LOL!'s Market Timing Newsletter

[NW-Bound]

I used to do covered calls and they work when the stock market is not going up. But even though almost all my covered calls made me money by expiring worthless, the few that didn't cost me money in lost gains. In essence, I didn't see that there was a free lunch for the work I had to put into it...

Out-of-the-money covered calls tend to limit your gains in a bull market, and cause you to lose your best performing stocks and keep your lousier ones. The above is very true.

Earlier this year, I saw that the market was topping out, and the chance for it to keep going up is not good. Hence, I got more active in writing options.

However, if I knew the market would get so bad, I would be better off selling the stocks and going to cash. Or I could have set the strike prices lower for the options to get assigned, then keep the proceeds in cash.

Wouldda, shouldda... I am just glad that my option writing reduced my loss this year.

Covered-call writing is a form of market timing, but a relatively safe one. Compared to buy-and-hold, it can limit your gains in a bull market, in exchange for a better return in a flat or down market.

What's ahead?

I think I will continue to do the same next year. But I will set the strike prices lower, and if the stocks get sold, I will not buy them back. Being a stock lover, it is hard for me to sit on too much cash, but I am trying to change.

 

[LOL!]

I should have sold that MTUM when it was up. Oh, well, a 6% swing downwards in a few days is not good for me. That can mean only one thing: I must DOUBLE my position in it.

But WHEN do I do that?

 

[LOL!]

In the last minute of the market session, sold a total bond market index ETF and bought a US small-cap index ETF. 017

I did this because US small caps are in bear market territory, but I need to double check this.

 

[LOL!]

Since I lost so much money since my last purchase in small-cap index, I doubled my position a moment ago. 211

 

[Running_Man]

I should have sold that MTUM when it was up. Oh, well, a 6% swing downwards in a few days is not good for me. That can mean only one thing: I must DOUBLE my position in it.

But WHEN do I do that?

What is your take on the worst month in the history of this ETF? Does this mean you double down or does it signal something else, I suppose I am wondering what the advantage of buying this over the overall index is from your point since it was a market performer for the early years of the bull market, an over performer to market indexes on the leg up in stocks from Jan 2017 to Sep 2018 but is getting oversold since was up 26% YOY on September 30th but is down 7 percent YOY now. The reason I am asking is I understand the small cap you frequently purchase when it had an larger reaction to downside than the overall market but sell when it over performs but you were buying this when it over performed not under performed so I was wondering what your thought on that was.

https://twitter.com/x/status/1076584130668888065

 

[LOL!]

MTUM is not a small cap ETF. It is large cap in a large way. i have not doubled-down on MTUM because I already have too much of it.

I don't know what MTUM will do in the future, but although I have a loss in it, I have also bought/sold during the year, so I have less than a loss of someone who has owned it since January 1, 2018. I should have sold some at a gain a week or so ago. But as I wrote, I'm not sure what I will do with it going forward. As a large cap though, it offsets my overweighting to small caps, so I am in no hurry to sell it at a loss.

A review of my portfolio today shows that it is ahead of one of my benchmarks and behind some others. So my trading hasn't killed me yet.

 

[Running_Man]

MTUM is not a small cap ETF. It is large cap in a large way. i have not doubled-down on MTUM because I already have too much of it.

I don't know what MTUM will do in the future, but although I have a loss in it, I have also bought/sold during the year, so I have less than a loss of someone who has owned it since January 1, 2018. I should have sold some at a gain a week or so ago. But as I wrote, I'm not sure what I will do with it going forward. As a large cap though, it offsets my overweighting to small caps, so I am in no hurry to sell it at a loss.

A review of my portfolio today shows that it is ahead of one of my benchmarks and behind some others. So my trading hasn't killed me yet.

No I knew what MTUM was I was comparing your trading strategy of small caps, which you appear to me to tilt to during underperformance times vs MTUM which you seemed to take while it was overperforming, which seemed to be reversed in December. As I am soon going to be have to buying something with the put money to rebuild me to 25% equities, I am not thrilled at the prospect of buying S&P500 leaning toward some decent individual dividend stocks but you usually have rational ideas for your purchases and I thought the MTUM was out of your normal when you spoke of doubling down so I was wondering what you thought of it and your logic

 

[LOL!]

Thanks for suggesting that I might have rational ideas for my purchases.

If there is a strategy, I think it is that I believe other investors panic and oversell things in the short term. Then they come to their senses and buy things back. I also am always looking for capitulation in selling. Or change of momentum on the downside, so that I can try to capture a little upside.

That also may mean that I am always trying to catch the proverbial falling knife. The bloody bandages on my fingers pretty much show that is true.

 

[LOL!]

