Margin & Options

There's enough risk in my portfolio that I've a had a great 2012 so far. My 2011 was horrendous, posting losses of 27%+. I'm up 24%+ so far this year, but well under my peak of January 2011. I bought more BAC at $6 a share, which was pretty spectacular. It's trading over $8 now, so I've realized some gains there. I'm still averaged at about $10.50, so I'm down 22% overall. The only winner I had in 2011 was my Pimco bond fund, (NYSE: PHK) which I sold in January, taking a 20%+ gain over about a year.

I'm taking Derivatives right now with Alan Marcus, author of 'Investments.' His textbook is used by something like 75% of all MBA programs in the world. I can't remember the exact statistic, but BC used that as a selling point when I applied. Most of the class (including me) did poorly on the midterm. It was a pretty hard test, but it was the first time in my program that I haven't aced something. I think part of the problem is that I have no experience trading derivatives. It's all very abstract to me. In any other class when we learn something new, I can come home and actually try to replicate it with my own stocks. In order to take a bit more from the class, I just added a margin account and options trading to my brokerage account. I'm not about to add leverage to my portfolio or sell puts or something, but I may try to hedge out my market risk in an effort to learn how it's done. That may or may not be a good idea with my portfolio, but the Dow is at 13,000 and it seems like a good hedge at this time.

I'm also headed to the Berkshire Hathaway shareholder meeting in May. BC has three seats at the meeting, so they give them to interested students. I applied aggressively (in the same way that I got into the MIT Sloan class) and booked my flights last week. I'll try to take lots of photos and post them here. I'm sure the coverage of that meeting is pretty comprehensive anyway, but maybe I'll be able to add something.