Saturday, August 19, 2017

Monthly: Fragile Market, Grade C+ 72-9

I count 72 winners, 9 losers for the August option cycle. The good news is that I closed the 2017 performance gap with SPY. The bad news is that I did that with SPY falling back, and had a minor loss for the month. Boeing, Facebook were two of the problem stocks this month. Both went higher than I thought they would.

A good adjective is fragile, this seems a fragile market, with possible frustration for both bulls and bears. It was a stressful month of trading with some relatively big up and big down days.

Here are some etfs and their YTD performance, best to worst:

EEM +24.7% emerging market equity
GLD +11.6% gold

SPY +8.6% U.S. large cap stocks
SLV +6.6% silver

TLT +6.3% US 20-year treasury bond etf
IWM +0.1% Russell 2000 US small cap

My trading account +8.7% nominally ahead of SPY, but both SPY and TLT also add about 1% in dividends. U.S. small cap stocks, as measured by the Russell 2000, are now basically flat for 2017. Gold has leapt ahead of SPY in year-to-date performance. I am hanging in there. Who would have guessed that EEM is way ahead of the pack, given the election rhetoric.

Going forward, I have a mish-mosh of positions, with a lot of free cash after expiration. As with most premium sellers, a big move either way causes a lot of consternation. I believe that any downside action will be contained. It has been so long since 5% or 10% down moves, that there is a ton of money waiting to buy a dip. This means that the first dip is likely to be met by a large number of buyers.

The wildcard is unforeseen events. Possible events that are on the front burner, such as North Korea, debt ceiling, legislative gridlock, are extremely unlikely to be the catalyst for a bear market decline. I don’t have a clear plan or position at this point. Even if I did, I can change and adapt relatively quickly. As always, my moves tend to be relatively cautious, mostly low risk, low reward plays. With premiums still relatively low, it is often very low reward. I still have a working theory of a 5% decline into Sep/Oct, but the air drop decline on Thursday would make an immediate decline painful. Time and price are both important, and virtually no one gets both right on the nose.

No comments: