Buy BRKB LGF SPY (sell puts) hedge KORS

Buy BRKB via selling Apr 90 puts @100.7

Berkshire Hathaway has a chart base at 90, which is also where it broke out at the start of the year.

Buy SPY via selling Mar 142 puts @151.4

SPY is the S&P 500 ETF, the first ETF, and still the biggest. There is a gap at 142 to 145, again from the start of calendar 2013. I believe 145 will be support, and 142 gives me an extra margin of safety.

Buy LGF via selling Apr 19 puts @20.6

I also add to my longs in Lions Gate Entertainment by selling Apr 19 puts. Chart continues to look constructive to me, with a shelf of support at 19.2.

Sell KORS via selling Mar 65 calls @59.3
Michael Kors priced a secondary offering at 61.5 and that put pressure on the stock. The principle is also selling some of his shares. The recent high was 65.1. I am already short KORS Mar 55 puts.

All three put sales are low risk, low reward trades. The call sale, a hedge. I am putting some money to work from the 11 positions that expired last week. I am a bit skittish about the stock market because February and March have often seen quick and fast drops. 

Elsewhere, bonds and gold charts have broken down. The weak seasonality for bonds extends to April. Gold doesn't look good, but I am reluctant to trade it from the short side. $1500 on physical gold may provide round number support. Volatility has perked up a little bit.

Long BA BRKB IWM LGF MON PG QCOM SPY

Net long APC KORS

10-1 for February, A- grade

Ten winners, one loser for the February option cycle, I Ten winners, one loser for the February option cycle. I give myself an A- for the month.
 

A bit of luck, and a bit of skill, yield a lot of small winners. The one loser was part of a vertical spread on AMZN, so really there were no losers. Even the worst entry of selling puts on Boeing (BA) before the 787 grounding news worked out, with me making money on both sides of the short strangle (selling puts and calls). I didn't take many risks, so the winners were all small fish. I was a bit lucky especially on AMZN.

The tight and narrow advance looks like big money scaling in. It won't last forever, but while it does last, shorts, especially option buying shorts are being punished. Eventually, the trend breaks, the elephants stall or turn and run. Worst case is that the elephants stampede, and then the stock market bulls get their turn at being punished.

 

Long BA IWM LGF KORS MON PG QCOM

Net long APC

Buy LGF (sell puts)

Buy LGF Lions Gate via selling Mar 19 puts @20.0

I was already short Mar 14 puts. I interpret the short term action as constructive. There is a shelf of short term support at 19.2. I mentioned the Lions Gate earnings report in Tuesday's post. 

I believe the best is yet to come for LGF. For years, this company had losses, so no matter how strong the franchises were, most money managers would not, could not buy. Two quarters of earnings, with upside surprises, may bring in more institutional support. Yes, LGF has had a good run, so there is risk in going long at this time. A SeekingAlpha write up said to wait for a pullback to 19, so there are some small fish likely waiting to get in at that price.

Long BA IWM LGF KORS MON PG QCOM

Net long APC

Expiring this Friday AMZN EBAY GPS LEN TBT

Buy KORS (sell puts) and LGF earnings

Buy KORS via selling March 55 puts @62.6

Luxury goods maker Michael Kors gaps up on earnings. Chart support at 57 and 55.

Elsewhere LGF Lions Gate Entertainment has good earnings. LGF ran up into the report and is drifting lower for the day. The breakout base is at 16, so there is some air in the stock at the 19 range. I am looking at the options, but nothing is compelling. Going out to June means waiting through another earnings report. I may wait until next week when April options become available.

Long BA IWM LGF KORS MON PG QCOM

Net long APC

Expiring this Friday AMZN EBAY GPS LEN TBT

Buy APC BA MON (sell puts)

I sell puts on three stocks: Anadarko Petroleum, Boeing, Monsanto. I already had positions in all three.

Buy BA via selling Mar 70 puts @76.5

Boeing moving up today. The 787 grounding news could not move the stock below 73. I was already short BA Feb strangles, 67.5 puts and Feb 80 calls. There are multiple chart support levels, 70 looks like solid support.

Buy APC via selling Mar 75 puts @82.4

I rebalance my APC Anadarko Petroleum position to bullish. APC moving up after earnings. I was already short strangles, Mar 90 calls, Mar 67.5 puts and Feb 70 puts.

Buy MON via selling Mar 92.5 puts @101.9

I sell Mar 92.5 puts on Monsanto. I was already short Feb 90 puts. Chart support at the 50-day moving average and the gap up, both around 95/96.

Long EBAY GPS IWM LEN LGF MON PG QCOM TBT

Net long AMZN APC BA

Ground hog sees another year of bull, top in 2014

The subject line is an attempt at humor as I type this up on Ground Hog day 2013. During a recent ThinkorSwim webinar (Swim Lessons Thursday January 31, 2012) they spent a lot of time on the long term SPY chart. Here is a link to a similar Yahoo chart.

A lot of traders are focused on the potential of a triple top, and the price for SPY 157 or so. What caught my eye is the time frame. If the next market top is the same distance in time as the others, that gives another year of bull market with a possible top in early 2014. That fits in with the shifting sands of stock market sentiment.

While there are a few headlines trumpeting Dow 14000 and the best January since 1989, there were also articles featuring doom-and-gloomers such as Marc Faber calling for a 20% smash, and another less famous pundit calling for a 50% waterfall decline. These tend not to be the kind of articles featured at long time market tops.

So many seem to be focused on the price level of the two prior peaks, I don't think it will matter that much. Not many seem to be focused on the cycle length.

During the ThinkorSwim weekly market wrap up, one presenter lamented that low volatility grinds higher was one of the worst kinds of markets for his style of trading. It is increasingly difficult for option premium sellers to find good risk/reward situations.

Buy QCOM (sell puts)

Buy QCOM via selling Mar 60 puts @66.7

Qualcomm up on earnings. Chart support at 65, 62.

As for the broader stock market, I am looking at February 4th or 5th as a time to look for at least a pause to refresh from this January rally. Marketwatch has a headline best January since 1989. The individual investor is starting to stir again, after missing the entire huge 100%+ rally off the stock market lows. 

Long EBAY GPS IWM LEN LGF MON PG QCOM TBT

Net long AMZN APC BA

Buy AMZN (sell vertical put spread)

Buy AMZN via selling a vertical put spread

buy Feb 210 puts, sell Feb 220 puts @270.3

Amazon.com earnings will be out after the close. 

