I
attend another Canslim meetup. I have mentioned a few times that a
stock market top is unlikely as long as the local group was poorly
attended. That if at a top, the room would be full. Well, guess what?
The Santa Monica group is turning away people, and the Hermosa Beach
room was jammed full.
So
I am calling market top? Going back to my post from May 2014, Tea Leaves for a Market Top (link), the answer remains no. I am still looking for an inverted yield curve, when
short term interest rates exceed long term rates. Still looking for a
significant divergence between transports, IYT, and SPY S&P 500,
with IYT usually topping well ahead of the broad market. So even
though sentiment is troubling, and valuation has been troubling for a
while, this doesn't look like a top.
Mark Cuban all over the media
calling bubble subtracts from the bear case. Cuban's sale of Facebook stock in the 30s as a data point for his market timing. Cuban bought like a 150k shares of FB near the IPO price, sold for about a 20% loss, or $200,000 a couple
of months later. If he had kept it, his FB stock around 80 now, would
be at about a 100% gain by now.
Cuban does have a point about IPOs, but IPOs are only a small slice of the market. Some recent IPOs saw a parabola trip, up then down. GPRO LOCO are two examples.
I
also read the monthly missives of Liz Ann Sonders from Schwab. She
looks at a lot of fundamental data, and doesn't see signs of a major
top either. However, a long awaited correction and more volatility
may occur.
Here
are the trades:
*
p = puts, c = calls, third week expiration unless indicated otherwise.
Fri
Sell SPY May put backratios @209.5
Buy
SPY May 188 p / Sell 2x May 183 p
Stock
market lower on employment news. I sell some put backratios for a
credit. These are delta positive, theta positive. There is a chance
of a big profit on a move to the lower strike. On a move below SPY
178, losses grow.
Sell
AMBA Apr 50 p @63.7. 70 New long position in Ambarella. AMBA had
decent earnings a couple of days ago. It is a CANSLIM type of stock.
Chart support at 50. AMBA is a supplier to GPRO and also for wearable
cameras for police departments.
Sell
AMBA Mar 75 c @64.5. 15 A bit later in the day I turn the Ambarella
into a short strangle with a positive skew. This is a reaction to
overall market weakness.
Sell
COST Apr 160 c @149.7. 36 I hedge my recent put sale in Costco by
selling calls.
Sell
BA Apr 170 c @153.3. 19 I hedge my short puts in Boeing by selling
calls.
Thu
Sell UNH MarW4 108 p @115.4. Rebalance a complicated position in
United Healthcare with week 4 puts. I am once again tending to sell the lows, buying the highs
and trying to stay near delta neutral. I took the bid on these
options, which is painful on the wide spread. However, a mid-order on
another was probably not going to get filled. To quote Laurel and
Hardy, another fine mess.
Sell
COST Apr 140 p @150.4. New long position in Costco. COST gaps
higher on earnings news.Chart support at 140.
Wed
Sell MNST Apr 155 c @138.4. I hedge the puts I sold on Tuesday by
selling calls as Monster Beverage declines. Some might ask the
reasoning. The idea is to keep delta about the same. The risk is of a
big rally bringing these calls into play. So now I have a short strangle.
Sell
HD Apr 105 p @115.0. New long position in Home Depot. HD reported
strong earnings about a week ago. Has been consolidating a bit lower.
Good chart support at 105.
Sell
IWM strangles @122.4:
Sell IWM 110 p and Sell IWM 130 c
A
short strangle is a bet on a trading range. I tend to sell them about
six weeks out, and sell the options around the 10% probability line.
So there is an 80% chance of profit, but if there is a big move,
losses can be large.
Tue
Sell UNH MarW4 118 c @113.3. I rebalance short strangles on United
Healthcare by selling some week four calls. I choose these because
there is a decent bid. This leaves me net long. The nearest options I
am short are the Mar 111 puts.
Sell
XOM Apr 95 c @87.4. A similar rebalance of short strangles, in
Exxon Mobil. Nearest short options are the Mar 85 puts. I am hoping
the chart low around 86 acts as support.
Sell
MNST Apr 125 p @140.6. New long position in Monster Beverage. MNST
gapped higher on recent earnings. 125 is about the level of the base.
Mon
Sell HON Mar 100 p @103.9. I rebalance a complicated position
in Honeywell. I have mangled the managing of this position. I have
some shares, short some strangles. Mostly I have been buying the
highs and selling the lows, which is kind of the opposite of how to
make money.
Position
summary:
long
APC ASH BA BRKB DIS GDX LUV JWN MMM UNP VRX WFC
net
long AAPL AMBA AMGN GDX HON MNST UNH XOM
net
neutral FDX ILMN IWM PANW SPY WHR
new
longs: COST HD / new net longs: AMBA MNST
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