LOL!'s Market Timing Newsletter

[copyright1997reloaded]

Since my 2/21 post:
Bought a little Teva on 2/26 in premarket@ $19.65 - so far not so good.
Sold a number of things as I am trying to get rid of some smaller holdings to get the number of unique positions down - I have way, way too many. Sold some HST @ 18.52, some BDX @ 226.25. Also trying to finally do some account consolidation. My first victim was a small 401k which I am transferring to a Schwab Rollover IRA (and where I have other assets). So in order to do that they had to liquidate assets. All of this (other than Teva) was done yesterday 2/26. Net effect is about a .75% decrease in equity %...to approximately 67.2%.

 

[LOL!]

361
I have been wanting to sell the DGS shares that I bought on Feb 27 at a nice gain, but every time it pokes its head above water, it only shows it eyes and doesn't get much further above breaking even before it sinks back down into shallow water.

I can take some consolation in that many other equity classes have lost money since 2/27, so the DGS was not a bad purchase (so far). Right now DGS is in the positive for me even though it is one of the worst performers for today. Yet it is not positive enough to make me want to sell.

 

[NW-Bound]

Semiconductor stocks are on a roll again. Many of my covered calls expiring next Friday are in the money, and if the price does not drop big next week, somebody will buy mucho of my shares.

This drives down my stock AA, and particularly my overweight in this sector. I still believe in this tech sector, so start to sell put options to buy them back at the same price I will be selling them, or even lower.

There are always bulls and bears in any market. When stocks go up good, I sell options to the bulls who bet stocks will go up even more bigly. Then, I turn around to sell options to the bears who bet stocks will crash.

 

[LOL!]

OK, got a limit order to sell DGS in. And a limit order to buy Total US bond index. Let's see what happens, but prices seem to be going the wrong way now. 726

Update: And the sell DGS order executed this afternoon.

 

[LOL!]

I bought several thousand shares of FLRN this morning with the money from selling DGS. FLRN is an ultrashort bond ETF: SPDR® Bloomberg Barclays Investment Grade Floating Rate ETF that I will try out for at least a month or so. 86

If anyone else has used, owned, or is considering buying FLRN I'd would enjoy reading any thoughts on this ETF. Thanks!

 

[NW-Bound]

At expiry last Friday (3/16/2018), many of my covered call options were in the money, were exercised by the other side of the trade, and resulted in me selling the shares. That reduced my stock AA from 73% down to 65%.

Today, some shares have dropped below what I sold. Heh heh heh...

There were also covered calls and puts that expired worthless, and I get to keep the option premiums and my shares too. So far, the options generate cash that is more than my expenses.

I have quite a bit in cash now, and am planning what to do with it. In the past, I would buy back the shares at a bit lower than what I sold, then write more out-of-the-money covered calls.

This time, I think I will wait a bit, then write out-of-the-money cash-covered put options to buy back the shares I sold for even cheaper. If the shares drop that low, I get the shares cheaper than what I have to pay if I buy back now. It would bring my stock AA up.

If the shares never get that low before the options expire it's OK too, because the option premium is a lot more than the interest I can get on the cash.

 

[LOL!]

At expiry last Friday (3/16/2018), many of my covered call options were in the money, were exercised by the other side of the trade, and resulted in me selling the shares. That reduced my stock AA from 73% down to 65%.

Today, some shares have dropped below what I sold. Heh heh heh...

Isn't it nice when a plan works out well?

I haven't figured out what today's market action is all about. US Large-caps seem to be the worst performers while US small-caps and foreign equities have gone down noticeably less. I see the news about Facebook and tech, so maybe that's an excuse for folks to start selling.

I just don't know, so I have no plans right now to make any trades.

 

[NW-Bound]

The options getting exercised helped, but I still lose much money today. I just lose less.

But at least, that means my defensive maneuvers using options work. A lot of people think options are volatile and risky. But as with any tool, you can use options to achieve different objectives. I use them to hedge, which limits my potential gains, but also reduces the loss if the market turns bearish.

 

[Brat]

I think it is sentiment about what is going on in DC. When things look stinky better to sit on the sidelines.

 

[LOL!]

Efficient Market Hypothesis: Not!
078

Everybody knows that the FOMC will announce a FFR increase later today. The prices of bond funds have already been adjusted for this prediction for some time.