My thinking is that there have been a raft of big moves in other stocks, so these options are priced higher. Chart support at 260, 240 and 220. As I type this up, AMZN is slipping lower, so not the best entry. There is about an 8% chance that the 220 puts come into play by expiration. I tend to think volatility is pumped up because of earlier big movers on their earnings (GOOG, NFLX, AAPL and others).

Doing a vertical instead of a straight put sale helps with the margin requirement. Also protects against a crash scenario. On higher priced stocks selling puts before a crash can do permanent damage to an account.

Long EBAY GPS IWM LEN LGF MON PG TBT

Net long AMZN APC BA

Buy TBT (sell puts)

Buy TBT via selling Feb 63 puts @67.1

TBT is the double inverse treasury bond ETF. There is minor chart support at 63.5. If my puts come into play, the plan is to roll down and out. One negative to selling puts on TBT is the relatively large margin requirement, because it is a leveraged ETF.

Bonds have broken down. The seasonality for bonds remains negative (positive for TBT) until April. November to April tends to be the weaker six months of the year for bonds, and the other six months tend to be supportive for bonds.

Long EBAY GPS IWM LEN LGF MON PG TBT

Net long APC BA

Ferri: Mr. Market doesn't care what you think

Rick Ferri contributing to Forbes writes an article with the title: Mr. Market doesn't care what you think (link). There is a slight negative correlation, but not enough to be actionable. The exception is at extremes, however in the vast middle it is not enough to be a useful indicator.

Let me make some general comments about sentiment. I find it to be a useful indicator. I remember back at the height of the dot-com bubble and the day trading craze, one of the ladies at church, proudly announced that she had opened a brokerage account and was in the game. Looking back it is easy to see that as a huge blinking red light. 

More recently, when silver was making its run to $49, three different novices at three different places talked about silver and their expectations of easy money to be made on the bullish side.

It doesn't always work. As I often write nothing is 100%, and it tends to be the lucky and the liars that get out near the exact top. However, I find sentiment to be useful and powerful. When news comes out on a company, I like to look at the Yahoo finance message board for that company (link to LGF message board substitute the company's ticker for LGF) to see what others are thinking. I look to run contrary. If a stock forum is dominated by negative nellies, that is often a prelude to higher prices. The opposite is also true, if everyone is positive, it might be time to go the other way.

Headline articles or talking heads on financial TV can be good contrary indicators. In particular if a talking head says something like I am 100% sure, that is a strong signal to go the other way. No one with an audited track record is 100%.

Buy PG (sell puts)

Buy PG via selling Mar 70 puts @73.0

Proctor and Gamble up on earnings, breaking out from a beautiful base at 70. There is not much premium on this low volatility stock. Same is true for a lot of other stocks.

Elsewhere, I place an order to sell an IBM put spread to take a long position on IBM, but it drifts away from me and looks like no fill. 

Most traders have been focused on AAPL, NFLX, GOOG. For those fast moving high value stocks, it is often best for slow moving little fish traders like me to steer clear.

Long EBAY GPS IWM LEN LGF MON PG

Net neutral APC BA

Rebalance APC (sell puts)

Sell APC Feb 70 puts @78.5

I rebalance my short strangle on Anadarko Petroleum. The drift higher moved my short straddle to delta negative. Chart support at 74 and 70.

/edit to add: Later in the day, I sell another layer of APC Mar 67.5 puts. APC@79.4 

 

Long EBAY GPS IWM LEN LGF MON

Net long APC BA

4-0 for January grade B-

Four winners, zero losers for January. I give myself a B- grade for month. I came in under invested and gradually put money to work. Just as important as the trades I took were the ones I avoided. Both gold and bonds seemed too risky to be selling options on. I almost sold puts on AMGN and it kept sliding lower and would have been a big loser. The BA Boeing trade was right before the bad news, but again, that will happen. The Boeing news was not like an earnings report, in that it was a surprise. 

 

I also avoided AAPL. I see that super popular stock as being more appropriate for more nimble traders. As long time readers know, I am a relatively slow moving position trader. I like to have time work for me, though with the low volatility it is getting tougher to make money by selling options. Again, eventually, the market will correct and go down, but the blast off seen at the beginning of the year often can keep flying for a while before that fuel runs out.

Long EBAY GPS IWM LEN LGF MON

Net long APC BA

Buy EBAY and IWM (sell puts)

Buy IWM via selling Mar 77 puts @88.1

I add to my IWM Russell 2000 delta. There are multiple chart support levels, 82, 80, 78, 76. A move back to 78 would negate the entire rally off the November 2012 lows. A pullback seems inevitable, especially because February can be a down month. However, I don't expect a big drop.

I also buy EBAY via selling Feb 50 puts @54.3.

Ebay is up nicely on earnings. Decent chart support at 50. Neither is a perfect trade. I still feel underinvested with January expiration coming this Friday, so want to put more money to work.

Long EBAY GPS IWM LEN LGF MON UNP XRT

Net long APC BA

Sell BA calls

I lighten up on BA by selling Feb 80 calls @73.9

I was long Boeing by being short BA Feb 67.5 puts.I don't like the tape action and the news is getting worse. It seems unlikely that all the uncertainty will be lifted by February expiration.

Long GPS IWM LEN LGF MON UNP XRT

Net long APC BA

Buy LEN, Sell APC strangles

Sell APC strangles with a bullish tilt @77.2

Sell Mar 67.5 puts

Sell Mar 90 calls

A short strangle is a bet on a trading range for Anadarko Petroleum. There is chart support at 70 and resistance at 90. APC is the largest holding in FRAK, the oil fracking ETF.

I also buy LEN Lennar Homes via selling Feb 36 puts @40.7. Their earnings were solid, though the stock dipped during the conference call. Some folks like to think of selling puts as placing a GTC buy order at that strike and getting paid for it, if the stock never falls to that level.

Boeing has been all over the news and my position is in the red. News happens, and sometimes it is bad news.

Long BA GPS IWM LEN LGF MON UNP XRT

Net long APC

11 books for traders

Minyanville has a list that the firm First New York uses for its trainees (link). From that list I have read:
Reminisciences..., Market Wizards, the first Trader Vic book, the Murphy, Weinstein and McMillan books, so 6 out of 11.

