LOL!'s Market Timing Newsletter

[NW-Bound]

It was $5.20/sh or $520/contract.

The return on the cash to secure the put works out to 9% when annualized. It would be better if I bought back the put sooner. The premium already dropped quite a bit a month or two ago, and it is not worthwhile to squeeze the last pennies out of it. I was just sidetracked with other things.

 

[Fermion]

Looks like we both will be holding our Gilead awhile, eh NW? On a positive note though, Merck only sold $50m worth of HCV drug so Gilead's slightly weak quarter was not due to massive switching of insurers.

It will be back over $90 soon.

 

[NW-Bound]

I am not worried about Gilead. My current stake is small, so I can still double up if it drops more. Most likely, I will buy another biotech for diversification as they tend to move together. Any other biotech that you like?

 

[Fermion]

I am not worried about Gilead. My current stake is small, so I can still double up if it drops more. Most likely, I will buy another biotech for diversification as they tend to move together. Any other biotech that you like?

The only other biotech I am in is Endocyte (ECYT) and it is a total powerball lottery ticket. It moves about $0.50 each way from the $3.50 level for the past year or so and I have traded it, but I have a few thousand shares tucked away if they hit all 6 numbers.

I actually am expecting some big news from them later this year which should drive the price up to the $6 to $7 range (much higher if they partner). They have $3.50 a share in cash and trade for $3.38 today, so it does have some form of a bottom at least for a year or so. The latest CC has two of their drugs showing anti tumor activity but the street has not realized this yet.

POWERBALL!

 

[NW-Bound]

OK. May be good for a speculative bet and I will look further into it.

How about a blue chip one like GILD, one that I can take long RV trips without worrying about it?

 

[Fermion]

OK. May be good for a speculative bet and I will look further into it.

How about a blue chip one like GILD, one that I can take long RV trips without worrying about it?

Amgen (AMGN) would probably be my blue chip pick.

 

[NW-Bound]

Or Celgene or Biogen. I do not follow these companies, so know of them but not about who is doing what. GILD is the only individual biotech I have now.

Perhaps I can just add to my existing IBB position if the sector drops bad. This biotech ETF has all the above names. For smaller firms, I currently hold the ETF XBI.

 

[aja8888]

Or Celgene or Biogen. I do not follow these companies, so know of them but not about who is doing what. GILD is the only individual biotech I have now.

Perhaps I can just add to my existing IBB position if the sector drops bad. This biotech ETF has all the above names. For smaller firms, I currently hold the ETF XBI.

Besides Gilead, I hold Amgen. It's one of the "best in breed" companies, but the stock bounces around with the rest of them. I've thought about dumping both and putting the funds in the IBB.

 

[Fermion]

Besides Gilead, I hold Amgen. It's one of the "best in breed" companies, but the stock bounces around with the rest of them. I've thought about dumping both and putting the funds in the IBB.

But if you own the top five (Gilead, Amgen, Celgene, Biogen, Regeneron) plus throw in Abbie, you have the best blue chip bios and don't have to pay the high fee of IBB.

Six stocks is not too many to buy individually, especially if you get 100 free trades at Wells Fargo each year

 

[NW-Bound]

Yes, that's not a bad way to do it.

In the late 90s, I did that with semiconductor and network hardware stocks. You name it, I've got it. No matter what I bought, I made money. It was crazy. Then, when the bubble burst, they all went down. I ended up jettison them all and bought material stocks (fertilizer, agriculture, mining, steel, cement, industrial metal, coal producers). I recovered all my loss and then some, until the finance bubble burst.

After the Great Recession, I got tired and did not follow the market as closely, and missed the biotech run up.

 

[LOL!]

Market Timing Works!

I reviewed my portfolio YTD and have an update on progress. I usually have an asset allocation of about 60% equities and 40% fixed income. When equities dropped earlier in the year, I re-allocated to more equities (up to 75% on at least one day), then cutback to about 60% equities this month.

