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.


NA 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.


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.

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