MACD Divergence. Don't ask me what that means because I don't know but the point is they both serve as a way to measure momentum. What I've done is combined the two.

For VZ, notice that the Williams %R is above that red line and the green MACD line is above the red one.

For MU, notice that the Williams %R is just about to drop below the red line and the green MACD line is below the red one. 

That is the difference between the outcome of the two. Momentum upward was on the VZ call but not the MU call.

Now because I had limited funds in my actual account, I went ahead and made some purchases in a virtual one based on the same concept.

Here are the current results.

And here's when they were purchased. (The VZ was the same day as the one from above so you already know that story)

Here's what the stock charts looked like on the purchase dates. I didn't draw the line but you can just look at the bold date at the bottom. You can click to enlarge the pictures. And YES. Three of them were purchased today.

Notice how EBAY was behaving just like VZ?
ARCP on the other hand looks like it's about to become like MU. So in truth, buying it was a bad idea. It's probably held up because it will be releasing earnings soon and stocks typically run up till right before an earnings announcement.

What about JBLU and CLF? You can barely see the separation between the green and red MACD line for CLF, but know that the green is above the red. The Williams %R is also above the red line. So that should continue to run up. JBLU looks similar except the Williams %R just dropped below the red line. No need to panic though since it just happened today. If it stays under for three more days, then we need to be out of the position. I don't think that will happen though because JBLU just released its earnings and it matched expectations. But we'll be sticking to the rules.

And what of LUV? Again. Green MACD line is clearly above the red one and the Williams %R is also above so expect a good outcome.

And there's a quick overview of the strategy. Again, I'll be getting rid of MU tomorrow. Probably VZ too since tomorrow makes two weeks. Mathematically, it's better to gain 20% every two weeks and reinvest all funds than to gain 40% in four weeks and reinvest funds. New opportunities are ready almost every day. Let's forge ahead!

BASE HITS. NOT HOME RUNS

Back at it.

The real estate world is harsh without capital.
It's worse if the capital you had was spent on bad marketing.
I believe I really needed to learn the value of money. Just because it's what you intend to "blow" anyway does not mean you should let it run amok.

And so. Down to my last pennies, I've sold the very little dividend producing stocks I had in my secret portfolio to gain about 360 bucks. Enough to venture back into options.

And so. with all the lessons learned.
Let the game begin again.

The goal for sure this time is base hits. Not home runs.

Obedience is Better than Sacrifice

If you are familiar with the story of Saul the first king of the Israelites in the Bible, you'll remember an incident where he failed to strictly adhere to God's instructions resulting in the eventual loss of his kingship. The lesson from that story is "obedience is better than sacrifice".

Well. It applies in this matter as well. The system gives clear signals when to buy and when to sell. I continually listened to when to buy and ignored when to sell thinking I still have time for the values to rebound. Well, things only got worse. As a matter of fact, all positions I have held or am holding end up basically worthless. Unfortunately, I sacrificed ALL of my cash (which is never advised by the way) with the thinking that things will get better when the system clearly told me that it wouldn't.

If you are reading this and have developed some sort of system that you believe will work, stick to it. You will not outsmart it with your emotions. It is when you do something the system has not suggested you should do that you will fail. I was told this when I made my decision to start trading. As is often repeated, "easier said than done".

Well. I'll be taking a long break from trading. I am penniless at present and need to focus on building my real estate business. Once there is income from there, I will come back. But I might secretly attempt to trade again with a little of my tax refund. Actually, I'm quite certain that I will trade. This time, I'll follow the system. But then again, that's what I said last time.

Greed Is BAAAAAAAD!!!!!!

I know I've been missing for some time. Forgive me. I have been focusing my efforts the past week on increasing my knowledge in and growing my real estate business (even thought it has only just been birthed).

But on the subject of options.
I did exactly what I wasn't supposed to do from what I have read and studied.
I deviated from my normal strategy and it resulted in a big win. This big win led me to think I was smarter than the market. So what did I do? I did the same thing again and I won. Big. I don't have the numbers or pictures because I was just going to magically show up with a much larger account value and then tell you what I did (which, by the way was not based on any sound strategy).

You may have already begun to see where I am going with this.
I'll summarize.
The third "bet" was a loss. I figured it was a fluke. The fourth "bet" was a big loss. I thought, "the market just doesn't know what it's doing. The fifth bet was an unbearable loss. I am too embarrassed to show you what the account looks like now.

It is true what the bible said. Money gained quickly is also quickly lost.

Needless to say. I am now returning to my conservative strategy. This means I'll only post an update when an opportunity that fits my fixed rules arises.
Yes, I'm annoyed and frustrated.
But I am also very glad. The first time I deviated from my plan, I actually hoped to lose a significant portion of my account value in order to learn my lesson. Well, it happened. My prayers were answered again.
Here's where the account is now after surging up to a value of $3576.91 (49% gain)

Current account value of $957.68 meaning a loss of -1442.32 or -60.10% loss

Oh what JOY!!!

Don't forget to comment below.

On to the Next

Anything can happen but here's where I am as of market close today.
As you can see, this plan is profitable. I wasn't hoping to repeat the performance of NCR but it looks like I beat it. Too bad I only "invested" $170.

