Stock Trading Simulation Report

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A Sample of Stock-Trak Report 11/30/15 1. Trader’s Log

a. All Transactions: Total Transaction Costs (Commissions): $430 (Not including Bid-Ask)

b. 5 Best and 5 Worse Transactions

1. Best

I. Equities - Apple Inc. $9,656.25

II. Equities - SPDR Dow Jones Industrial Average $4,700 III. Bonds - American Airlines - 8.057% Jan 2022 $2,855

Date Order Type Company Qty./Unit Price Comm. Amount 9/4/14 Market - Buy Equities Alcoa 1,300 @ $16.99 $10.00 $22,087.00 9/4/14 Market - Buy Equities Verso Paper Corp. 5,050 @ $3.35 $10.00 $16,917.50 9/4/14 Market - Buy Equities Microsoft Inc. 250 @ $44.92 $10.00 $11,230.00 9/4/14 Market - Buy Equities Deltic Timber Corp. 500 @ $66.81 $10.00 $33,405.00 9/9/14 Market - Buy Equities Apple Inc. 500 @ $99.50 $10.00 $49,750.00 9/12/14 Market - Buy Equities Apple Inc. 500 @ $101.29 $10.00 $50,645.00 9/12/14 Market - Sell Equities Apple Inc. 500 @ $101.35 $10.00 $50,675.00 9/29/14 Market - Buy Equities SPDR Dow Jones Industrial Average 500 @ $169.31 $10.00 $84,655.00 10/1/14 Market - Buy Options SPDR DJ Ind. Avg. Trust Units 5 @ $2.83 $10.00 $1,415.00 10/28/14 Market - Short Futures S&P E-MINI 500 INDX DEC 14 1 @ $1,975.25 $10.00 $0.00 10/29/14 Market - Buy Equities DaVita Inc. 800 @ $77.22 $10.00 $62,176.00 10/30/14 Market - Buy Equities Chipotle 95 @ $645 $10.00 $61,275.00 11/24/14 Market - Buy Equities Apple Inc. 1,000 @ $118.13 $10.00 $118,130.00 11/24/14 Market - Buy Equities Ashford Inc. 1,000 @ $125.85 $10.00 $125,850.00 11/24/14 Market - Buy Bonds American Airlines - 8.057% Jan 2022 100 @ $1,107.70 $10.00 $113,926.58 11/25/14 Market - Buy Options (Call) Macy’s Inc. 5 @ $5.40 $10.00 $2,700.00 11/25/14 Market - Buy Options (Call) Macy’s Inc. 1 @ $5.40 $10.00 $540.00 11/25/14 Market - Buy Options (Put) Macy’s Inc. 1 @ $1.48 $10.00 $148.00 11/25/14 Market - Sell Options (Call) Macy’s Inc. 5 @ $5.25 $10.00 $2,625.00 11/25/14 Market - Buy Equities Macy’s Inc. 3,000 @ $63.96 $10.00 $191,880.00 11/26/14 Market - Buy Spots OIL CRUDE (SWEET) 7/09 500 @$73.49 $10.00 $36,745.00 11/26/14 Market - Buy Equities SEI Investments Co. 1,400 @ $39.72 $10.00 $55,608.00 11/28/14 Market - Sell Equities Ashford Inc. 1,000 @ $112.80 $10.00 $112,800.00. 11/28/14 Short Proceeds Equities Tesla Motors 60 @ $241.53 $0 $14,491.80 12/3/14 Market - Buy Equities Microsoft Inc. 2,750 @ $48.17 $10.00 $132,467.50 12/3/14 Market - Buy Futures Petroleum 1 @ $68.92 $10.00 $0.00 12/3/14 Market - Buy Futures Petroleum 1 @ $68.95 $10.00 $0.00 12/3/14 Market - Short Futures Currencies - Euro 1 @ $1.2347 $10.00 $0.00 12/3/14 Market - Sell Equities SPDR Dow Jones Industrial Average 500 @ $178.71 $10.00 $89,355.00 12/3/14 Market - Sell Equities Apple Inc. 1,500 @ $115.70 $10.00 $173,550.00 12/3/14 Market - Sell Equities SEI Investments Co. 1,400 @ $39.95 $10.00 $55,930.00 12/3/14 Market - Sell Equities Chipotle 95 @ $655.44 $10.00 $62,266.80 12/3/14 Market - Cover Equities Tesla Motors 60 @ $229.46 $10.00 $724.20.00 12/3/14 Market - Sell Equities Alcoa 1,300 @ $17.25 $10.00 $22,425.00 12/3/14 Market - Sell Bonds American Airlines - 8.057% Jan 2022 100 @ $1,136.25 $10.00 $116,980.24 12/3/14 Market - Sell Equities Macy’s Inc. 3,000 @ $63.01 $10.00 $189,030.00 12/3/14 Market - Sell Equities DaVita Inc. 800 @ $75.94 $10.00 $60,752.00 12/3/14 Market - Sell Equities Deltic Timber Corp. 500 @ $63.25 $10.00 $31,625.00 12/3/14 Market - Sell Equities Verso Paper Corp. 5,050 @ $3.10 $10.00 $15,655.00 12/3/14 Market - Cover Futures S&P E-MINI 500 INDX DEC 14 1 @ $2,070 $10.00 $4,737.50 12/3/14 Market - Sell Spots OIL CRUDE (SWEET) 7/09 500 @ $67.25 $10.00 $33,625.00 12/3/14 Market - Sell Options Macy’s Inc. 1 @ $4.43 $10.00 $443.00 12/3/14 Market - Sell Equities Microsoft Inc. 3,000 @ $48.08 $10.00 $144,240.00

