LOL!'s Market Timing Newsletter

[LOL!]

Hey, where are all the market timers and swing traders of the forum? Y'all go indexing and doing buy-and-hold or what?

I'm just back from communing with the bears and deer. By doing nothing (OK I took a nice hot shower upon getting back), the portfolio was ahead of ALL of its benchmarks. That's because the benchmarks lost more money than the personal portfolio did.

And for my major benchmark, I have set up the portfolio to track it for the rest of the year since the personal portfolio is ahead by more than the stated goal amount.

 

[copyright1997reloaded]

Today is a sad day for me, as some of my OLED is being called. To rub salt in the wound, I decided yesterday to let the assignment happen, rather than buy back the call for a loss and keep the stock. Because I decided this, the stock went up another $5 or so on the open. While most of my position is now gone/soon to be gone, I will still have about 1/3 of my max position left.

 

[NW-Bound]

More than a dozen call and put option contracts expired worthless yesterday. I got assigned on only a single call contract. So, my strike prices were set just right.

The YTD net profit from option selling is $26K, more than my expenses. Will I maintain this luck?

On Monday, I will set out to write more calls for April. Stock AA has inched up to 71%. Perhaps I should set strike prices a bit lower, in order to get assignment and lower my stock AA.

 

[LOL!]

Just a couple weeks ago, the portfolio was ahead of all of its benchmarks which frankly made me feel pretty good. Small caps were outperforming large caps.

But now things have changed. Because small-cap value equities have dropped about 5% since then plus intermediate-term bond funds have gone up about 1.5%, the tables have turned. The portfolio is ahead of only one benchmark now and as much as 1% behind another. So ahead of a small-cap and value-tilted benchmark, but behind a benchmark with only US equities and bonds.

This all makes sense when one sees the YTD performances of the pieces. US equities are up about 12.5% while foreign equities are only up about 9.5%. That 3% difference applied to 25% of the portfolio creates a 0.75% difference in total portfolio performance. The rest of the underperformance comes from the small-caps dropping this past week.

So next week, I will probably have to buy some of the lower performers in order to get the portfolio back into balance even though I have no expectations that they will start to outperform. Also next week, quarterly dividends are being paid, so that will produce some cash for some of the buys that are needed.

And did somebody mentioned that the bond yield curve inverted? 135

 

[LOL!]

Sold some VCSH (short-term corporate bond index) and bought MTUM (large-cap momentum equities).

I chose this trade because we have an IRA that was 100% VCSH and this IRA has free trades. After last Friday's drop, I do need to add to equities. VCSH is up about 2.75% so far in 2019 which is great for a short-term bond fund and blows the pants off of any CD (though VCSH has more risk than a CD). I bought MTUM because it had not popped as much as other US equities this morning AND because I own it in another account, so that I can sell it immediately in that other account without a commission, without taxes, and without any free-riding concerns. That is, I don't have to wait for the new buy to settle in one account before selling in the other account. 480

I probably should have bought US small-caps or any international fund, but I have no guts today for them. Maybe later this week I will exchange from another bond fund into them? As always, I will let you know.

 

[NW-Bound]

... On Monday, I will set out to write more calls for April. Stock AA has inched up to 71%. Perhaps I should set strike prices a bit lower, in order to get assignment and lower my stock AA.

I did sell a dozen contracts after the above post.

Then, yesterday I bought back 3 call option contracts on semiconductor shares that I have, netting a bit more than $500. Of course, my stocks dropping cost me hugely more than that.

One day the market acted like these shares would shoot to the moon. The next day, they came crashing down like a stalled aircraft.

I hate this, and selling out-of-the-money calls then buying them back lower is the way for me to get even with them traders.

 

[LOL!]

Update on today's trades: The market faded starting about an hour after my purchase. I thought I would end up in the red, but I had bought MTUM low enough these shares are still in the black.

In other news, I found out that many of my non-Vanguard ETFs paid dividends last week and I wasn't paying any attention to that. The consequence was that I thought I was underperforming many of my benchmarks in a big way, but that turns out not to be true when I include the unnoticed dividends paid into my accounts. So today was a good day for me.

 

[LOL!]

Since my purchase of MTUM earlier this week it has traded lower. Only small caps have dropped down below their early March lows and are rising a little bit today.

I have no idea what's going to happen in the near term, but today I sold some of my FLRN (floating rate note ETF) to have some ready cash to buy equities or even intermediate-term bonds. Since I hate cash, I am kinda looking for something to buy that fits in with my desired asset allocation, but I am not thrilled with anything at the moment. I am looking at both equity and bond ETFs, but cannot seem to pull the trigger.

 

[NW-Bound]

Since my purchase of MTUM earlier this week it has traded lower. Only small caps have dropped down below their early March lows and are rising a little bit today...

For market timing (it's the goal here, is it not?), I go for gusto and trade the sectors most volatile. They bounce up/down as much as or even more than small caps.

Hence, my entire portfolio often moved as much as if I had 100% stock AA in the S&P, although I am only 70% invested in stocks.

 

[LOL!]

The goal here is not Market Timing just for the sake of Market Timing.

The goal here is Market Timing to Outperform Benchmark Funds.

So there are certainly times to go for gusto, but I think there are also times not to go for gusto.

 

[NW-Bound]

My goal is to make money. And of course knowing when to "go for it" and when not is the difficult part of the game.

The higher volatility of a sector amplifies the fear and greed of the market, and lets me see it clearer.