Over the next few weeks, I won't be saying much. This is because of two reasons. One is that I have convinced myself my system works and hopefully I have convinced you as well. This means that as long as I believe the market will continue to rise, I can apply it at any time. This brings up the second reason.

I'm taking out the money in this account and applying it to another avenue of wealth. This is in order to more quickly clear all outstanding debt and build up capital to return to the market. I was fortunate enough to speak with and become a part of a "mastermind" group of real estate investors. Unfortunately, venturing into this arena requires a few thousand dollars. I will be sacrificing these thousands knowing that it will be fully recouped within a month or two, leaving only profits afterwards.

There's more than one way to attain wealth in this country and I am grateful to God for putting me in the right place at the right time and with the right people to be able to implement the two avenues that have produced the most riches: stock market and real estate. My truest interest lies in the stock market but if I can use real estate to fund my brokerage account in order to compound the effect of those gains you've seen, then why not?

Don't be surprised if I turn these two into more than just private affairs and develop them into fantastic businesses in the not so distant future. I have non-selfish things I want to accomplish with the wealth I attain and the journey has only just begun.

Look. Nobody's Perfect

I wanted to post on Monday to show you just how badly your calculations and analysis can go because the rest of "the herd" doesn't think. The market went down almost 2% for absolutely no good reason at all. Now if the market goes down 2%, anyone who holds options for stocks that also go down that much will have lost about 20%. Fortunately for me, it wasn't THAT bad, but it was bad.

Tuesday, the markets came back. At the end of the day the loss from Monday had been recouped and the year to date (YTD) loss had come to -$274 and some cents. I wanted to wait till Friday to show you this but the excitement at present is incredible. Two things happened to my holdings. Half increased in value, and half decreased in value. The wonderful thing about this is it allowed me to further look into why and I have come to a conclusion that will be of benefit in the future.

The two that went down in value did not go down because my analysis was wrong. They went down because of the timing of my purchase. There is a certain indicator that lets you know whether too many people have bought into a stock or too many people have sold. I had previously ignored this. Turns out I entered those positions when too many people had bought into it. Since price is controlled by supply and demand, naturally the positions decreased in value as the number of people buying reduced. The loss is sitting at exactly 20% but I still have until the third Friday of February (21st) to make a profit. Nobody's perfect so losses are expected. As long as the wins outweigh the losses, I'll be fine.

But let me not bog you down with all this talk. Take a look at the %Gain for the NCR position below (third row). This is what can happen if everything is perfect. Now remember, we are only aiming for a maximum of 20% increase monthly but if things can go this well for a position, we'll just continue to rake in the profits. I will be selling the NCR call tomorrow and replacing it with something else because they become worthless when the market closes on Friday. Again, nobody's perfect, but look at that gain in value when you're successful.

Let's Get This Straight

It's the first of the month and the first of the year 2014. I just want to get some things straight before this catalog of exciting times continues.
The blog is titled "Get Rich Quick(er)" for a reason. And what is that reason? Well. Simply put. For the reasons hinted at in my first post, I want to get rich. Quick. BUT. I must heed the words of Solomon as I know them. I'm certain these have been put in many places before but I will chose the words from the Bible.

Proverbs 13:11

Wealth gotten by vanity shall be diminished: but he that gathereth by labour shall increase. (KJV)

Wealth gained hastily will dwindle, but whoever gathers little by little will increase it. (ESV)

Wealth [not earned but] won in haste or unjustly or from the production of things for vain or detrimental use [such riches] will dwindle away, but he who gathers little by little will increase [his riches]. (AMP)

Easy come, easy go, but steady diligence pays off. (MSG)

Proverbs 28:22

He that hasteth to be rich hath an evil eye, and considereth not that poverty shall come upon him. (KJV)

A stingy man hastens after wealth and does not know thatpoverty will come upon him. (ESV)

He who has an evil and covetous eye hastens to be rich and knows not that want will come upon him. (AMP)

A miser in a hurry to get rich doesn’t know that he’ll end up broke. (MSG)

What am I getting from this? It means no matter how fast I wish to be rich, I have no choice but to do it gradually and to put in some kind of effort. The aim is to acquire wealth in such a way that I am doing something just with a degree of diligence. It means I must not be desperate to be wealthy. If it comes fastER than expected, fine, but don't expect it to happen overnight. It means I must be conservative rather than aggressive in my journey to acquire wealth no matter what means it comes about.

And so. First avenue I chose out of my own interest and experimentation from the middle of 2012 to the end of 2013 is the stock market. Now a word of warning. You should never, ever, ever, ever, ever, ever, ever, invest in the market unless you already have 6-12 months of living income secure somewhere safe simply because any money used for investment involves risking a 100% loss. With that said, here's what my brokerage account looks like at the beginning of this new year. The aim is to grow it 5-10 % monthly. I know it is possible because my experience in the past two years has taught me so. And while some see this as aggressive since reinvesting every amount earned means potentially doubling or tripling your money by year's end, it is really not. That's because I will be using a "subavenue", if I can call it that, of the stock market called options.

Have a Happy New Year building wealth!!!
And if you're a Christian, don't forget your 10% tithe. :-P