It is not a bad list. The opening quip is one I tell everyone though not in the same words: "One thing that every beginning trader needs to learn is there are a lot of ways to skin the cat,“ says Tommy Goelz

There are a 1000 ways to make money (or lose) in the markets. What works for me, may not work for you, and vice-versa. Journaling (what this blog is), is a powerful tool to learn what works for you.

As for today's market, the low option premiums continue to be a challenge. I am tempted to take on more risk. The AAPL drop sure is tempting. However, I remind myself my worst trade of 2012 was a short Iron Condor on AAPL. I have found that yes, some stocks become associated with profits, some with losses. There are plenty of other stocks to trade.

Ritholtz post: cash really has been trash

One of the more popular posts on the sidebar has been "Cash is Trash." At the Ritholtz blog an interesting graphic about ten year asset class returns, that confirms this.

http://www.ritholtz.com/blog/2013/01/asset-class-returns-2003-2012/

Missing from the list are long term treasuries, straight gold, straight silver, all of which would be near the top of the list. So the list makers likely have a bias towards equity oriented investments. AGG is the bond entry and it has a shorter duration than TLT, and hasn't done as well.

Cash has returned zero since the 2008 financial crisis (0.1%), and may stay there for a while yet. Those with money market accounts have seen those statements perhaps with 0.01% as the stated rate. Zero returns are bad, though many might say, better zero than risking another -30% down year in the stock market, or a similar move in bonds (some European bonds already saw that during their crisis). However, the other side is that those that moved to cash during the crisis have missed out on a doubling in the U.S. stock market.

Obviously if someone or some group were smart and lucky enough to be in one of the top performing asset classes every year, their returns would be tremendous. Just as obviously, no one does that, well maybe 0.05% but there are far more liars saying they did (usually after the fact, in hindsight) than real life people that actually did and have the records to prove it.

I know a lot of traders dislike hearing it, especially novice traders, but steady state allocations such as PERM (25/25/25/25 gold, stocks, bonds, cash) or a 50/50 stock and bond allocation do okay in most markets and over the long term will out perform most professional money managers. Yes, every trader thinks they will be in the top group, the outperforming group. In reality, 80% of active managers lag the indexes over the long term. These are the smartest of the smart.

Buy MON (sell puts)

Buy MON via selling Feb 90 puts @99.3

Monsanto broke out from a flat base on strong earnings. There is chart support at 92 and 90. Again, I am going with a 90% percentage option for a tiny premium. The low VIX readings mean pickings are slim for put sells (and call sellers).

Long APC BA GPS IWM LGF MON UNP XRT

Buy IWM (sell puts)

Buy IWM via selling Feb 78 puts @86.6

I continue to edge into the stock market by selling 90% probability puts on the Russell 2000 ETF. There is a 90% chance that the puts will expire worthless if held until expiration. It seems difficult to imagine a scenario where the stock market gives up all its gains from the November 2012 lows. It could happen, but historically, less than a 10% chance.

This trade feels uncomfortable. Some recent trades moved against me quickly, so it feels like I have a cold hand. I remind myself that I came into the year, way under exposed to the stock market, so even if on the 10% that some of these puts come into play, getting assigned stock on a sharp pullback wouldn't be the worst thing.

Long APC BA GPS IWM LGF UNP XRT

Buy BA (sell puts)

Buy BA Boeing via selling Feb 67.5 puts @76.2

Boeing has been trading in a narrow range for about two years now. The recent market rally saw modest new highs. There is chart support at 75, 70. The strike is near the 2012 lows.

Long APC BA GPS IWM LGF UNP XRT

Buy UNP (sell puts)

Buy UNP via selling Jan 125 puts @130.2

I buy Union Pacific railroad, it broke out from a base at 125 and there is minor support at 127. Since breaking out, it made a higher low and now a higher high. If it does move down to the strike price, a roll down and out is the plan. Being under-invested is an uncomfortable feeling during this roaring bull week for the stock market.

Elsewhere, gold and bonds are moving lower, in part because the slowing and possible end of the Fed's massive quantitative easing program. I wistfully look at the up move in TBT (inverse bond ETF) and how little I participated. 

I continue to be tempted to take a shot at the short side of the stock market, but fighting the tape can be an expensive battle. I remind myself that often it is the third time that will break. The stock market has not even faced strike one. The tepid decline on Thursday, did not scare any bull, or excite any bears. 

I went into 2013 expect a down year for the stock market. So far I have been wrong.

Long APC, GPS, IWM, LGF, UNP, XRT

Buy GPS (sell puts)

Buy GPS via selling Feb 28 puts

Having for the most part missed the massive two day rally, I buy Gap Stores on the strength of a public pronouncement to short it (Yahoo link). There is minor chart support at 30, 29, 28.

Long APC, GPS, IWM, LGF, XRT

2012 year in review 101-27-3 grade B-

Overall modest gains, up 9.7% in my trading account. For closed trades, there were 101 winners, 27 losers, 3 breakeven trades for a 79% winning percentage. B- is my grade for the year. The letter grades are new for this year and I like the concept. 

While critics might say that 9% trails the gains in SPY, IWM and EEM, I trade more than stocks, and also go long and short. I'll take 9% year-in-year out, especially because I believe I am at a lower risk level than many other investors and traders.

Select ETFs:

SPY +13.5% TLT -0.1% GLD +6.6%

SLV +9.0% EEM +16.9% IWM 14.3%

Best trade of the year measured by the margin required, were short puts on EWG, the German stock ETF during the summer crisis time. Made 80% vs. my margin required. Other traders other brokers may have higher or lower margin requirements. Novices are going to tend to have higher requirements, advanced and pro traders often lower. Worst trade was short Iron Condors on AAPL Apple computer, lost like 500% basis the premium collected on the bad leg. Other 2012 winners were monthly rounds of selling puts on LGF Lions Gate, and BRKB Berkshire Hathaway, and some short strangles on IWM. Some other losers include GDX, ALXN, WFM, MMM. Other winners include GLD, XRT, AMZN, IBM.

The win percentage is about as expected. 79% winners would be extraordinary if I were doing straight coin-flip 50/50 up or down trades, but I often take trades at 80% probability or better.

Some notable events include: moving my retirement accounts to Schwab and attending a bunch of their free live presentations. Many are aimed at beginners, but I still managed to find some nugget in almost every presentation. I started going to some local stock market meetups. The local CANSLIM group is often interesting. It seems difficult to find stock market groups, so even though the momentum style favored by CANSLIM is not my strong suit, I find value in the occasional CANSLIM meeting. I don't advertise my blog at the meetup, nor do I talk much about my own picks, mostly I listen and try to learn something.

