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Isn’t it soooo late to do a wrap-up of 2007? Well I never say too late to reminisce about anything, to learn and improve above past mistakes and successes. 2007 is a pretty good year and somewhat interesting for me. In 2007 (which is several days past) is where my life is at a crossroad. 3 major point of my life last year is Teknopreneur (which is still going right now, although I have resigned and now only contribute sporadically - if any), final paper, and trading.

Teknopreneur: The Magazine

The first one is the one where I really brushed up shoulder to shoulder to the tough media industry. Apparently from my short stint on the industry, only slim chance for any new players to succeed on traditional media business (that is, the old business model of print media, you provide the content and sell it). In fact, the reality that the magazine is still holding its ground (albeit at some point, struggling) is a remarkable achievement. I wish the current team well and a better year for 2008. There’s still so much potential in it that I believe with some twist on the business and delivery model, it can be a huge success for it.

There are lots of wrong that we did in this business. The one that hit us badly is the bad deal with both distributors and early advertisers. Generally we strike the usual deal with magazine distributors such as x% of our printed price will be shared among distributors and/or retailers. However in practice, there’s this one distributor that operates on one of our biggest market segment that marks up the price extravagantly. This made the magazine isn’t enticing if compared to other thicker and more established competitors.

And to make matter worse, even before that unauthorized markups, our magazine can be categorized as expensive. The business team priced the magazine to aim at BusinessWeek, Fortune, and the likes. Of course as a new magazine, the disparity between the two side is as deep as grand canyon. We don’t hold a candle in term of design, journalistic quality, and news source. Next time I believe we should start on the lower end of the price and gradually increasing it along with quality and quantity.

Final Paper

On to the next big thing, my final paper. I defend it to the panelist in May and graduated in August. The topic of discussion is how to design a better artificial neural network system to use to trade stock in equity market. The premise is from the abundance of option chain data we (the system) can disseminate a lot of information base to form a pattern. I ground this theory from the system that is used by many hedge funds in the US that manages a ridiculous amount of money and still can average a lot better than the benchmark (notably, S&P500, Nasdaq, and Dow Jones Industrial).

At the time (that is before sub-prime mortgage crisis turn to be an all-out credit crisis) I designed a system that performed better than the standard MLP system that commonly used in the industry. Of course I’m very excited because that will give me a good take-off to open my own fund management (based on neural network). But boy, am I in for a ride to the next 5 months. The very same Wall Street companies that used alteration of the model, in which has performed very good for the past several years, actually went bankrupt when volatility spikes on the market. Big guns such as Bear Sterns and Merril Lynch found that some of their hedge funds must be declared bankrupt due to the severity of the market (although they don’t really use that model to trade stock but MBS).

One thing that I regret the most about this is, I delayed stuffs too much. It took me 8 months to finish this paper when in fact, my effective time doing it is probably less than a month. This tendency-to-delay-mentality is really costing me a lot of time in 2007. This one is going to my 2008 resolutions list.

Trading

And that of course will lead us to the last big thing on 2007: my trading. I have been trading in the market for several years now but on that August, I have made a jump to trade the US options market. Shifting my focus totally and exclusively trading options and turn my back to Indonesia equity market (which have performed admirably well, up more than 50%, second only to Shanghai market I believe). Boy am I in for a rough ride. But despite all the turbulence, my performance since early August till end of December is admirably well.

While the major benchmark is pretty much flat since August (Nasdaq up 4.5%, S&P500 up 0.9%, DJ30 up 0.4%), my total portfolio value went up 280%+. I have every reason to be thankful on that kind of performance considering most of Wall Street crooks doesn’t even survive the year, although if compared to peers that trade exclusively options my return don’t actually hold waters because we have to win big in order to tolerate the risk inherited with options trading (mind you, options can be both safe and risky depending on the strategy that you use, I’m using directional strategy for aggressive capital growth).

Again, here’s the major flaw on my trading “system”: I have a lousy risk management and too impatient to wait for the buy/sell signal. How bad? Let’s just say, I reached 400% return on December but gave it all away on the last 2 weeks of the year. It’s THAT bad. I’m holding off to a position for far too long. I know when to open a position, but I found out that the hardest part is to know when to CLOSE that position. It’s a newbie mistake of course. I guess I never experienced that kind of problem in the past is because I don’t use much leverage. Now with options, everything is leveraged 2,4,5 even sometimes 10 times so any profit can be magnified by those leverages but so does a loss. I’m still working on this system of course as the lack of proper risk control already cost me 7%+ YTD, and mind you, the year has just begun! Several ideas come to mind, but I guess that’s for another blog post.

Oh, starting today, I’m going to write regularly again about the stocks that I’m watching so stay tuned late in the day

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