DOUBLE THE ANGI

http://ibankcoin.com/option_addict/2015/01/22/the-trade-that-fixes-everything/

She’s looking like she caught the market offsides today.

Anyone still in this?

With a weeks time frame in mind, which of the following will hit $50 from where prices rest today?

GPRO – currently trading at $47.30

TWTR – currently trading at $48.40

YELP – currently trading at $47.80

Official poll here: https://www.surveymonkey.com/r/72M8R29

Discuss.

OA

I picked up shares of both this morning.

More later,

OA

Long $SFUN @ $6.77.

I’m light on set-ups, so I’m browsing the lists of all stocks down 2% or more today for dip buys. I missed the $FB set-up we discussed in After Hours with Option Addict. Thinking I might book $FEYE or $ROSG to finance some fresh names.

Top pick this week: $WYNN.

More later,

OA

It’s heating up in the halls of After Hours with Option Addict and 12631. The market continues to ackrite, and we’ve been able to navigate some epic wins over the last couple weeks.

I must leave early today, which means After Hours with Option Addict will be canceled. I look forward to doing this all again with you next week.

Until then, happy weekend.

OA

I don’t want to presume, but I want to start planning ahead.

If you’ve followed my long term market analogue, it suggests that there is still one last phase to the bull cycle. If we’re about to engage in such conditions, I think it would be best to discuss the topic of asset allocation to optimize your returns while managing portfolio risk in trending market conditions. We’ve discussed this at length on After Hours with Option Addict, but its always good to review how to allocate a portfolio. You don’t want to get overleveraged, but nor do you want to sit out years of epic opportunity staying 98% cash during easy market conditions. Such behavior is likened to deserting your post in a war. Furthermore, only a paranoid asshole psychopath would pass up an opportunity to earn in easy conditions based solely out of fear.

So how should one start to build in terms of allocation? If I took you through the standard model I would need your age, time until retirement, dependents, goals, ambitions and would want to experience your personality a little. This way I might be able to recommend suitable strategies and instruments that are conducive to your personal strengths and weaknesses.

Assuming my reader is 47.5 years of age, is thinking about retirement, still has years of earning power under his/her belt, and wants to risk their nut, here is a starting point that is a little more aggressive based on our current market analogue.

Leveraged instruments (Options, Futures, etc): 10-20%

Equities (Growth/Value/Foreign): 50-70%

Fixed Income (Bonds/Dividends): 0-20%

Cash: 15-25%

Again, an aggressive allocation model will emphasize more weight in equities, and less weight in fixed income. Personally, I’d rather utilize covered calls as a way to generate income on a portfolio of stocks as opposed to focusing on yield through dividends only. Best case scenario, you double dip and sell calls against your dividend paying stocks. Either way, the premium on a weekly/monthly basis in most equities, especially growth oriented stocks, will produce a steady yield based on the going rate of option premiums in general.

I want to take options a step further in this discussion, especially on their use in an investment portfolio. If you are using options in a conservative manner (high delta, ample time til expiration) you might opt to allocate more funds to this strategy. If you are using options in an aggressive manner (low delta, less time til expiration) you might opt to allocate less. In terms of position sizing per trade, I’d rather risk more on a conservative option (up to 5% per trade) and manage fewer positions. If I am trading options aggressively, which I do, I’d rather risk less on an aggressive option (up to 2%) and manage multiple positions.

Going forward, I have started to up my position sizes slowly, and will start to allocate more to options as market conditions dictate. I know many are still cash heavy here, but if the volatility leaves and the market starts to grind, I’d start looking towards building out the portfolio a little more as conditions improve.

I know each individual has a different set of circumstances, but if you have a question that can open up some dialogue on this, feel free to post comments in the chat.

OA