Well, in a previous quote, back on May 24th 2011, $DWCPF was at $699.06. Today is September 30th 2011 and $DWCPF is at $559.01, a 16% loss in a few months. Well, I've done pretty lousy with a lot of investments, but praise Jesus, this time I avoided this particular hit.

I've spent the last few months in the G fund, which pays out about as well as looking for lost dimes on the sidewalk. But you know what? I'll take a 1% gain over a 16% loss any day. However, it's pretty hard to plan on a retirement income from a 1% investment.

Looking at the TSP's historical rates of return, the F fund, which is mostly bonds, has been paying out in the 5% range, even through the 2008 collapse. With the US getting a beat-down in the S&P ratings, it is an inevitability that the fed, state governments, and municipalities will be paying more for borrowed money. So, I'm expecting the F to actually improve it's rate of return over what will likely be a moribund season for the stock market.

update 03 Oct 2011: I thought I went in half F half G, but when I got the confirmation letter, it was 2/3 F, 1/3 G.

Well, I'm taking the hit and cutting my losses. Moving back to the G with $DWCPF at 671.79, about a what, 4% loss? Yeah it is. Argh. Well, with the summer outlook being flat at best, and the August deadline approaching on the Federal deficit ceiling, it's probably best to take the 4% hit now and get it over with. The G fund it is.

This is a note more for myself rather than for the general public, but whatever. For the last year, I paid to subscribe to Trader Fred's info over at www.tsp.gov. Can't say the performance was any good, though, so it's back to going solo.

Today, I moved my TSP allocations into the S fund, which equates to the Dow Jones U.S. Completion Total Stock Market Index, aka $DWCPF.

So, today, May 24th, $DWCPF is trading at $699.06. I'll have to keep an eyeball on it if it starts tanking, and bail out. Or, if it shoots up, may be I leap out and capture profits. Or just do nothing at all or let 'er ride.

• Friday, April 1 2011: Southwest Airlines flight 812 suffers hull rupture, forced to make emergency landing
• Sunday, April 3 2011: Southwest grounds 79 jets, cancels 300 flights
• Sunday, April 3 2011: Three additional Southwest Airlines aircraft found to have hull cracks

So what does that mean? First off, praise God nobody got hurt. Now, for the short term, this should spell a panic sell-off of LUV. Stockholders will be rightfully concerned about the grounding of those flights having an impact on profits, along of course what with customers getting scared off and all.

Since this all happened on a Friday, there hasn't been a lot of time for markets to react. Monday morning will be crazy. At close of Friday, the last trade on LUV was at 12.67, having opened the day at 12.74. This is basically a pre-bad-news price.

So for now, let's forget the stock price and instead take a look at the options price, as that's where the action is going to be.

So, a crash course. A "Put" option is one where you are anticipating a drop in the value of the underlying stock, in this case LUV (Southwest Airlines). Options have an expiration date, like concert tickets. After that date, they are worthless. Tell you what, google up "options explained" and you'll get the full story. Anyhow, I'm thinking there will be a quick panic sell-off, probably dropping LUV down a dollar or so. In the options world, this is huge.

While it isn't likely, in my guesstimate, that LUV will drop more than a dollar, and maybe not nearly even that, it is likely to drop enough to make a trade worthwhile. The lower the initial buy-in, the greater the gain when that thing starts moving upwards. Let's say I picked up 50 contracts on the LUV 11.00 May 11 PUT. 10 cents a contract? Contracts are priced in 100's so it's really 10 bucks, not 10 cents. 50 contracts * $10 = $500. The risk with this one is that there isn't a lot of volume on LUV, so there is a big difference between the the bid (what you'll make if you're the seller) and sell ask (what you'll pay if you're the buyer) price. So, it's risky. Let's say that the stock value drops a dollar, and the 11.00 PUTs price out where the 12.00 PUTs are now; with a bid of .25 and ask of .30. This means you sell and get 50 contracts * $25 = $1250, a $750 gain. I'm leaving off commissions on this, that'll eat what, $1.25/contract plus a base fee? Well, I'll not worry about that right now as it's pretend anyhow.

So why am I bothering to blog about this? Simple. I don't have any $ available for investing at this time, so the next best thing is for me to write down what I would do, and see if the future plays out so nicely.

So let's pretend tomorrow at the opening of the market, I immediately jam in an order for 50 contracts of LUV 11.00 May 11 PUT with the intent to exit when (okay, "if") the bid reaches 25 cents per contract. I'm curious to see how this will turn out.

