I’ve been preaching to raise the stops on your long positions. Perhaps to even lighten up and to sell while it’s easy. Many of you who bought with me in mid-to-late 2010 have done so.
There are also those who came out of their bearish bomb shelters when the major indices were up 20%. You are the latecomer and if you don’t sell or protect yourself, you’ll be the bagholder.
I have a suggestion. Buy some protection. It is relatively cheap to do so. If I’m wrong, you’ve bought some insurance. If I’m right and we soon test the low Dow 11k area, then you will be thrilled.
The fact is that in the space of in-between just one earnings reporting season, the major indices have rallied 25-35% and some commodities double that. But don’t worry the Fed has your back, the economy is roaring and happy days are here again–AFTER a big rally!
Our perception of “goodliness” is based solely on the markets performance and the market seems very illiquid. Case in point; yesterday’s New Year pop was on very low volume. 25% of the entire day was run at the close! The lights are on, but nobody is home…Please be careful out there!
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How dare you preach to be responsible and level headed when trading! What are you thinking telling people to use caution and book profits! I mean come on, you have to trade every day in size or else you’re a patzer!
The market is going up every single day from now to forever (@ least 2013 according to Mr. Birinyi). There will be no pullbacks or corrections!
My trading thesis is simple. market up, buy. market down, buy. market sideways, buy. anyone says different its a contrarian signal and I buy more. Agree with me? Hell, I’m a momentum guy so it means the crowds with me, thats another buy signal.
😉
LOL…
BTW–did you know that I went to Fort Lee High School?
Nice, what year did you graduate?
a very long time ago. I am over 47.5 years old.
but apparently not old are heart. Still counting years by halves.
I don’t have a Lion, can I gird my Tuxedo Tom Cat?
Scott, I have been skeptical of your bearish call over the last month. And I have made good money being on the right side of the trade.
However, I am starting to believe you now. Yesterday was “too good” to be true.
What I hate is that we take the stairs on the way up, and the elevator on the way down. I went to all cash today.
Back in July I bought shares and sold puts in line with Scott’s bullish mid-summer stance. Now, in keeping with Scott”s “lighten up” advice, I’ve been buying-to-close my short puts at 50-90% profit. I still have the underlying shares; still collecting dividends and have sold calls that seem ridiculous that anyone would buy them from me. I’m not worried about a drop to 11,000 because I’ve driven my basis down selling premium on 2012 and 2013 LEAPS. If we do drop, I will sell another round of puts as I’ve got lots of cash and margin. If we continue up, I might get my shares called away at 15-20% profit in less than 12 months. If we go sideways, I collect time premium and dividends. I sleep well at night.
It’s a B-E-A-U-T-I-F-U-L thing…
congrats John.. I want to learn how to do that, hedge my longs as well as you have. thank you and all best..
@Scott — I don’t post often but deeply appreciate what you share, thank you sir..
That sounds like rational and wise use of options on your part, John..
Options are cheap right now as shown by the VIX. I think you want to be a buyer not seller
Its not called hedging if you buy or sell options in the same direction as your shares
Luke, you are correct and I considered that after I posted my comment. John was on one side of it and that was a risk
What struck me was his longer term view of an options trade as part of an overall strategy, instead of someone betting on next Friday.
Telling me that “options are cheap as shown by the VIX”. Who cares? I make each spread trade based on the specific underlying stock. And for each trade I calculate what will happen if prices go up, down or sideways. When I can accept all three in my strategy and I see the odds favoring the best outcome for the way I’ve built the trade, I pull the trigger. My overall timing is influenced by market conditions…such as my overall taking profits now on short-puts–but it’s an easy decision when I’m above 50% profit in less than 8 months. My objective is 20-25%/year on my total investable cash and for 2010 I did 20% with LESS THAN HALF MY CASH INVESTED. Imagine even 15-20% compounded per year on a few hundred thousand dollars when I have 25+ years left before retirement? Using options I do sacrifice big upside moves in stocks for safety and consistency. (I’m in XOM now with BIG profits but the profits is capped by my short calls–I’d rather XOM go down). I could lose in a big crash if all my short puts were exercised, but my short calls would soften the blow and I would have a portfolio of world class dividend stocks at ridiculously cheap values for the long term…so I’d still be looking good in 2035. Like Scott I combine technical analysis with fundamental analysis but without losing sight of the way the Fed distorts the economy and the Wall Street/media complex distorts information. I love the excitement demonstrated by Mr. Le Fly, but I also like my peace & serenity (Scott and I are about the same age–so I get all his pop culture references and due to illegality no longer read anyone but Scott’s blog). I don’t make my living from this as The Fly does, and I don’t need to hit home runs with my portfolio. Maybe when I was a young gun and lost 90% in the Internet blowup…that tempered my spirit. But I LOVE investing now because I can do it without fear. Lots of cash and margin is what is required to sell puts and calls, but once you can do it, it’s sweeeeeeet.
Scott, got any inside info on MCD
what if we see rotation out of 2010 leaders into new leaders and WE NEVER GO DOWN AGAIN
why yes. yes I do.
Their Angus Third Pounder is the best fast food buger in the world.
Last paragraph of article you tweeted:
“And if indeed this news was the catalyst for today’s precious metal and other commodities sell off, it is woefully misinterpreted, as the only major institutional parties impacted will be those who hold outsized short positions in the precious metals space. As for JP Morgan’s ongoing attempt to corner the copper market: we wish them godspeed.”
Just the low 11k …only a 600 point loss doesn’t seem like a bear case scenario just a simple little correction.Would you buy if we ever get to that area?
Dippy; I never said Bear market. A quick 5% drop would take the bullish edge off a lot of equity…
So you would start buying again then??? Or do you think we get a drawn out correction lasting a couple of weeks
You people are a bunch of whining imbeciles. If I was Scott, I’d ban all of you twice.
Seems like nothing but good news and up we go again, this January effect can’t be denied seems like you might be a counteractive indicator.I think your equation might work next month though.
If you guys would like some financial advise just let me know.I might even do a live paid show were you can watch me drink coffee for an hour.
Scott,
I’m a big fan, as you know… I took some profits before the end of the year, but have bought financials heavily anticipating a rotation out of commodities. Don’t know you think that the action in finnies warrants staying bullish. It’s true that a lot of names got slaughtered yesterday, and we’ve gone far very quickly, but will there be a real rotation out of equities? No one likes bonds at the moment it seems. I’m with the Fly’s perpetual melt-up for the time-being, therefore. No volume–has that been a problem? It’s been a low-volume affair for a while now.
Dunno. Thoughts?
right on scott, VIX calls and TNA puts is my chosen protection