So why have bond ETFs such as AGG and BND dropped more than 0.3% in the past couple of days? I think it is just that folks are waiting for the news. I think these bond funds will go back up over the next few days, so I have put in a limit order to buy a few shares of total bond market this morning. I don't actually expect the order to execute until the gyrations that happen right at the FOMC press conference.

And you might ask: Why bother with a small order and potential 0.3% gains? I don't have an answer for that. Sorry. I guess perhaps I like making predictions in this Market Timing Newsletter.

 

[NW-Bound]

...And you might ask: Why bother with a small order and potential 0.3% gains? I don't have an answer for that. Sorry.

I did. That's $300 on a $100K bet. Personally, I like to bet on more volatile individual stocks, and stand to make or lose $3K or more on $100K bet. Of course the risk is higher.

One tries to make money whichever way he can think of or is comfortable with, I guess.

I guess perhaps I like making predictions in this Market Timing Newsletter.

I do not make specific predictions per se, other than semiconductor and biotech sectors will continue to do well and better than the entire market. Also EM.

However, when these sectors surged like crazy, I wrote covered calls on them. These companies are good, but not that good. I usually try to set the prices so high that I do not think they will be reached, but not so high that the premiums are puny.

The last batch of call options, I underestimated the market appetite for semi stocks, and ended up selling a bunch of them. They dropped big on Monday, in sympathy with FB it looks like. Lucky me. Crazy, as what do semi stocks have to do with FB, but that's the efficient market for you.

So, I have sold put options to buy them back at even lower prices. The stocks recovered, and it looks like these put options will not hit (and I will pocket the premium). However, I like to hold these stocks for long-term gain, so may buy some back at the current prices to continue to write covered calls on them.

 

[LOL!]

I did. That's $300 on a $100K bet. Personally, One tries to make money whichever way he can think of or is comfortable with, I guess.

I am just following my Investment Policy Statement to make money.

I can write that I am overweighted in equities per my asset allocation plan, so that I need to buy some more fixed income here ... or not buy anymore equities. Thus, if I find myself with a little cash, I buy something, and today (my order was executed about 20 minutes after placing it), I bought bond ETF shares.

 

[NW-Bound]

I am more like Groucho Marx.

"Those are my principles. If you don't like them, I have others" -- Groucho Marx

Actually, I do try to limit my stock AA at both the high and low ends, and also the concentration in any individual sector. But without doing something different than the market, I might as well do index and call it quit.

Here's a good day for a non-indexer: my stocks are up nearly 1% while the broad market is down nearly 0.2%. When diluted out by cash and some MFs, the portfolio is still up 0.62%. That's quite more than a few $K, and in fact the same as 3 months of living expenses for me (if I can hold on to this gain that is).

What happened? Well, the sectors I am heavily in, like biotechs, semiconductors, EM, energy (oil), chemical, and mining all surged. It's like having a 12-cylinder engine and suddenly 10 of them fire, instead of taking turn sputtering.

Maybe tomorrow I will pay for this, but such is the life of a non-indexer. The interesting thing even if I do not beat the market is the conundrum that it presents; why these things happen, and what makes investors suddenly pay as much as 9% more for a stock compared to what they did yesterday (or will tomorrow).

It may be the same weirdness as the morbid interest of watching insane patients in an asylum, but I am hooked.

 

[JPatrick]

The past year or so I've been trading the VIX using VIXY covered calls.
Volume is low, but thus far it has been good. Best just to paper trade for a while if you don't have a feel for what the market action does to VIXY.
Right now I have the APR 30 calls written. A few days ago I rolled the Mar 30 calls.

 

[LOL!]

Here's a good day for a non-indexer: my stocks are up nearly 1% while the broad market is down nearly 0.2%.

Ah, but an indexer can choose which index funds/ETFs they will invest in and over what time periods, so an indexer still has a chance to outperform the broad market indexes.

 

[NW-Bound]

Ah, but an indexer can choose which index funds/ETFs they will invest in and over what time periods, so an indexer still has a chance to outperform the broad market indexes.

Very true.

Over time, I tend to do away with individual stocks and use ETFs to play different sectors. In the past, I was in the wrong company in a hot sector, and that was terrible.

But I do the slicing and dicing at a finer level to go down to the industrial sector levels, and not just growth vs. value, large vs. small cap. Of course it's higher risk, but the potential reward is higher.