Monday, April 4, 2011

So at the end of Monday, April 4, 2011, here is where LUV is at:

LUV: 12.46 (down 1.7%)

The stock didn't even drop two percent! Go figure. Well, anyhow, looking at the options, the LUV 11.00 May 11 PUTs would break even at the bid-vs-ask, but of course, commissions would toss that into being a loss, an ugly $139 loss, based on 50 contracts = base $7 trade + $1.25/contract. I'd hold on and hope for a further drop in LUV as maybe just maybe investors decide to sit out the possibly very expensive airframe repairs that Southwest Air is going to have to undertake.

The LUV 12.00 May 11 PUTs would have a modest gain. But I wasn't looking at the 12's, I was looking at the 11's. Including commissions, the 12's would have costed about $1570, and would have sold at end of day at $1680, yielding what, $111? That wouldn't be too shabby for a one-day trade.

Tuesday, April 5, 2011

Today, LUV closed at at:

LUV: 12.20 (down 2.09%)

Two percent? That's it? Well, the news reported that Southwest Air completed their airframe inspection and only a few planes needed repairs. I suspect today is the end of any news-driven price drop for LUV.

Problem is, the LUV 11.00 May 11 PUTs really didn't move at all, and the bid price is sitting there at .10. Ugh! Seeing how May is soon approaching, these options are going to start to drop in price due to the lack of time remaining on them. If I had real $ in on this trade, I would probably take the hit, lick my wounds, and call it a lesson learned. As stated in yesterday's comments, my theoretical $500 investment would take a nasty $139 loss, but you know what, better to take the loss at $139 than see that loss double in another day.

Now if I had gone with the LUV 12.00 May 11 PUTs, there would have been a bit of profit. Had I have plunked down $1570 for 50 contracts on Monday, and cashed out at close of market today, the trade would cash out at $2180, a $611 gain, or a 38% profit in two days.

But you know what? I wasn't looking at the LUV 12.00's, I was looking at the 11's. Ugh.

Disclaimer: This is not investment advice! It's my own personal-yet-public track of TSP moves so I can look back a few years from now and get the answer to the "What on earth was I thinking when I did that?" question.

The last time I did a jump from the "C" to the "G", my timing was bad, bad bad. It was during the bottom of the crash, but of course, nobody really knew when we hit the bottom. Well, that time, it was okay, because I got back into the "C" once the markets stabilized.

So now it's May 2010 instead of the tail of 2008, and the market is starting to take a slide. Contributing factors to the slide include the near-collapse of Greece's economy, and the oil spill in the Gulf of Mexico. Of course, our nation having a jobless rate at about 10% doesn't help either.

For reference, here is a list of historical prices for the DJIA at May 7, 2010, the date my request to transfer from "C" to "G" took place. You'll see the dates prior, too. Market was at 11,000 and above through April, but took a dive. So I figured it was time to wait a bit. Of course now, a week later on May 14th, 2010, the market has rebounded to 10,620. Argh. Maybe I should have stayed in? Eh, hard to say. I can only do two moves per calendar month, so I'm loathe to dive back in while things look unstable; I'd rather wait til' the end of the month when I could make a move, then cross over into June and do a couple moves there too if needed. Ah, there just ain't no crystal ball, is there? Nope. Only time will tell if this move was another case of bad timing or if it was foresight of an impending collapse.

Well, barely a week ago I took 100% of my TSP money and stuffed it all into the "G" fund. I said I'd go back in if the DJIA went over 7000. Today it's there, a tad over the 7000 mark. Okay, I said I'd go back in, but how much? I'm looking at the different funds to invest in in the TSP, and have decided on the following strategy (Jesus have mercy, please.) I'm starting out going into the L Income fund for now as the DJIA climbs just over 7000. If it can hold that to say, 7250, I'll ramp it to the L2010. And if the DJIA continues to hold, I'll move from the L2010 to the L2020, the L2030, and the L2040.

It's not a brave strategy, it's more of a "show me the market isn't dead and I'll go back in" strategy. Again, God, if you were speaking to me through that warning in Ezekiel, have mercy on me.

I feel it was a sign from God to move my TSP retirement money out of the stock market and into the government securities "G" fund. I said to myself, if the Dow goes over 7000, I'll go back into the market. Well, today the Dow is at what, 6940? It's pretty close.

So the dilemma: Did God really give me a sign? How do I know? Time will certainly make it clear, but being wrong could be costly, literally. I suppose more prayer is needed. Yep. If the Dow does rise over 7000, I'll be pretty surprised, as I'm expecting profit takers to eat away recent gains, but we'll see. Lord, what should I do?