Tuesday 22 January 2008

Oops, I lost $36,000.00

Another down day on the Aussie stock market - this time around 7%, taking the total decline since it's all-time-high on 1 November to about 22%. The 400+ point drop in the All Ords index translates to a "paper" loss of about $36,000.00 in one day! I try not to dwell what "might have been" if my Index Put options had expired a month later (20 Jan 08, instead of 20 Dec 07), or if I'd made the effort to find and purchase suitable replacement Index Put options before they expired... If I did still have unexpired Put options I could now sell them to recoup the decline in the physical stock market, and use that cash to increase my stock portfolio at these lower prices. Oh well, there's always next time. Note to self - spend the time required to properly compare the cost/benefit of using my CFD account to short the Index vs. buying exchange traded Index Put options vs. warrants. And then get accounts etc. organised so I'm able to make the required trades "next time" the market appears to be overheated and due for a correction.

I bought 6,000 CDF shares today at $1.66, although I probably overpaid since CDF is an ETF that approximately tracks the All Ords index, but was only down about 3% on the day. I bought it using some "spare" margin in my Comsec margin loan account, but that will probably be the last purchase I make as I don't want to gear too highly in case the market falls much further and I get close to a margin call.

Copyright Enough Wealth 2007


Anonymous said...

All I can say is ouch.

Norak said...

I lost $1200. But don't worry, it's the day after now and last time I checked the All Ords has surged back up by 200 points.

And it's the long run that matters (for me at least).

Andy said...

Don't worry we are all in the same boat....paper losses are mounting. Why do paper losses cause so much more pain as compared to the emotions from paper gains? Or is it only me. Check out my views on the ASX and investing at my blog - Finance Viewpoint /. Great blog and you are on my Aussie blogroll.


Norak said...

Loses impacting us more than gains is widely observed in the behavioral finance literature and is called "loss aversion." It may have to do with the emphasis on survival during human evolution and how being loss aversion aids survival.