tactical trader

Well it’s been a while since I mentioned warrant trading and I’ve just realised I never posted an update about my experiments. Unfortunately at the end of April I was hit by a pretty nasty stomach bug that took me out of action for almost a week. The good news is that I lost a stone in weight and much to the annoyance of my constantly dieting friends and family I’ve managed not to put it back on The bad news is that the warrant strategy bit the dust.

I’ve just gone back over the results for my April trading and the results were very disappointing, with an overall gain of only 0.06% after commissions. As with the first month of testing there were some large gains, such as 100.4% in a British Land and 38% in Rolls Royce September calls, but they were offset by a number of large losers.

This strategy was also a test of using point and figure buy and sell signals to determine whether a call or put should be bought and that I think was the failure of the strategy. I used to feel that PnF charts offered the clarity that is often missing from other technical analysis techniques, however the more I have tried to use them in real trading, and the more I have learnt about them, the less impressed I have been.

I still think warrants have potential for use in a shorter term trading strategy but I need to find a better method of selecting those warrants and limiting losses in order to make them work for me!

Some very interesting views from Martin Pring.

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Back in March I posted about my research into SG’s World Cup Warrant which, now the football is thankfully over, is about to mature. So how did it perform? Here are some figures:

• The warrant issue price was £1020.00 at the start of February

• The highest price reached was £1216.50 in early May, a 19.26% gain

• The lowest price was in early June when an overall loss of 11.57% was reached at £902.00

• The final settlement price of £1086.50 represents a 6.52% gain over 6 months

Remembering that the past performance of the basket was 14.9% and the 2x leverage should have given a 30% gain, the 6.52% actually achieved is pretty poor.

The chart below shows how the warrant (shown in black) tracked the DAX 30 and CAC 40 indices (shown in blue):

As I concluded in March, this warrant had nothing to do with football - that was (shock) just marketing. It was simply a way of gaining leveraged access to a basket of European stocks, and as such it has risen and fallen with the best of them. I’m just glad I didn’t bother buying any