I continue to view online webinars presented by my other broker ThinkorSwim. In particular, their one-hour weekly market wrap up is something that I try to watch every week. Non-customers can register and view the wrap up for free. Some of the material is filler, some is same-old, same-old, especially for weekly viewers, but I almost always find something of value.

With classes, with presentations, with indicators, with methods and strategies, a few folks have unrealistic expectations, believing in some kind of holy grail. Nothing is 100%. Nothing. If something is 100%, it tends to stop working as soon as it gets found and published. The ThinkorSwim folks often remark, that they are looking at the pot odds (poker term), or that they have seen a lot of movies so have a good idea how this movie is going to end. That doesn't mean they don't get it wrong, but their experience gives them a better idea. Journaling is one way to avoid making the same mistakes over and over, and something I highly recommend.

During 2012 I ventured into some more exotic option trades. Naked strangles became routine, I did a single short Iron Condor (which turned into my biggest loser for the year). Delta neutral is another term and it means that a position makes money on time decay as long as the underlying remains in a range. Many pro traders use delta neutral strategies such as short Iron Condors and short straddles, and short strangles. For those that want to learn more about options, the CBOE link (Chicago Board of Options Exchange) is a good place to start learning.

I see that my first blog post from 2006 has sometimes been on the most popular list lately. Back then, I was mostly doing buy/writes and taking some small trading positions. I have learned so much by doing this blog and evolved so much during what is now close to seven years of blogging. Making my trades public makes me far less likely to do what some might characterize as “stupid trades.” I started in the stock market in August 1987, a few months before the 1987 stock market crash. That trial by fire has made me a relatively cautious trader. 

Again, let me restate, that I do this blog mostly for my own benefit. I also that hope that some others might learn from my trades and observations. Surprising as it may be to some, I have nothing to sell, nothing to advertise, nothing to gain from my blogging.
 

Buy XRT (sell puts)

Buy XRT via selling Jan 57 puts

XRT is the retail stock ETF. Chart support at 58. I wish I could say I bought the low of the day, but that virtually never happens, especially with orders placed before the open. 

I was surprised by the steep selloff. However, I am way underexposed due to my busy schedule. Hopefully, I will have more time to trade and blog.

Long APC, IWM, LFG, XRT

Buy APC (sell puts)

Buy APC via selling Jan 65 puts. Anadarko is the top holding in FRAK, an ETF play on oil fracking. I have played it before, and am coming back to it. 65 is chart support.

Long APC, IWM, LFG

7-0 for December grade A-

Seven winners, zero losers for the December option cycle. All were small winners including a short strangle on IWM and short puts on BRKB, EWZ, LGF, TBT.

My schedule limited the time I could spend on the stock market. Going forward I have two small positions, short Jan IWM puts, and Mar LGF puts. I'll write a year in review a bit later in the year, as New Year's Day approaches.

Long IWM, LGF

Buy LGF (sell puts)

Buy LGF Lions Gate via selling Mar 14 puts

For the first time in a long time I placed some good-til-cancelled orders to sell options. I placed them on Sunday, and LGF got filled today. I had second order to sell IWM Russell 2000 puts and a third to sell GLD puts. I cancelled the GLD order on the big drop morning.

Long BRKB, EWZ, LGF, TBT

Buy IWM (sell puts)

Buy IWM via selling Jan 70 puts

Placed an order before the open and got filled on the morning dip. By the end of the day, nicely in the green. I also entered a day order to sell TBT Jan 53 puts, but it expired without a fill. IWM is my first January position. With my busy schedule, I only have a few small December positions.

Long BRKB, EWZ, LGF, TBT

Net long IWM

2-0 for Nov grade B-, also buy EWZ (sell puts)

Two winners, zero losers for the November option cycle. I was on the sidelines for most of the month. The grade B- is on a curve because of difficult market conditions. The two winners were IWM Russell 2000 stock ETF and LGF Lions Gate Entertainment. I saw a lot of red ink on orders placed before the open on some of the big dipper down days. 

I also buy EWZ Brazil stock ETF via selling Dec 45 puts. More a gut trade than anything else. I finally get some green ink by the end of the day on one of these pre-market orders.

Long BRKB, EWZ, LGF, TBT

Net long IWM

Buy LGF (sell puts)

Buy LGF Lions Gate via selling Dec 14 puts

Another whoops order entered before the open. Red ink follows as the market crumbles.

Long BRKB, LGF, TBT

Net long IWM

Buy TBT (sell puts)

Buy TBT via selling Dec 53 puts. Another ouch entry with TBT taking a big hit today. TBT is the double inverse Treasury ETF. My order filled close to the open and moved deep in the red. Other positions also took on water, though LGF Lions Gate had a positive earnings surprise after the close.

The time change has mostly brought grief with my recent trades. These things happen. Hot streaks and cold streaks are part of life for almost all traders.

Long BRKB LGF TBT

Net long IWM

Rebalance IWM (sell puts) "brilliant"

I had the “brilliant” idea to rebalance my IWM position back to delta positive by selling puts. I placed an order to sell IWM Dec 72 puts before the open and got filled shortly after the market open. Ouch. 

The bad news is some red ink on my positions, the good news is my huge cash position. LGF also has been going down, so those positions are taking on water as well.

I'd like to say that the stock market reaction is over done, but the other side of the argument is that the market is always right, don't argue with it.

Long BRKB, LGF

Net long IWM

Buy LGF and BRKB (sell puts)

Buy LGF Lions Gate Entertainment via selling Nov 15 puts

Buy BRKB Berkshire Hathaway via selling Dec 77.5 puts

With the time change, I find some time to place some orders before the open. With virtually zero exposure in my trading account, I take some small positions. LGF hit an air pocket ahead of its earnings, but at below 15 I am a buyer. The story on Berkshire is the same as it has been for a while, a stock buyback at 10% above book value provides major support.

Long BRKB, LGF

Net long IWM

Dollar Cost Averaging vs. a Lump Sum

A Vanguard study (link1) is cited on Marketwatch (link2), saying that investing all at once gives better results over dollar cost averaging. The premise is a person inheriting a large sum of cash, or some other kind of windfall, such as selling a business, or winning a lottery. The edge for lump summing (investing all a once) tends to be measurable, though small.

