Friday, December 31, 2010

Buy SPY (sell puts)

Buy SPY via selling Jan 117 puts, SPY @125.7.

I also placed an order to short SPY via buying a vertical put spread, long Feb 118, short Feb 112, but it did not fill. I am thinking that there is likely to be a bit more pop to the upside in the stock market then a downturn. That said, if I could call every little wiggle in the markets, I wouldn't need to hedge or trade cautiously.

/edit to add: got a fill a few minutes after the close for the Feb put spread, making me net short SPY.

Short SPY

Buy GLD, GDX, TBT (sell puts)

Sell GDX Feb 49 puts and TBT Feb 33 puts with GDX @61.1 and TBT @37.4. As my open Jan positions approach delta zero, I open some Februarys.

/edit to add sale of GLD Feb 120 puts


Sunday, December 26, 2010

Jaffe: Investing goals

Chuck Jaffe has an insightful column about what investors should focus on (link).

most people are investing as if they are trying to make the most money, but what they want — and what they should be investing for — is the best life ...

I strongly agree with the above. I was talking to a long time friend about investments. My friend has a method of choosing stocks that works for him. It has served him well for a long time. Other people sometimes suggest new things for him to try, but I remind him, if it ain't broke don't fix it. If a person has found peace of mind and relative financial security using what they already know and understand, there is little reason to tinker all that much with a tried and true formula.

Sometimes I'll meet young (or old) gunslinger type traders that report huge gains in a short period of time. I sometimes may look wistfully at those returns, but realize that I am not a spring chicken and would be foolish to take on big risks because I am almost certainly in a different phase in life from where they are.

Readers know that I like the term "mental capital." That wear and tear on the psyche is sometimes not worth a bit more return. Drawdown is an important concept (the loss if a position is sold at the worst possible time during the cycle). Some others may crave excitement, but again, at my place in life, I am happy to be free of excessive focus on every percentage point of return. Slow nickels are fine. I dislike fast moving markets, so will often sit out those conditions until the dust settles.

Saturday, December 25, 2010

Merry Christmas

For all the readers that celebrate Christmas, a hearty wish for a merry one.

It has been a good year for trades reported on the blog. Sure, the glass half empty side is to think that I could have made more, especially with 20-20 hindsight, and taking on more risk.

For history buffs, there is a well known tendency for military generals to plan to fight the previous war. That is a danger in financial markets as well, to think that what worked last year is going to work in the coming year.

Merry Christmas to all. Cheers.

Sunday, December 19, 2010

Dogs of the Dow

Dogs of the Dow is an investment strategy that picks the highest yielding DOW 30 stocks. Current list is at this link. The strategy hit an iceberg when the then high yielding bank stocks blew up. My favorites on the current list are MCD and JNJ. As always, I am not offering investment advice, just offering an opinion.

Investment themes often go in cycles. What worked one year, stops working the next. What was a big loser sometimes turns around.

Readers know that I see the popular press mostly as a contrary indicator. When I see blaring headlines or talking heads on TV warning about the dangers of a certain asset class, it is often a low risk time to go long, or sell some puts because downside is limited. When there are headlines about huge profits, past, present, and future, it is often time to short or at least hedge.

I recently read an article in a local newspaper saying that U. S. tech stocks are going to remain strong, gold and emerging markets are high risk. If anything that kind of article makes me want lean the other way, long gold, long EEM, short tech stocks. As always, one article, one indicator doesn't mean too much, but when lots of popular pundits start saying the same thing, it is opportunity time.

Saturday, December 18, 2010

4-0 for December

Four winners, zero losers for the December option cycle. The four were short puts in GDX, GLD, SPY, TBT. All are tiny guppy-size morsels, but considering my busy schedule, it was a good way to go. Bigger fish usually involve more risk, and with little time to devote to the markets, risk is something to avoid.

I have three open positions for January, GDX, GLD, TBT, and all are on the positive side. I am looking at shorting SPY out to February with a bearish vertical put spread. Timing is tricky as the markets can be sleepy during holiday time, but sometimes they do move.


Monday, December 06, 2010

Buy GLD (sell puts)

Buy GLD via selling Jan 120 puts (GLD @138.5 or so). I open a January position.


Thursday, December 02, 2010

Buy GDX (sell puts)

Buy GDX via selling Jan 47 puts, GDX @60.9, opening a January position.