Tuesday, May 1, 2007

CNBC Million Dollar Portfolio Challenge: #1227

It was just a matter of time before my string of good fortune came to an end, but for all practical purposes, it probably should not have been today. Still, at #1227 out of 1,441,536 contestants as of last night, I have managed to hold on to a top 0.1% rating for one more day.

Scrolling back a little, my current position is the result of a 2.8% loss in Wright Medical Group (WMGI) yesterday, putting an end to a nice run of six straight days of gains of 2% or more. As I described earlier, I had carelessly thought WMGI would report earnings before the market opened or during the day yesterday, but this turned out not to be the case. Had I held on to WMGI, I would be sitting on what is currently a 6% gain, but instead, I went back to my earnings spike potential algorithm. This handy tool had helped pick the six consecutive winners and had pointed to a couple of other big movers as well. Yesterday it spit out Atheros Communications (ATHR), currently up 7%, as the top choice. Between WMGI and ATHR, how could I go wrong? Well, I got cute and thought I might be able to get even more volatility out of i2 Technologies (ITWO), whose dangerous coiled spring cocktail includes a huge beta (over 10 on Yahoo), an equally impressive short position of 13.1 days to cover, and an implied call volatility of 60. Well, I got the volatility I wanted, but I missed out on the direction, as ITWO is trading down 28% this morning. It is only a small consolation to know that the algorithm seems to be working…

Depending upon how far I fall down the ranks today, I will make a determination whether I should roll the dice one final time with the likes of Dendreon (DNDN) in hopes of rocketing my way into the finals or just play for a respectable position, such as the top 1%. I know that this is only play money, but after having come this far, it seems silly to spend it all on one last lottery ticket.

3 comments:

Yaser Anwar said...

Off topic:

Have you ever tried to develop a system that automatically execute trades based on the inverse relationship of Vix vs. SPY futures? As you know, they've got a very good negative correlation, and thus it might be interesting to see if one goes long SPY futures, then short VIX/ZN futures.

Tx

Anonymous said...

It sounds like we are having a very similar experience. I've been anywhere from No. 174 to No. 1442 since the second day of the contest.

As of late last week, I was meandering between 600 and 850 with a portfolio value between 1.7 and 1.85 million. I fell to 1234, down on Hilton to 1.74, but after today I will be at 1.897 so it will be interesting to see how high I rise. When I was at 1.817 last week, I was ranked 612. The majority of my money was in DW today, which really jacked me up--plus 18.18 percent.

Bill Luby said...

Yaser, that's exactly the focus of one of my current research projects. If and when I come up with any ideas worth mentioning, I will at least sketch them out on the blog.

Anon, I'm glad you caught a nice ride on the volatility wave; it almost crushed me today. Have fun with the balance of the contest and don't shy away from going for the top ten.

DISCLAIMER: "VIX®" is a trademark of Chicago Board Options Exchange, Incorporated. Chicago Board Options Exchange, Incorporated is not affiliated with this website or this website's owner's or operators. CBOE assumes no responsibility for the accuracy or completeness or any other aspect of any content posted on this website by its operator or any third party. All content on this site is provided for informational and entertainment purposes only and is not intended as advice to buy or sell any securities. Stocks are difficult to trade; options are even harder. When it comes to VIX derivatives, don't fall into the trap of thinking that just because you can ride a horse, you can ride an alligator. Please do your own homework and accept full responsibility for any investment decisions you make. No content on this site can be used for commercial purposes without the prior written permission of the author. Copyright © 2007-2013 Bill Luby. All rights reserved.
 
Web Analytics