It is worth thinking about. However, there are several caveats. The vast majority of stock market investors are not in that fortunate group making a decision about a large inheritance. Much more common are people making every day decisions with their every day savings. For example a person that has been in CDs for ten years and decides to plunge into the stock market, or bond market or gold market.

Those making "all in" or "all out" decisions tend to do poorly. While a few will do okay, many more will buy and sell at near the worst moments. This is how markets work, that at market tops there are a relative maximum number of buyers, at market bottoms a maximum number of sellers. A lot of those wrong-way buyers and sellers are small investors that feel the greed at the top and the fear at the bottom and act on it. NOTHING CAN CHANGE THAT. Markets make tops when a lot of people are buying, and bottom when a lot of people are selling. Those that think they can beat that, tend to be fooling themselves, or in an elite group with some special talent. Almost everyone making "all in" or "all out" decisions believes they are making a smart decision, but 80% to 90% are making terrible decisions.

So while the Vanguard study is interesting, it mostly applies to a person receiving a large sum out of the clear blue sky, not someone who is moving "all in" or "all out" because of news, or "just because." Another point is that dollar cost averaging can be a disastrous strategy during a prolonged bear market. Of course, no one thinks they are entering that territory when they start investing. Only in hindsight can we really say, that there was a 10 or 20 or 30 year long bear market in a certain asset class.

Another passive way to invest is to set an asset allocation and then rebalance as the various assets move up and down in value. This forces an investor to buy when prices are lower. The catch is that a person has to stick to their asset allocation. The permanent portfolio popularized by Harry Browne is one such approach (25% each to cash, bonds, stocks, gold). I am a fan of this approach. However, as always, there are no guarantees, but this kind of approach has done well for the past 30 years, with no need for bold decisions or market timing. Some will say that is because of the huge bull markets for gold and bonds and that is unlikely to be repeated. 

Another more common approach is a 50/50 stock and bond allocation, with a cash reserve of six months or a year that stays in cash. The big danger with this kind of approach are black swan events such as a change of government due to revolution or the loss of a major war, making all those paper assets virtually worthless. While the odds are low for any particular country in the short term, over the long term, these historic events do happen. Again, think back to 1900 and how many of the major powers (France, Germany, Russia, China, Japan and more) saw their governments fall and their bonds essentially go to zero before 1950. Equity investors did not do much better. Americans tend to ignore these kind of big risks because we have been blessed, but just like investment results, that is not guaranteed for the future.

My schedule continues to be too busy for much trading activity, and probably will be that way for the next two months. So I'll chime in when I can, but it won't be often.

Buy IWM sell puts & strangle

Buy IWM via selling puts and selling a strangle

Sell IWM Nov 74 puts

Sell IWM Dec 70/88 strangle (88 calls, 70 puts)

These filled in the morning. I take some small positions after many weeks of no trading. My only other trading position is short LGF Dec 11 puts. 

Why now? The stock almanac shows November to be a strong month. As always, seasonality is one of the weaker indicators. I have tons of free capital to deploy, and the recent selling squall is an opportunity to dip my little toe in the water. 

Net long IWM

long LGF

10-0 For October grade A-, also anniversary of the 87 crash

Ten winners, zero losers for the October option cycle. I've been so busy, that I didn't trade much, but these ten came home as winners. Why the A- because there was plenty of room for improvement and bigger profits.

One of my best percentage gains for the year was on EWG the German stock ETF. I sold puts months ago, and the return on margin required was like 80%. Most of the puts I sell are about six weeks out and return on margin required is usually in the single-digit percentage range. That's the good news, the bad news was that it was a very small position in dollar terms.

For oldtimers, the 25^th anniversary of the 1987 stock market crash, saw another drop. I started trading a few months before the 1987 crash. I believe that those early days of trading have forever imprinted on me, and a big reason why I tend to be so cautious. Suzy Orman often talks about a person's earliest memory of money, and how that impacts them. The first few investments a person makes can also have a big impact, especially if the “end of the world” happens when a person is just getting in.

I wish I could say that I knew the stock market would recover, but virtually no one did. As with any crisis, there is no way of knowing where the bottom is. Back in 1987, it was near impossible to make any trades during that time because it was all done over the phone.

My schedule looks like it will remain very busy, so updates will tend to be sparse for a while.

End of 3rd quarter

Year to date returns for some ETFs:
+14.7% SPY S&P 500
+ 2.4% TLT 20-year US Treasury
+13.1% GLD gold
+24.3% SLV silver
+ 8.9% EEM Emerging Markets
+13.1% IWM Russell 2000

Plus signs all around, with the bigger plus signs in metals and U.S. stocks. Sell-stocks-in-May started as a good idea this year, as the stock market moved lower, but the rally has moved past the April highs. Silver was one of the laggards in 2011, and treasuries a strong performer in 2011. In 2012, the roles are reversed with Treasuries barely positive and volatile silver a strong performer.

Regression to the mean is a powerful tendency in markets. The other side of that is the huge money can be made in trending markets by aggressive traders. Range traders and trend traders tend to be opposite styles. It is difficult to master both kinds of dances. To do one well, is enough to make decent money, as long as position size and risk management are strong. The latter two are vital no matter what kind of style, no matter what kind of vehicle.

Many successful traders believe that risk management and right sizing of positions are far more important than the kind of indicators used, or if a person is a trend follower, or a range trader.

I wish I had some bold predictions or insight into the markets. Unfortunately, I've had little time to look at or think about the markets, or to reinvest the money that was freed up at September option expiration. For now, I am content with my smallish low risk positions.

14-5-1 for September grade B-

Fourteen winners, five losers, one breakeven for the September option cycle with a grade of B-. Another positive month, though the gains were modest. Short strangles were a dangerous strategy this month and I covered the short calls at major losses. To offset those losses, there were gains on layers of shorts puts.

As I wrote, earlier some call buyers made 5x to 10x their money this month. No home runs for me, and the hedging reduced returns. Still, another month in the green is a positive, and I covered the losers before they became nasty.

Going forward, all I have are short put positions. Changes in my schedule mean less time for the stock market. I'll still update, but there may be delays. Also October is often a dangerous month in the markets, so I often am more cautious this time of year. The historical record of September as the worst stock market month, so far has been opposite, with big gains this month. My favored strategies of selling puts or strangles suffers when premiums are low like they are now.