 

[LOL!]

Well, there you go: Made the 0.3% in less than 24 hours.

 

[NW-Bound]

Every little bit helps, particularly on a day like today. How's the rest of your portfolio?

As for me, I lost what I gained, then some more. Today, my stocks are down worse than the market.

The silver lining, if it can be called that, is that my stock AA has been driven down to 62.5%, closer to the 60% I was thinking of. Hah!

I already have some put options out, and some are already in the money, meaning if the market stays down like this, I will have to buy some, come April 20 expiry date. That will bring my stock AA back up. I will lay off for a while to keep some dry powder.

 

[LOL!]

Every little bit helps, particularly on a day like today. How's the rest of your portfolio?

All equities got killed yesterday. But there is a silver lining:

I was ahead of ALL my benchmarks the day before, but I ended up behind most all my benchmarks at the end of the day which was quite a disappointment --- until I noticed this morning that dividends were paid and/or things went ex-dividend yesterday. So accounting for those dividends, the portfolio is still ahead of all my benchmarks.

Folks who own Vanguard Wellington must not be too happy though.

 

[NW-Bound]

Could not sit on my hands.

Just sold a put option on the S&P, betting that it will not drop more than 3% from where it is. Expiry April 20. The premium is 1% of the cash to cover that put.

This means in a month, if the S&P is down more than 4%, I lose (and own more stock). If it is up or down less than 3%, I have a 1% return in 1 month.

Not a lot of money at stakes here. Just about 1% of portfolio. And so, this bet, if successful, will increase the total portfolio return by 1% x 1% = 0.01%.

 

[LOL!]

833
Decided to buy equities today, so sold SPSB (short-term corporate bond index ETF) and bought MTUM (US large-cap momentum) mostly because MTUM is down the mostest in the past 2 days. Also, because of the recent drop in equities my portfolio had fallen below my top rebalancing trigger point. (MTUM went ex-dividend yesterday.)

No commissions and no taxes for these trades.

 

[LOL!]

Things were looking good for my MTUM purchase when it was up about 1% shortly after I made the buy, but since then it has dropped about 2%, so it is showing a net 1% loss on that lot right now. This means I might have to double-up in equities buys today.

I will wait and see what happens, but I may buy something else before the market closes today and will report here either way.

Update: So markets continued downward, so I bought Total Stock Market Index fund (TSM) shares with about the same dollar amount that I bought MTUM earlier today which now is down about 1.5%. I can sell TSM in another account next week if it shows any sign of life by then.

 

[Running_Man]

Could not sit on my hands.

Just sold a put option on the S&P, betting that it will not drop more than 3% from where it is. Expiry April 20. The premium is 1% of the cash to cover that put.

This means in a month, if the S&P is down more than 4%, I lose (and own more stock). If it is up or down less than 3%, I have a 1% return in 1 month.

Not a lot of money at stakes here. Just about 1% of portfolio. And so, this bet, if successful, will increase the total portfolio return by 1% x 1% = 0.01%.

If there were 600 point decline in the S&P 500 what is the per put loss $200,000? Do I have that math correct or is it another amount?

 

[NW-Bound]

I do not understand your statement. This bet was on a cash amount worth 1% of my portfolio.

If the S&P goes to 0, not just a 600-point decline, all I would lose on this bet is that 1%, which is a lot less than $200K.

Now, the rest of my portfolio would be decimated too (with all stock portion going to 0), and that would be a 7-figure loss, but that is outside of this bet.


PS. The market dropped 2% since I sold that put. Another 1% down, and I will have to buy. That would bring my stock AA up another 1%.

 

[Running_Man]

I do not understand your statement. This bet was on a cash amount worth 1% of my portfolio.

If the S&P goes to 0, not just a 600-point decline, all I would lose on this bet is that 1%, which is a lot less than $200K.

Now, the rest of my portfolio would be decimated too, and that would be a 7-figure loss, but that is outside of this bet.


PS. The market dropped 2% since I sold that put. Another 1% down, and I will have to buy. That would bring my stock AA up another 1%.

Maybe I do not understand selling of puts, my understanding is they have a limited upside and unlimited downside. IF the market were to open 500 points lower on Monday, you are saying your loss is 1% of your portfolio? Did you buy some kind of straddle?