Just showing everyone I know a thing or two.
I’ve overachieved in an overextended market during a historically not so bullish time, overbought RSI on weekly and daily extended into upper Bollinger band and overbought slow stochastics near the upper trend channel and resistance coming up on longer term pattern.
The strongest bull markets don’t give you a chance to buy much of a dip very often, but this is a little bit extreme. Protection is my play… But if I had to initiate some new positions.
Gear up for war with ERJ, KAMN, RGR, maybe TASR and the civil disorder with SWHC.
If you want the high debt equity, low quick ratio BK plays with high short float and low float…
CSTR,ALJ,CSUN,ROYL,BIOF and why not SOL too with solar going apesht.
Low float momentum names with EPS growth of 25+% MELI,VOXX, BBG,SWC,ZAZA
And ACTV and FSLR into the volume pocket
But mostly UUP and a small position in puts on Monday.
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BOOM! Take a look at those plays. Just taking a look at some of the gains from Friday’s close. Th
ERJ around 2.5%
KAMN 1.3%
RGR has yet to leave the station. TASR only one down 1% or so but I did say “maybe” by it. SWHC so far is break even.
CSTR up 3.2%
ALJ up about 6%
CSUN up near 90% from Friday’s close to today’s peak
ROYL up near 8%
BIOF up 15% today
SOL up around 35%
BBG up over 10% (although option addict had that name pegged like 10% earlier than me)
SWC nice 5%
ZAZA near 6%
Just in case anyone listened.. you’re welcome!
And in case anyone bought options in those names, you can send me a christmas card. haha
As for the “hedging” it allowed me to hang onto names like BIDU and FSLR and other plays a bit longer, rather than selling.
If you have acquired enough skills you should be able to outperform the market. However, there is always the chance that a liquidation takes just about everything down. Can you produce huge gains on down days? Certainly. But it’s a lot more difficult to account for the rare “flashcrash” type of events and get back to where you would be than it is to make up for a few minor losses because of a few puts you buy. Afterall insurance is cheap right now.
I am still long the dollar and the yen. The “Island bottom” in the Euro is a bit concerning for the time being. I do not feel comfortable aggressively adding to an already reasonably sized position in any currency at this point of time. I will let it come in to add while also keeping an eye on the technical breakout point of $23 on the UUP.
Unfortunately GOLD never worked off it’s oversold position enough for me to be comfortable with shorting it on the way down to it’s retest of the recent low and silver’s break. Those type of plays are great because you can make two profitable bets while hedging slightly as there is a slight positive correlation between gold and the S&P.
So when no real great shorts are setting up except the hard to borrow type or type where option spreads are insane, I am left just playing for alpha, betting that my longs will outperform the market and grabbing some puts on the SPY to preserve my gains without selling and protect myself from a drawdown.
My account still is climbing as I continue to park some of my gains from other plays into mostly longer dated hedges (puts in SPY, calls in UUP,FXY), and some just go back into other plays.
Why pay so much for premium I won’t use? Because if I don’t, I am betting aggressively on my timing and on “not being wrong”. I can do that with individual plays if the setup is right, but not in timing tops and hedging which is a more gradual process.
Timing the top is extremely difficult and I don’t expect to hit this out of the park. Just protect against on possible outcome. (I do have a small position in the more aggressive puts the first week of JUNE as well, but). If it moves against me, I want to protect myself with a large percentage of my position intact. The more time value you have, the more people pay for “potential” even for options far out of the money. So the chance of losing 50% of your premium or 100% are greatly reduced from your short term options, even though the returns will be less as well. Since the idea is to “protect capital” so I can focus on “making and earning capital” with the rest, hedges are generally played more as cautionary plays.
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