Long ALL BRKB EWG GLD IWM LGF XHB XRT
ALL Allstate Insurance
BRKB Berkshire Hathway B
EWG German stock ETF
GLD Gold ETF
IWM Russell 2000 ETF
LGF Lions Gate Entertainment
XHB Housing stock ETF
XRT Retail stock ETF

Other winners for September include short puts on AMGN Amgen, ESRX Express Scripts.

Buy IWM (sell puts)

Buy IWM via selling Oct 79 puts @86.7

The Russell 2000 ETF made a new 52-week high. Resistance often becomes support, so that is 85. There are multiple minor support levels at 84, 81, 80. The massive Fed induced rally in stocks and gold was a surprise to me. Fortunately, I covered all my short calls before the news event.

Captain Obvious can say in hindsight that it would have been best to be long calls. Some of the calls I sold are up 5x to 10x in value in a few weeks, so call buyers hit home runs. Thank goodness I covered before the losses became financial ice bergs. It is ironic that just days after Barrons runs a column about short strangles (short both puts and calls) producing excellent returns, the strategy blows up with major losses for those that did not use stops. Even stops are sometimes of limited value on a fast moving news day.

Long AMGN BRKB ESRX EWG LGF XHB

Long GLD IWM XRT

Net neutral SPY

Heart: Fantasy Football lessons for investors

Long time readers know that I like sports analogies. Ross Heart at Minyanville has 15 traits and lessons that will help you  in fantasy football as well as investments:
1. Research 

2. Quick Decision-Making

3. Sentimental Picks
4. Spotting Value
5. Riding Winners 

The full list is at the Minyanville link .

>>

I have been looking at the markets, but am not finding that much to be compelling. Some stocks of interest (besides the ones that I have positions in) include: BIIB KORS TRV

Sell KFT (cover short puts)

Cover short KFT Sep 39 puts @40.7

Kraft Foods gaps down on news. I bail out at a break even profit to avoid the uncertainty. Even though there is modest chart support at 40.

As of this writing, my short covering from yesterday looks like some good moves, especially with gold moving higher this morning.

Long AMGN BRKB ESRX EWG LGF XHB

Long GLD IWM XRT

Net neutral SPY

Short covering: GLD IWM XRT

Cover short XRT Sep 63 calls @63.2

Cover short IWM Sep 85 calls @83.9

Cover short GLD Oct 177 calls @165.2

It is a similar situation to yesterday, I was short strangles on all these, and when the stocks moved higher, the short call side becomes a loser. I did not expect today's massive rally. For all three: Gold, the Russell 2000 ETF and the Retail ETF, there is a high probability that layers of short puts will offset the losses from these calls.

There is some discussion on taking losses in yesterday's post. To repeat some it: basically, there is no one way that works best for every trader, every situation. Using a stop loss, whether it be a mental stop, or an actual order can help limit losses in a trending, orderly market. If a market gaps on news, stops will have less value and may not work. In trading range markets, stops often get triggered and then the stock reverses, to the consternation of many traders. 

Some traders won't use stops. A few favor a style that doubles their positions when they start losing. There are a lot of ways to go. Some traders will initiate their positions at well known, well publicized stop loss levels. It is often a game within the game, for every buyer, there is a seller, and each has their reasons for making a move. 

Again, in a trending bull market, hedging strategies such as selling strangles, will lag behind buy-and-hold in terms of performance.
 

Long AMGN BRKB ESRX EWG KFT LGF XHB

Long GLD IWM XRT

Net neutral SPY

Cover LGF short calls (and stop losses)

I cover my short LGF Sep 15 calls LGF@15.4

With Lions Gate in the money (over the strike price of 15) this leg of the short strangle is taking on water. I remain short multiple layers of short puts. I thought 15 would provide resistance. The loss is over 100% on this leg of the short strangle, which sounds alarming. However, it is a small dollar amount, and is offset by the probability of profits on the short puts.

/edit to add: LGF closes near unchanged, so at least for the moment it looks like a bad decision. Discussion on use of stops follows: When a position goes against a trader, that trader can choose to use stops or not. The overall market mood and direction are factors when I decide whether to close out a losing position. Some traders place actual stop orders, some use mental stops. 

Some traders will double down if a position goes against them. Obviously this only tends to work if initial position sizes are very small. There is no method that will always work. Stops can save a person from big losses during trending markets. However, in a trading range market, whipsaws are common, where a stop level is triggered and the price reverses. Stops may not work if there are big price gaps at the open or after a trading halt.

Long AMGN BRKB ESRX EWG KFT LGF XHB

Net neutral GLD SPY
Net short IWM XRT

Buy ALL, rebalance GLD & LGF (sell puts)

Sell LGF Oct 13 puts and Oct 14 puts @14.8

I rebalance back to long by selling two layers of puts after the rally in Lions Gate pushes my position to net short. I was short Sep strangles (15 calls, 14 puts). There is resistance at 15, but this rally looks like it has a shot at breaking that.

I also sell Oct 33 puts on Allstate Insurance with ALL @37.1. Allstate broke out from a chart base at 35 at the end of July on a strong earnings report. The base makes for layers of support at 35 and 34, so 33 seems like a relatively safe strike to sell puts.

The Fed news makes for a volatile day in gold, which is now up, after tumbling immediately on the event. This pushes my short strangle to net short.

/edit to add: later in day I sold GLD Oct 150 puts @163.4 to rebalance my gold position back to neutral. The bad part of the layers of short gold puts is that they eat up a lot of working capital in terms of buying power. The positive is that I still have some dry powder. My broker likes me today, with this being my fourth trade of the day, a recent record, if not an all time one.

Long AMGN BRKB ESRX EWG KFT XHB

Net long GLD LGF XRT

Rebalance XRT (sell puts)

Sell XRT Oct 54 puts @61.4

I rebalance my retail ETF position back to delta positive. I was already short Sep strangles 63 calls, 57 puts and more layers of puts below that. Like I wrote yesterday, retail has been one of the strongest groups during this rally (home builders, medical and tech are some others). Chart support for XRT at 56 which is the bottom of the trading range, resistance at 63 which was the rally high.

Long AMGN BRKB ESRX EWG KFT

Net long LGF XRT

Net neutral GLD SPY
Net short IWM

Buy XHB home builders (sell puts)

Buy XHB via selling Oct 21 puts @23.4. XHB is the home builders ETF. XHB broke out from a chart base at 21.8 and there is another layer of support at 21. Home builders have been one of the strongest sectors during this rally. Other strong sectors include retail, medical and tech (mostly Apple).