So, instead of buying $2 of the S&P, I like to buy $1 of a high-beta stock. It is not as "gusto" as you think, or rather as I portrayed.

 

[NW-Bound]

Yesterday, the semiconductor sector was floundering while other segments were showing signs of life.

Today, seeing that buyers of the sector are going gunho again, I bought back 5 covered-call contracts, netting $1200. The gain would have been quite a bit more if I did this yesterday, but any gain should make me happy. It is not bad for opening these options just a week ago.

It is not that I expect these April contracts to become in-the-money and I have to sell the shares. They were out-of-the-money when I first sold them, and are even more so now.

Rather, I want to close them out to free up the stocks, so that I have the chance to sell options on them again, possibly with May expiry without waiting until Apr 18 when these contracts expire. The rule for myself is to never sell naked options. Besides, I am doing most of this in a tax-deferred account where naked options are not allowed anyway.


PS. Just closed out 2 more contracts, netting an additional $330. Every little bit helps.

PPS. 5 more contracts closed out. This is enough. I am getting off to go do some gardening.

 

[LOL!]

So I made the money I was expecting to make on my recent purchase of MTUM. However it is lagging (not going up as much as) other large-cap stocks in the first 15 minutes of today, so this seems like another buying opportunity to me.

Thus, I just bought more shares in a different account and submitted a limit order to sell the same number (that I just purchased) of shares from last week. That is, I should get double any gains if MTUM moves up to the limit price I set, but that is not a free lunch as I have doubled my position which means more risk until I de-risk by executing the sell order. 253

Oh, I should say that if my limit order does not execute, then I will probably change it to a market order near the end of the day. I intend to add an update to this post later today, too.

 

[LOL!]

Update: Sold MTUM and bought VCSH thus reversing the VCSH to MTUM trade of last week. VCSH dropped here in the last few minutes which made buying it back worthwhile to me. (Yes, it went ex-dividend today, but the drop was more than that as it was for most bond ETFs today.)

 

[NW-Bound]

Sold 8 out-of-the-money covered call option contracts on various stocks I hold, for a bit less than $1600.

Again, if the market tanks, I have that $1600 cash as consolation.

And if the shares surge up another 3 to 5% by April 18th and I have to sell at those prices, I shall not complain. Need to lower my stock AA anyway.

 

[LOL!]

^Help me out here please: The $1600 is how much out-of-the-money? 1%? 5%? 3%-5%? Is that what you mean?

 

[NW-Bound]

I generally set the strike price at about 2 to 3% higher than the current price. And for that, the option premium is 1.5 to 2% of the current price. So, if I get assigned, I effectively sell the stocks at 3.5% to 5% above the price when I sell the options.

The above is what I usually get for volatile stocks, and for expiry one month out or less. Stable stocks such as Procter & Gamble will not get me option premiums that high. Hence, I tend to sell options only on my more volatile holdings, and when I feel I am overweight in these stocks and do not mind lightening up.

PS. By watching the market daily, I often can sell then buy back the same option within a month before expiry when the shares drop. Then, when the market comes back in just a few days, I can sell the same options again, and occasionally at a higher strike price. The more crazy the market gets, the more opportunity to trade. Or more missed opportunity when looked in the rearview mirror.

PPS. My beloved semiconductor shares got bid up like mad today. It looks like they are retreating from their high of today, so I held my nose and sold some more options for another $570.

 

[Rickt]

Nice Strategy NW-Bound.

 

[NW-Bound]

Sold 9 more out-of-the-money call contracts on various shares, getting a measly $1430 or so for the premium.

I can see buyers pulling in their horn and not paying as much, compared to yesterday.

Nice Strategy NW-Bound.

It's just my way of overcoming greed in an attempt to sell high. Instead of selling a stock at $100 right now, I find it easier to sell an option with a strike price of $103 say, and the buyer even gives me $2 in cash right now. Whether the stock goes up or down after this, I can convince myself that I did the right thing.

It's all a mental game I play on myself. Buying low is easier for me than selling high. But if I failed to sell high, I would not have cash to buy low. Selling covered call options is a way to force myself to sell high, although I tend to set the price so high it won't hit.

 

[LOL!]

Since this morning US Total Stock was down and MTUM was up and they normally go the same direction, I sold all the shares of MTUM in one of my Roth IRAs. I used the money to buy the ETF that had dropped the most since yesterday's close which turned out to be DGS a small-cap emerging market value ETF.
432

 

[LOL!]

Well, look at that! MTUM (sold yesterday) is down about 0.6% today and DGS (bought yesterday) is up about 0.5% today, so a total swing of 1.1% improvement over not making those trades yesterday. That counts as a base hit for me. 674

 

[pb4uski]

Since this morning US Total Stock was down and MTUM was up and they normally go the same direction, I sold all the shares of MTUM in one of my Roth IRAs. I used the money to buy the ETF that had dropped the most since yesterday's close which turned out to be DGS a small-cap emerging market value ETF.
432

Well, look at that! MTUM (sold yesterday) is down about 0.6% today and DGS (bought yesterday) is up about 0.5% today, so a total swing of 1.1% improvement over not making those trades yesterday. That counts as a base hit for me. 674

What to the numbers 432 and 674 at the of each of the last two posts mean?

 

[LOL!]

What to the numbers 432 and 674 at the of each of the last two posts mean?

They are there to provide analytics and to track views. Another purpose is to make people ask "What do those numbers mean?"

 

[pb4uski]

That's what I figured.

 

[LOL!]

And a week later, that sell MTUM/buy DGS trade is now worse off than doing nothing.