I expected the S&P 500 to hold support above 1,100 and when it tripped lower at the end of the day yesterday I decided to cut more exposure this morning. I started off with my biggest risk, VXX. The VIX could easily ease off from these levels, but with the insanity going on this week I hedged my short VXX calls by buying another call that expires in just a few days. While VXX was trading at 58.03 I bought to open one VXX October 7th $58 call and paid $250.47 with commissions. The coverage only protects me for four days, so this is likely to be just a quick trade if VXX spike even more. If it doesn’t continue to climb then I’ll loose less as VXX drifts lower and my short call costs me less. I don’t expect a move sideways to be an actual option for VXX.
After goofing my SDS trade last month I decided to take my short ETF trade a little slower this time. In hind sight I should’ve stuck with my initial analysis and believed in my prediction that the S&P 500 was heading lower. If I had more patience on the trade I wouldn’t have sold my SDS shares for a loss, but would’ve added to it on the suckers’ rally and then I’d be sitting on a paper profit right now. Now that the SDS ship has sailed for me I moved to its little brother, SH. SH is a short S&P 500 ETF, but not double like SDS. Without using options I bought 150 shares of SH for $48.45 and paid $7,268.25 with commissions. I planned to buy 300 shares, but added one of my client’s accounts to the trade and forgot to up the quantity, so we split the 300 shares. Lucky for me since SH dropped soon after (I bought 3 cents from the high) and we started to take on a paper loss. I’m still thinking of upping my position on it and will probably regret not doing it today. I might sell a put or two in the money to try to protect myself from small gyrations and leave my new 150 shares to run if the SPX keeps dropping.
Before I had my short position in place I decided to cut some bigger exposure and get rid of some of my SSO puts that I have short positions in. While SSO was trading at $34.51 I bought to close two SSO January $55 puts for $21.00 and paid $4,200.68 with commissions. After I bought these puts and also after I opened my SH position I still thought I should take away more downside risk and while SSO was trading at $34.58 I bought to close one SSO January 50 put for 16.50 and paid $1,650.34 with commissions.
My biggest risk with these SSO trades is upside risk. If the markets recover I expect the snap higher will be quick and I’ll miss the recovery rally. I have been thinking that and fearful of missing profits for the past $15-20,000 lower in my account. I should’ve done it then and don’t want to look back and wish I had done it even now. The markets still look sick even though we had some good fundamental news come out yesterday. Greece still rules the roost on market destroying news and that doesn’t seem to be on the verge of changing. If anything, I might look back and think I should’ve exited even more of my positions.
For a bullish trade, I’m still considering an option spread on AAPL. I’ve been thinking about it for a while and wanted to wait for a dip. That dip is here, but I don’t know if I want to keep my cash on the sidelines a little longer. At some point I feel like I should just wipe my slate clean and start over with less emotion and more trust in the charts (especially since fundamentals don’t seem to be helping lately). The charts still say sell, so that’s what I did today. Maybe I’ll give it another round tomorrow or the next day.
Looks like I couldn’t have timed my trades any worse. What an insane end of the day! Really? A 8+% gain in SSO from the afternoon lows, even more from the morning lows when I was trading. #Frustrating.
“I expected the S&P 500 to hold support above xxxx ” –
You are gambling or Speculation and it means the chances you win/lose is 50-50 and when you lost it’s permanent loss.
“An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.” – Benjamin Graham
He died rich and bring us value investing and Warren Buffett.
Notice he first emphasized ‘thorough analysis’ and second ‘promises safety of principal’ and last is the return. Your approach is not meeting any of the definition so you are not investing and thus speculating.
By the way, can you sleep at night not knowing tomorrow what the (VXX, VIX, ABC, XYZ) ‘position’ you are holding?
Do you think Warren Buffett need to worry about Coca-Cola stock price doing tomorrow? or if you bought MCD 7 years ago for $24 and they are reporting ever increasing sales/profit and up dividend every year, do you care if Greece or Europe is “cratered”?
Because he is investing. He could care less what the heck SPY dropped 10 points.
Do yourself a favor, read some books about W.B. and understand value investing
SWW, Sweet dreams following Buffett into BAC.
@ Mule, LOL
@ SWW, We have different approaches. Many investors make money through technical analysis. Not every approach is going to win each time. I make some investments as value plays, but not many. Europe’s woes do play a roll in KO and MCD’s earnings. If the dollar strengthens it will cut into their profits. They are global companies. Thanks for your input.
@Mule – You want to learn investing (philosophy) from W.B. not follow exactly what he did.
Dancing in and out of stock market and make money it’s like a guy running through a dynamite factory with a burning torch – Even if you survive you are an idiot.
By the way, Joel GreenBlatt said that, not me. He is the hedge fund manager that made 40+% annual compound for continuously 10+years in Gotham Capital. He told people to study Ben Graham, Buffett and others work. Good luck with your T.A. and I’ll not post any more comments.