* I added a search box to the blog. It looks for blog content and links that I have posted. Blogger says I have over 1200 posts over the course of six years. So if nothing else it may be a useful search tool for me.

Long AMGN BRKB ESRX EWG KFT XHB

Net long LGF

Net neutral GLD SPY
Net short IWM XRT

Rebalance GLD (sell puts)

Sell GLD Sep 151 puts @162.3

I am surprised by the strength in gold. The short strangle I recently sold (Oct 147 puts/Oct 177 calls) is underwater and taking on more water as gold rallies sharply. To move back close to net neutral I sell some Sep 151 puts. I do so reluctantly, thinking that gold is most likely to fade. Another factor is the hefty margin requirement because the underlying is high priced. On the other side, these puts only have about an 8% chance to come into the money by September expiration, and I have plenty of dry powder from the recent option expiration.

Another recent reluctant move, selling LGF Sep 14 puts to rebalance isn't working out too well, as Lions Gate is taking on water with the rest of the market.

Long AMGN BRKB ESRX EWG KFT

Net long LGF

Net neutral GLD SPY
Net short IWM XRT

Sell GLD strangles and Buy BRKB (sell puts)

Buy BRKB via selling Oct 77.5 puts @85.6

Story remains the same on Berkshire, chart support and a stock buyback. I was already short Sep 77.5 puts.

I also sell strangles on gold this morning. I sell the Oct 147 puts, and Oct 177 calls for credit. Again, a short strangle is a bet on a trading range. GLD is breaking out this morning with GLD@159.0. However, there is resistance at higher prices.  Chart support is at 148 and resistance at 175. So while bullish, I am not wildly bullish. Like I wrote in an earlier post, gold has been getting some positive press with the Soros and Paulson buys.

This morning's stock market rally has nudged my IWM and XRT positions back to net short. LGF had a rough Monday, perhaps because of disappointing box office results for Expendables II, but is up today on strong DVD sales for Hunger Games. Anecdotally, some are reporting the DVD is sold out at some stores.

Long AMGN BRKB ESRX EWG KFT

Net long LGF

Net neutral SPY
Net short IWM XRT

Ritholtz: Where has the retail investor gone?

Barry Ritholtz lists ten reasons at the Washington Post (link1). To summarize:
1 Secular cycle (long term cycle)
2 Psychology (investors are scared)
3 Risk on/risk off (Fed intervention)
4 Poor returns (self explanatory)
5 De-leveraging (paying down debt instead)

Five more reasons are at the link and I see it as a decent summary of reasons. In a separate article, high school students were surveyed and 75% believe the stock market is rigged against them.

Over at the Ritholz blog (link2), he makes an argument against the thesis of the book Stocks for the Long Term (1994), that over the long term stocks always outperform bonds.

Let me add two cents and say that what many long, long term investors ignore are systemic risks where government bonds and stocks go to near zero. This happens when governments fall, because they lost a major war, revolution, or the country breaks into pieces. While extraordinary events, they do tend to happen. Read some world history and count up major powers in the 20th century that suffered such events (China, France, Germany, Italy, Japan, Russia).

Only the United Kingdom and the United States were relatively free from these scars in the 20th century, and even they suffered major problems from winning the wars. The odds are much greater than the miniscule percentages that most Americans like to give them. Probably because Americans have never seen it happen here. This is a good case for having some physical gold, just in case.

6-1 for August grade B

For the August option cycle, I count six winners, one loser, and give myself an overall grade of B. The lone loser was one side of a LGF short strangle. Had I waited it out, it would have come in okay, though the drawdown would have been scary. Winners included short puts and calls on LGF and IWM. Seven is fewer closed trades than usual and that is due to my vacation. I added a new Philosophy page that has my grades at the bottom (link) and can also be accessed by the tab on the header, next to the word "Home." I also added a First Time Readers page (link2).

Going forward, I am still looking for a stock market trading range. LGF Lions Gate has the movie Expendables II opening today. Gold looks to be a bit too popular in the short term, what with articles citing big buys by George Soros and others. Bonds are perplexing. I outlined my long term view of a parabolic up move followed by a crash, but this doesn't help that much with the short term.

Long AMGN BRKB ESRX EWG KFT

Net long LGF SPY

Net neutral IWM XRT

AMGN Amgen

BRKB Berkshire Hathaway

ESRX Express Scripts

EWG German stock ETF

IWM Russell 2000 ETF

KFT Kraft Foods

LGF Lions Gate Entertainment

SPY S&P 500 stock ETF

XRT retail stock ETF

* ETF = exchange traded fund

Rebalance XRT (sell puts)

Sell XRT Sep 57 puts @61.4

This move rebalances me to neutral on the Retail ETF. I was already short Sep 52 puts, Sep 54 puts, Sep 63 calls, and Aug 50 puts. I am surprised at the strength in the stock market. I am dancing closer to the flame with the narrowing of the short strangle (short 63 calls, short 57 puts and two more layers of short puts).

The bond market in the short term is confusing to me. I wrote about the possibility of parabolic move up in bonds on big news, followed by a crash. What does a trader or investor do with that? I am still processing, though my tendency is towards risk aversion.

Long AMGN BRKB ESRX EWG KFT

Net long LGF SPY

Net neutral IWM XRT

Sell IWM Sep 73 puts

Rebalance to neutral again as IWM keeps rallying. I was already short IWM Sep 67 puts, Sep 71 puts and Sep 85 calls, as well as an Aug strangle that looks to expire safe tomorrow. IWM is the Russell 2000 ETF.

Long AMGN BRKB ESRX EWG KFT

Net long LGF SPY

Net neutral IWM
Net short XRT

Rebalance LGF (sell puts)

Sell LGF Sep 14 puts @14.3 I rebalance to long on Lions Gate by selling these puts. I was already short Aug 13 puts, Aug 16 calls, Sep 13 puts, Sep 15 calls. The rally had moved my position to net short. A spike in volume sometimes marks an intermediate top for LGF. While volume was on the high side yesterday, it wasn't as big a volume spike as some previous tops.

I feel uneasy about selling these puts. The short strangle is narrow at 14/15 (short Sep 14 puts, short Sep 15 calls). We will see how it works out. Lions Gate has the movie The Expendables II out this weekend.

Elsewhere Berkshire discloses some buys and sells:
sales: ir kft intc ups pg kft ge v
buys: psx nov via bk dva dtv wfc ibm
Because BRK is such a big and public player, their moves are news.

