It was a fine week trading where (unlike last week), everything I did in my TradeStation account worked out well. John Carter came in to the Simpler Options trading room on Monday Morning to find a very oversold market and we put on a number of trades as follows:
- Sold the IWM 92/94 Put Credit spread for a credit of 0.53
- Sold the VXX 25/27 Call Credit spread for a credit of 0.25
- Sold the GOOG 845/840 Put Credit spread for a credit of 0.70
These were the weekly options and all 3 positions went out at maximum profit on Friday without even a closing transaction. Also, I had profitable trades in the IBM 190/185 Put Credit spreads on Friday (twice) and I had a double on the AAPL Weekly 400 call purchased for 0.21 and sold for 0.58 on Friday. In all cases, my lot size was small so all this amounted to about a 1% gain for the week. So that's my new trading plan, more like a chess game which plays out over days, versus a video game that plays out over minutes.
For the rest of the post, I want to talk about another formative experience I had this week. On Tuesday, I volunteered for an organization called Habitat for Humanity in Paterson, NJ. This was arranged through my corporate job as part of their Global Community day. I have heard of this organization before, but I did not know what they were about. What I found was surprising and enlightening.
Habitat for Humanity builds homes for people in need. They are funded by Federal, State, Corporate and private sources. In the case of Paterson, NJ, they take depressed and dilapidated areas and rebuild entire neighborhoods, once house at a time. They are a non-profit organization, but they do not operate like your typical charity and here's where it gets interesting.
Habitat does not give the homes away, they sell them. The buyers must meet strict criteria for job status, credit history etc. Also, the buyers must work a certain number of hours building the house itself. This contribution of "sweat equity" gives the homeowner a sense of pride and ownership. And the job status ensures that the buyer will meet the mortgage payment, ensuring long-term stability of the neighborhood.
Much of the labor on the house itself is done by volunteers who come in on a daily or repeat basis and this is where I came in. I worked on laying tile on the floors in 2 bathrooms. In the process I learned what it takes to lay tile and operate a tile saw. My co-workers did framing and some of them laid hardwood flooring.
What is so great about Habitat for Humanity (unlike many charitable causes) is that the house build has many positive 2nd order consequences as follows:
- Habitat employs "Team Leaders" skilled construction people who lead the volunteers in their activities. My team leader Jose showed me how to lay tile. Jose has worked for Habitat for 10 years and we joked how annoying it must be for him to train a brand new crew every day.
- When volunteers can't complete the job, Habitat brings in local contractors to do plumbing, roofing, electrical and other things beyond the ability of volunteers.
- New home construction requires purchase of all types of building material, creating demand in the economy.
- Once occupied, the house becomes a long term source of benefit for the economy, more on that below.
When the house is complete, the buyer gets to purchase it at below market value and for a zero-interest mortgage. In fact Habitat takes a loss on the property and they estimated it costs about 200K to build the house and they sell it for between 130K and 150K. So they take a 50K or more loss per house. But the benefit is that the homeowner gets a brand new house that they could never afford with the approximately 30K annual income of the typical home buyer served by this organization..
What really stuck me is the positive affect that house construction has on the economy. Feed someone who is hungry and they are okay - for about 3 hours. Employ a skilled trade person and you turn an unemployment statistic into a productive member of the economy. Build a house (which takes 1000's of hours of labor) and you now have a productive asset where before you had vacant land and a bunch of raw materials.
Once you have your house, it needs to be equipped with appliances, washer, dryer, dishwasher. Then there's furnishings, window covers furniture bedding towels, dishes, etc etc. It creates a whole new chain of demand for goods and services which has other positive 3rd order affects on economy. Housing and home construction is truly great for the economy and feeds the "accelerator" and the "multiplier" key underlying forces leading to economic growth.
So just think for a minute how the economy could change if this same operation was repeated. Its happening right now through a chain of over 1500 affiliates across the country and across the world. Check them out at www.habitat.org.
So take some of your trading profits and donate them to this worthy organization. Or better yet, get out there and volunteer - you may gain some valuable construction skills in the process. Also, you will contribute to the growth of the economy and help people in need - not by handouts - but by helping them pull themselves up by their own bootstraps.
Enjoy your weekend.
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