So what did that get me? I did participate in the gains of equities after they dropped. But let's say I had an extra 10% of the portfolio in equities (70% overall) when equities went up 10%. That would mean that my portfolio got only an extra 1% in performance out of all this market timing.

And I find that I am beating my 60/40 benchmarks by about 1%. It just doesn't seem to be such a big deal, but it gives me an extra 1% to blow trying to market time the rest of the year.

I suspect others have done well market-timing, too. But if you only do it with a few percent of your total portfolio, then it probably won't help you that much. OTOH, it probably won't hurt you either.

 

[brainsqueeze]

LOL, how do you take into account the bid-ask spreads on your trades? How do you calculate the net drag this has on your frequently traded portfolio?

 

[LOL!]

I don't think the bid-ask spread has to be taken into account. I use a real-time level II quote trading/charting tool and decent brokers. I do look to see if I get good executions.

For instance, I bought shares of VTI on Friday (yesterday) with a market order. Bid/ask was 104.52/104.53. I paid 104.5201 at 13:09:07 (you can look that up I suppose). And that was with a market order.

Just because there is a bid/ask spread does not mean that you pay 100% of it. The other investor could pay all of it.

I don't know if I am explaining well enough or providing enough evidence, but if you tell me what evidence you need to convince you, then I will try to get it on my next few trades and post it. I do not have any trades planned though. Here is an example of evidence: If I buy and watch the trade in real-time, I can see that the trades immediately before and immediately after my trade were higher. That is my buy was at a lower price than adjacent trades.

My experience: If trading round lots of 100, 200, 300, ..., 500 shares, then use limit orders so the other guy pays all the spread. If trading under 100 shares, then just submit a market order and be pleasantly surprised that my broker made me pay much less than half of a 1 cent spread.

Conversely, do not submit limit orders for things like 108 shares or 243 shares. They seem to need more human intervention and execution is slower. With free trades, it would be better to submit a 100 share order and an 8 share order. And a 200 share order and a 43 share order.

 

[LOL!]

VNQ keeps going up, so market timing does not work. I sold too soon which is pretty typical for me.

 

[NW-Bound]

This morning, I added to my IBB position, and paid $258.59/sh which was already up from last close at $255.28. Just stopped the RV at a rest area, and saw that it is now $261.

Biotech is doing well today, but so many other positions of mine in metal and energy are getting hammered, the total is going down.

 

[NW-Bound]

Does market timing work for me? It depends on one's benchmark or way of measuring.

If I consider my short-term trading activity as market timing, then I have made about 0.45% of portfolio YTD with the stock-covered calls and cash-secured puts. It gives me a bit extra spending money.

The principal used for the option writing, meaning the stocks to cover the calls and the cash put aside for the puts, fluctuates around 5% of portfolio.

So, I can say that I get 9% return YTD on the amount used to back up the options. That's not too shabby return, and I am often tempted to up the amount at stake. The problem is, as you know, "pigs get slaughtered", so I have tried to be careful.

Market Timing Works!

I reviewed my portfolio YTD and have an update on progress. I usually have an asset allocation of about 60% equities and 40% fixed income. When equities dropped earlier in the year, I re-allocated to more equities (up to 75% on at least one day), then cutback to about 60% equities this month.

So what did that get me? I did participate in the gains of equities after they dropped. But let's say I had an extra 10% of the portfolio in equities (70% overall) when equities went up 10%. That would mean that my portfolio got only an extra 1% in performance out of all this market timing.

And I find that I am beating my 60/40 benchmarks by about 1%. It just doesn't seem to be such a big deal, but it gives me an extra 1% to blow trying to market time the rest of the year.

I suspect others have done well market-timing, too. But if you only do it with a few percent of your total portfolio, then it probably won't help you that much. OTOH, it probably won't hurt you either.

 

[LOL!]

Does market timing work for me? It depends on one's benchmark or way of measuring.

If I consider ....