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I just have to try to catch that knife, so I sold some BIL (1-3 month T-bills) and intend to buy some MTUM in the next 20 minutes. If it goes up in the next week, I have some MTUM in 2 other accounts that I can sell without incurring a frequent trading commission, so I will probably do that. I'll post an update in a few minutes.

Update: And done. No complaints as the late extra drop in the last minute was sort of expected.

 

[LOL!]

So the last time my MTUM went up more than 2% in a few trading hours, I didn't sell. It would be easy to sell it if it had gone up 4%, but now I'm not sure what I want to do.

The math tells me the following: If I had an extra 20% of total portfolio in MTUM instead of bonds, then a 2% gain would only create a 20% x 2% or 0.4% gain compared to my benchmarks. That doesn't seem like a big enough advantage, does it?

 

[LOL!]

938
OK, a 3.5% gain from purchase at end of day 12/24 is good enough for me. I will submit a limit order to sell some MTUM shares later today and update this post.

Update: With 25 minutes to go, MTUM is trading up 4.4% and SPSM (small-cap index) is trading up 4% today. So I feel now that I have to sell something no matter what. I think I am going to sell similar holdings such as a US large cap fund (but not MTUM). By posting that I am going to sell helps me to actually go through with the deed.

Update2: Sold VTI (US large-cap) in another IRA and will hold MTUM a little bit longer. MTUM now trading up 4.8%. Submitted limit order to sell US small cap index (SPSM) for a little bit higher than it is trading now. Will switch to market order if it starts to go down instead. ... And sold. Done for the day.

 

[NW-Bound]

... I am always trying to catch the proverbial falling knife. The bloody bandages on my fingers pretty much show that is true.

I do too. We need this metal mesh glove.

 

[LOL!]

179
Some year-end thoughts with 2 days to take some action still:

1. My portfolio was heavily weighted in foreign stocks for 2018 which are one of the worst performers with small-cap foreign down 20% through yesterday while US Total is down just 6%. There is no way to make up a 14% underperformance in 2 days.

2 My portfolio was heavily weighted in small-cap stock for 2018 which are another worst performance with small-cap value US down 13% through yesterday. There is no way to make up a 7% underperformance in 2 days.

3. I have one benchmark that overweights small-caps and has a good amount of foreign equities: DGSIX, the DFA Global 60/40 asset allocation fund. My portfolio performance is very close to the performance of this benchmark.

There is really no action to take that will change anything. I'd need to gain 3% in 2 days while everybody else stays flat or loses money. In order to achieve an overall gain of 3%, I'd have to have 30% of my portfolio gain 10% -- or have 10% of my portfolio gain 30%. It ain't gonna happen.

But since foreign equities are down more than US equities, I will be rebalancing somewhat into foreign equities as money becomes available through profit taking and dividends. I wrote the previous sentence so that I can hold myself to that plan and not get sidetracked.

Thanks for reading and Good luck!

 

[copyright1997reloaded]

Ugh. I just completed doing 37 trades in the last few trading days, across multiple accounts and for multiple family members.

Tax-loss harvesting. Kiddie account Tax-Gain Harvesting. Taking some ST gains on some things acquired during the Christmas eve slaughter (to offset a YTD ST loss given I have a larger YTD LT gain).

I did a lot of similar but not the same ETF swaps (for those things in Funds in terms of Tax-loss harvesting). Sell and buy back's for Tax-Grain Harvesting. One area where I did a net plus in is I decided to open a position on some US equity Small-cap value (IWN), hoping that it outperforms Large Cap and/or Growth in the next n weeks. I bought some in a regular account and will also likely buy some (with an end of day pricing) in one of my 401k accounts.

 

[LOL!]

That's a lot of trades.

I don't have any losses to harvest because I haven't bought anything in a taxable account for a few years now. That eliminates all this year-end tax-loss harvesting and thinking about possible wash sales for me.

But I have some cash now in tax-advantaged accounts from recent sales. I should buy bond funds and ETFs because I am so overweighted still in US equities. And I need more foreign equities which I should buy after selling more US equities.

I just can't seem to pull the trigger today. It would be easy if there was a big dump this afternoon.

 

[LOL!]

774 I sold some bond fund shares today because they were up more than 0.4% since yesterday. I used the money to buy some Total US Stock Market index shares and some Int'l Develop Market index fund shares.

The plan is to reverse the trade in a day or so with the goal of making a quick 4-figure profit. Of course, I cannot predict the future, so don't expect this to work.

 

[LOL!]

This is crazy. I will certainly undo my trades of yesterday. The only question is do I do it now with the 3+% gains or do I try to hold out until just before the market close. There is danger both ways, so maybe I will do some of each unless folks can give me some other advice.
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[NW-Bound]

Being a greedy guy that I am, I would write a Jan 18 option on those new shares right on the money, or just slightly above it. That way, I get a bit more money. If the market keeps on going up, that is.