All my August positions look to be safe for expiration this Friday. My IWM and XRT positions are back to near neutral. Again, this happens as the prices move without me buying or selling.
 /edit to add: sold another layer of puts later in the day, LGF Dec 11 puts with LGF@14.5

Long AMGN BRKB ESRX EWG KFT
Net long LGF SPY
Net neutral IWM XRT

Trade of the century--shorting the bond bubble

With no Olympics on TV, I feel like I have time to write. I had a recent conversation about bonds, and the words "trade of the century" came out. Eventually, being short U.S. bonds will be a huge winner (being long TBT is one way to be short bonds). The air already has come out in select European bond markets. For example, the Spanish ten-year bond went from 3% yield to 7% in about a year. I see the same eventually happening in the U.S.

Doing a search on "bond bubble 2012" turns up a lot of hits. A few interesting links:

brief thoughts from Peter Schiff link1

Jim Kochan quoted in Barrons link2

Allan Roth at CBS with alternatives link3

My thoughts are that the bears will eventually be right, but not quite yet. For investors and traders, technical analysis can be a useful tool. Stereotypical bubble markets have an exhaustion phase, that include a short sharp run up in prices before the bubble pops. This might be a 30% to 100% increase in a few months. Timing the exact top is near impossible, and a parabolic top, may or may not occur in bonds.

The Fed is a wildcard. QE1 and QE2 (quantitative easing) and the Twist have injected close to $3 Trillion USD into the bond market. Even in the gargantuan U.S. bond market, $3 trillion, makes a huge difference. The trickle down has spread to most other markets. Low interest rates affect option prices, CD yields, stock yields, real estate, gold.

When and if the U.S. bond bubble bursts there will likely be casualties in other markets. If the 10 year Treasury goes to 7% (which is about the average yield for the past 30 years), stock yields may well go to similar levels, carrying costs and opportunity costs for gold and real estate become that much higher, derivative decay for options and leveraged ETFs becomes that much steeper.

It seems like bond bears have been crying wolf for years now, and been wrong, wrong and wrong. Their time will come. One scenario is a war or economic crisis that is a catalyst for a parabolic rally before a crash. Again, in parabolic moves, trying to time the exact top tends to be a fools game.

For the short term, I remain positive on U.S. bonds until October. This seasonal bearish period is November until March. As always, seasonality is a weak indicator, and easily jumped (eg: if every "knows" that bonds turn in October, most will jump in September and start to ruin the indicator).

For the long term, I am looking for the parabolic phase. Because of the massive Fed intervention, we may or may not see a textbook bubble blow off top. If we don't, indicators such as the 200 day moving average on TLT might be useful tools.

Oldtimers remember the Internet bubble. Everyone and their brother knew that the stocks were over valued. However, many thought there was still time. Many traders that tried to short the high flying Internet stocks, lost money because as the irrational exuberance reached a fever pitch and the blow off top was much higher than most could imagine. Many bought the first steep drop in Internet stocks, thinking there was to be another rally, but got crushed. The U.S. bond market is many times bigger than the stock market, and if there is a bubble and a crash, the long term economic damage may be great.

For easier historical tracking:
TLT 125.49 SPY 140.77 BND 85.69 GLD 155.99 TBT 15.48

A footnote: I started a new blog for my piano playing, so the about me section now has that as the lead. I also took this time to revamp the layout and look.

Late: Sell LGF calls

Late report from Friday:
Sell LGF Sep 15 calls @13.5
I lighten up on my LGF position by selling the Sep 15 calls. I am already short Aug 13 puts, Aug 16 calls, Sep 13 puts. Three months ago, the earnings report led to a rally to 15. I think with the mixed earnings report just out, that would be the best case.

Longer term, I still think Lions Gate is worth $20 or more. However, the short term upside is limited and that's the reason for selling calls.

Long AMGN BRKB ESRX EWG KFT
Net long LGF SPY
Net short IWM XRT

Buy ESRX (sell puts)

Buy ESRX via selling Sep 52.5 puts @60.6
Express Scripts higher on earnings. Chart support at 55, but I am reluctant to sell the 55s, choosing the lower risk, lower reward of selling the 52.5s.

Elsewhere, movement and decay has pivoted my IWM and XRT positions to delta negative, or net short.

Long AMGN BRKB ESRX EWG KFT
Net long LGF SPY
Net short IWM XRT

Buy AMGN (sell puts)

Buy AMGN via selling Sep 72.5 puts @82.2
Amgen had a good earnings report on 7/27. Strong chart support at 70, with minor support at 80 and 75.

As the August option cycle winds down, I remain underinvested because of the recent vacation.

Long AMGN BRKB EWG KFT
Net long LGF IWM SPY XRT

Rebalance IWM & XRT (sell puts)

Sell XRT Sep 54 puts @59.9 to rebalance to delta positive. The move up in the retail ETF moved my short strangle position to net short, delta negative. Adding a second layer of short puts rebalances. I was already short XRT Sep 52 puts, Sep 63 calls.

Also sell IWM Sep 71 puts @79.4 to rebalance. Story is near the same. I was already short IWM Sep 67 puts, Sep 85 calls.

Long BRKB EWG KFT
Net long LGF IWM SPY XRT

Buy KFT (sell puts)

Buy KFT via selling Sep 39 puts @40.6
Kraft up on earnings, 39 is yesterdays close. Some like to think of selling puts as placing a GTC order to buy a stock.

Long BRKB EWG KFT
Net long LGF IWM SPY XRT

Buy BRKB (sell puts)

Buy BRKB via selling Sep 77.5 puts @84.2
Story is the same as it has been all year, Berkshire has chart support and is doing a buy back. Chart base has moved up, so that 80 and 78 are decent support levels.

Long BRKB EWG
Net long LGF IWM SPY XRT

Sell IWM & XRT strangles

Sell XRT strangles @58.8 for credit
sell XRT Sep 63 calls and Sep 52 puts

XRT is the retail ETF. A short strangle is a bet on a trading range, and loses if there is a big move up or down. Recent top was 63 and there is a base of support at 52 to 54.

I also sell IWM strangles, selling Sep 85 calls and Sep 67 puts for credit with IWM@77.5. Again, this is a bet on a trading range, 83 and 85 are resistance, 72 and 70 are support. IWM is the Russell 2000 ETF.

Long BRKB EWG
Net long LGF IWM SPY XRT