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IV. Equities - Chipotle $991.80 V. Equities - Tesla $724.20

VI. Equities - Microsoft $542.50

2. Worst I. Equities - Ashford Inc. ($13,050)

II. Futures - S&P E-MINI 500 INDX DEC 14 ($4,737.50) III. Spots - Crude Oil (Sweet) 7/09 ($3,120) IV. Equities - Macy’s Inc. ($2,850) V. Equities - Deltic Timber Corp. ($1,780)

c. Specific Events Analysis

1. Events Affecting My Best Transactions

I. Apple stock: There was a booming success of the iPhone 6, which greatly helped my

returns for that investment. This appeared to greatly appease investors. II. SPDR DJIA ETF: This investment was impacted by the timing of my purchase, since

the market appeared to stabilize over the past month, helping investor sentiment and causing U.S. indexes to rise.

III. American Airlines’ bonds: I believe what caused this profit was due to oil tumbling and stocks dropping over the past two weeks, causing bonds (in general) to increase.

IV. Chipotle stock: I believe the increase was due to lower oil costs. Not only is it cheaper to be driving to a restaurant, but it is also putting more money in consumers’ pockets from the savings at the gas pumps (which is spent elsewhere).

V. Microsoft stock: Microsoft hasn’t necessarily had any sort of earth-shattering news, but has been showing some innovation in products such as a cheaper Lumia 535.

2. Events Affecting My Worst Transactions I. Ashford Inc. stock: An interesting shareholders’ rights plan involving issuing

dividends in response to volatility post IPO did not seem to please investors. This caused the stock to tumble, and accounted for the greatest loss in my portfolio.

II. S&P E-MINI future: As is stated later in this report, I failed to pull this short of the S&P 500 off the table before the market began to increase, causing a rather large loss. My timing was off and, had I acted in a more timely manner, would not have affected my portfolio as much and possibly even created a profitable situation.

III. Crude Oil spots: I had anticipated that OPEC would announce a decrease in oil output at its recent meeting, but it didn’t causing oil prices to tumble dramatically from where I had originally bought the oil.

IV. Macy’s stock: Lower than anticipated Black Friday sales hit retailers, and Macy’s stock was one that demonstrated this unfortunate event. I had bought this stock anticipating that Black Friday sales would be high due to a stabilized market and lower prices on oil, but this did not come to fruition and I experienced a loss.