Of course, the danger is that the market drops back, and I still have the shares. And that's how I was not able to drive my stock AA down to 60% as I planned to do in 2018, and suffered larger losses.

 

[LOL!]

I think a bunch of traders won't want to hold positions through the weekend, so there will be a fade this afternoon. Of course, no guarantees on that prediction.

With the 0.8% swing in the bond fund shares (+0.4% yesterday, -0.4% today) and the 3.5% gain in the equites, I'm looking at a pseudo 4% gain on these trades if I undo them now.

I've made thousands of dollars and I am worried about a $13 short-term trading fee. Ugh!

 

[LOL!]

957
Sold all shares a moment ago that were bought yesterday near the close. I may sell even more things near the close today as I am still overweighted in US large-cap equities.

 

[NW-Bound]

I have been paying $0 for stock/ETF trades with Merrill Edge. My option trades are only $2.95 plus $0.35/contract.

I guess I am not a day trader, but more like a month trader with my short-term options. Last couple of months, I have sold and bought back covered calls within a week when the market went nuts. I did not want to do that; the market made me.

Just did a roll on a few Jan 18 contracts to Feb 15, picking up a few hundred bucks. Minuscule compared to the loss yesterday, which was about the same as my annual expenses. Crazy stuff!

 

[LOL!]

Generally, I pay no commissions and did not plan to pay any commissions today. But at TDAmeritrade, the no-commission list of ETF requires one to hold the ETF for 30 days or a round-trip commission kicks in.

Yesterday I bought with the intention of selling mutual funds in another account in the same asset class, but in the end I decided not to wait until the end-of-day when a mutual fund transaction would take place.

I suppose I could ask for some free trades at TDAmeritrade. I did that last year and was granted so many that I didn't use them up.

Also since I sold, then bought/sold the same shares in a 401(k) (no margin), I cannot use the cash until next week to buy something else or I would create a free-riding violation and get a 90-day trading restriction for unsettled cash.

But there is still more than an hour to decide whether to sell more today or not.

 

[LOL!]

Last update for today: My wife came home early and I decided to let her get in on the action. She sold some total US stock market and bought 2 funds: (1) Vanguard LifeStrategy Moderate Growth which has a 60/40 asset allocation and will serve as a set-and-forget benchmark and (2) Vanguard Total US Bond Index fund.

The exchange(s) will reduce amount of US large-cap in the overall portfolio a little bit. Plus the orders served as a refresher / reminder of how to make transactions in her Vanguard account which she has not logged into for many months now.

 

[LOL!]

It has been about a month since I started buying more equities back on December 7th (you can check my transaction notices in this newsletter). If I look at my records, I bought over $400,000 worth of equities and have gained some money over that time. Only the shares I bought on 12/7 are underwater still even accounting for the mid-December dividend payout, but the other transactions have more than made up for that.

Basically, I've built up a nice cushion of positive results, so that in 2019 I can afford to make a lot more mistakes and still come out ahead of my benchmarks. A benchmark fund I use is the Vanguard LifeStrategy Moderate Growth fund which has a 60/40 asset allocation and for the month is down only 0.6%.

Of course, the overall portfolio is still down from the beginning of December, but not as much as it would have been if I had only done buy-and-hold. And there ain't no such thing as a free lunch. I have increased the risk level of the portfolio by increasing the percentage of equities. The portfolio is still way overweighted in US large caps. I am now looking for a good time to sell things to get that overweight taken care of.
403

 

[LOL!]

OK, I sold some Vanguard Total Stock Market index shares and some Vanguard Total International Stock index shares today in a couple of accounts. The money was used to buy Total Bond Market Index shares, some small-cap foreign index shares, and some developed market (ex-US) shares.

One may wonder why sell Total International and then turn around and buy small-cap foreign and developed market (ex-US) shares? Mostly because doing it this way means no commissions now, no commissions in the future to unwind, and simplification of the portfolio by moving from 2 funds in a couple of accounts to one fund in those accounts.

Also I hope to be doubled-up in some of the equities for the last 15 minutes of today and capture a little bit of excess profit if things don't fade today before the mutual fund exchanges happen at the closing NAV.

The net result should be (a) decrease large-cap US, (b) increase small-cap foreign, (c) increase bond allocations, (d) simplify the portfolio.
648

I wanted to add that I didn't do any real math on how much my asset allocation would change when I made the trades. I simply sold 100% of entire funds in 3 accounts to simplify, then bought into existing funds so as not to create new funds in these accounts. I'll check later tonight how this changed overall asset allocation and set a new course based on the results.