Bailing out the banks

European banks took a good kicking this week; Her Royal Highness’s Bank of Scotland plunged over 50%, kept in good company by the newly formed Lloyds-HMG-HBOS, down 35%.

My morning began with a nasty reminder of the drawbacks of using stops overnight. On Friday, I decided to run my £2 FTSE short bet over the weekend. I left my trade in good shape; I was reasonably in the money with a stop loss at 4198 locking in a small profit.

Well, not exactly. Firstly, I tend to leave the desk a bit earlier on Fridays to get a headstart on the weekend, so I missed the mega sell-off that began just after the close. Secondly, the subsequent rally wasn’t quite enough to stop me out, but this morning’s optimistic open was. The early mark-up took me out at 4208, way above my stop, back to where I sold in the first place.

My more recent trades haven’t been too adventurous, what with the US being on holiday on Monday. In the early market I sold GBPUSD for a £50 profit and made a further £20 by shorting EURGBP. And talking of EURGBP, although I missed out on Friday’s equity collapse by leaving early, at least it prevented me from opening a short in EURGBP. Now that would have made my Monday morning tea taste that bit more bitter.

At the moment I’m running three short bets, opened this morning:

1) I’m short £1 FTSE (again) from 4195.
2) I’m £2 short of EURUSD from $1.3196. I sold £5, but closed out £3 at $1.3186 to ensure a gain. This one’s working quite nicely, but I’m giving the bet some slack with my stop way back at $1.3186.
3) Not done this for a while (and really should have done it last week when I first thought about it) but I sold £7 of Lloyds TSB HBOS (whatever) at 76.3p. I’ve since bought a scrap back at 64p, leaving me short of a fiver. I’m not sure about this one; at 68p it could be a screaming buy, but the price action seems to be following the pattern of Northern Crock, Bungle & Bodgit and RBS.

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The Eurozone still looks to be falling apart at the seams. Today, Spain lost her treasured AAA credit rating, following on from last week’s downgrading of Greece. And over the weekend an ex-official from the Irish central bank called for the Emerald Isle to threaten withdrawal from the EU unless it’s owners, France and Germany, bother to lend a helping hand. Whichever way you shake the tin, it doesn’t look good for the Euro.

This week sees CPI and GDP releases in the UK and a big step-up in US corporate earnings reports.

Happy Trading

PS. If you’re going through a tough time with your trading, try and get a look at Million Dollar Traders (Monday, BBC2) to see how bad it can get.