Thanks for the comment and update.

I think too often folks might think that Market Timing is to go between All-Cash and All-Stocks for one's entire portfolio based on some feelings or signals. It looks like we are not doing that.

Some folks might call what I am doing Tactical Asset Allocation. Others might call it Over-rebalancing. No matter because it is what it is.

As for benchmarks, I am using the following Vanguard funds:
VSMGX LifeStrategy Moderate Growth 60/40 allocation
VTWNX Target Retirement 2020 which is currently at 60/40, too
VBIAX Vanguard Balanced Index which is 60/40, but no international

Once I get ahead of these, I can simply try to match them for the remainder of the year and keep that advantage. I find that I am no good at going much less than 60% equities in order to avoid any guessed-at future losses. So I just have to lose money along with my benchmarks.

However, once I've lost the money, I have a better chance of recovering more of it than my benchmarks. Sometimes. I usually buy equities too soon and sell too soon. Of course, when I increase my percentage to equities, I am increasing risk, too.

I should in fact switch to a benchmark with higher equities temporarily, say a Vanguard Target Retirement 2030 fund for the Purists who say one cannot do better than passively-managed index funds. I can't argue with them, so I don't.

Does anybody else risk more than 10% of their total portfolio for these market timing activities? Or switch their asset allocation by 10% or more based on market changes in the previous week or month?

 

[papadad111]

I don't over think benchmarks. If my trading money went up more than it would have net of taxes by being in my core non trading portfolio then I won. If it didn't go up as much as if it was in core, then I lost. Simple as that, for me !!!

My gamble account is 10 percent or less. It sits in cash when not in gambles.

 

[NW-Bound]

Besides the 5% of principal used for option writing, I also have another 5% that I use to add to existing positions as I see fit. This latter 5% is meant for longer-term holding, which depending on how the market moves may be for 6 months to a year. The options on the other hand usually are for 1 to 2 months expiry, hence shorter terms. I do not trade daily or weekly.

 

[Sunset]

Currently I'm again trying to sell my 2 BRK.B options, but since they are good for another 1.5 years, I'm in no hurry and want a good price of $64.50 ea.

 

[LOL!]

It looks like Wall Street is taking my lead and selling off VNQ today. I feel strangely warm inside.

 

[NW-Bound]

I feel warm today, but that's because I am no longer in Vail but back to the low-desert home where it hits 101F.

On Tuesday, the market did well, and my stocks beat it. The gain was almost as much as my expenses YTD.

Then, I gave it all back the next day, and the next. And today, I will be back where I was a month ago. Darn!

The small consolation is that all my covered calls are becoming worthless and I keep the premiums and the stocks. For a little while there, I was thinking I sold these options way too cheap. Hah! Greed was then quickly followed by fear.

Am I fearful enough to buy more stocks or to sell put options? Nah, I can still make jokes here, so it cannot be that bad yet.

 

[Sunset]

Well I have to wait to sell my options. Missed the peak.

 

[NW-Bound]

Why, nobody does any trading lately? Where are all the self-proclaimed market timers?

I had 5 covered call options expire worthless last Friday, letting me keep a few $K in premium.

Then, I sold a put on XLK at the strike price of $42, a tech ETF that I sold recently a month ago at $43.31 after holding it for many years. XLK is climbing back to where I sold it at.

Perhaps I should have bought XLK back straight out right. If it holds or go higher, the bitty put premium will give me a puny annualized return of 10%, while owning the shares may give me more gain, plus the chance to write covered calls. Oh well, smaller risk, smaller reward, I keep having to remind myself. I still have some XLK shares anyway, because I did not sell them all.

 

[LOL!]

Why, nobody does any trading lately? Where are all the self-proclaimed market timers?

I've been traveling while at the same time waiting for the FOMC meeting to instill fear into investors.

With all those folks whining about the market being flat, I think a good strategy here is to just wait and see what happens, but be sure to ask again on June 13th before the meeting.