V. Deltic Timber Corp. stock: Performance in the forestry & paper industry has not been great over the past couple months, after having a good run-up in September (which I would have profited from had I pulled my investment earlier). One of the reasons for this may be a growth in supply of paper (from timber) due to a lower demand for food and beverage markets, which use paper for packaging (causing stock prices to drop).

d. Performance Of Portfolio Vs. S&P 500 ETF

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1. My portfolio returned -1.01% over the course of the semester, while the SPY ETF returned 3.44%. I. For a 1 Month comparison, please refer to Exhibit 1 in the Appendix.

II. For a 3 Month comparison, please refer to Exhibit 2 in the Appendix.

2. Performance Assessment

a. Summary: In regards to performance, over the course of the time period from September

19th to around November 10th, my portfolio performed better than the overall market (as is shown by the graph in Exhibit 2 in the Appendix). The market took a plunge, while my portfolio did not feel the effects as badly and actually outperformed the S&P 500. My strategies included both a momentum, as well as event driven, investment strategies. I would look at stocks with good charts, and try to take advantage of medium term momentum from items such as good earnings announcements. In addition, I would base investment decisions off events (e.g. OPEC meeting, Black Friday Shopping). With these strategies, I finished a little over 1% negative for the semester on my portfolio’s returns.

b. Comparison: For most of the first 2 months, my portfolio appeared to outperform the overall market. Around November 10th, the overall market rebounded and began to overtake my market’s performance. My portfolio grew in value until around November 23rd, at which point it began to take a dive into negative territory. Some of my investments in my portfolio began moving in a negative direction, and I lost a decent amount of money. That being said, I only finished up about 1.01% down from where I originally began which, although is not necessarily the best when managing a portfolio, I was proud of due to it being the first time I have ever managed a trading portfolio.

c. Reasons: There were a number of reasons for the difference in performance. First off, was a bad investment in Ashford, Inc. This stock had been tracking well over the past, but proceeded to begin to drop shortly after I purchased it. In addition, I invested in 500 barrels of crude oil (spots) because I believed that the recent meeting with OPEC (the week of Thanksgiving) would result in a drop in their oil production, which would have sent prices up (and which would have given me a profit). This went horribly wrong when oil prices began to creep up, then dropped again once the news came out that they would not be lowering their oil output. In addition, I did not pull my investment in a short of the S&P E- MINI future before the market began to stabilize and trend upward. I was able to outperform the market during its tumultuous run during September and October, but was not able to continue doing so after things seemed to settle down and market sentiment rallied with various positive indicators and negative news of Eurozone economic woes.

3. Critique Of My Active Portfolio

a. Successes & Failures: Some of my greatest success came from simply investing in the market index, something that supports the Efficient Market Hypothesis. My only return that was greater than my investment in the SPDR ETF was through Apple’s increase due to the good news from the iPhone 6, which supported the use of my event-driven strategy.

b. Transaction Costs: Although transaction costs that were visible were minimal (the $10 commission) the ones that were not as visible, the bid-ask spread, did absolutely impact trading greatly. This spread makes it so that, regardless of how good of an investment, you are instantly down in an investment because if you wanted to resell, it would only sell it for a price that is less than what you bought it for.

c. Notes For The Future: Although my two strategies, momentum and event driven investing, seemed to work, there is certainly one factor that must be better managed in the future:

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timing. My timing was not necessarily the best, and could greatly be improve. I certainly need to learn when to take investments off the table, because a great deal of the time I would wait too long before taking my money out of an investment, and actually end up losing any profit I had made. I will use this in any future trading endeavors I pursue.

Appendix

**Note: Appendix was not factored into the 3-page limit. It is only to add to the quality of the report.

Exhibit 1: 1 Month Portfolio Performance Vs. S&P 500

Exhibit 2: 3 Month Portfolio Performance Vs. S&P 500

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Exhibit 3: Portfolio Holdings Before Liquidation (12/3/14)