I’ve got answers to your questions along with some good insights from other subscribers below:
@Cody: Are you still recommending WDC short into Seagate earnings this tuesday?
I wrote this a couple weeks ago, but let me repeat it for new subscribers or those who missed it. It’s a very important point: “Let me be clear that the main reason behind our WDC short is to hedge against our STX long. I do think that WDC is very cheap much like STX is, but I think WDC has company-specific problems that will keep the WDC the stock from being able to rally nearly as much as STX does over the next few months…and if both stocks fall, I expect that WDC will fall more than STX would over the next few months. That’s not the same as saying that I think WDC is going to fall over the next few months. WDC is part of a pair trade with STX and not an outright short bet, you see?”
That’s what you want to see in a paired trade. And WDC is not an outright short for me, but part of a paired trade.
You’ll see this in bold below but I figured I’d highlight it up here at the top for ease of reading purposes:
I’m going to gently add to my Google calls today, looking out to September or later and using strike prices around $670 or higher. I’d like to scale into some more Google calls on further weakness but for now, just another toe in the water.:
Lots of discussion about Apple. Here’s something else I wrote a couple weeks ago: “Apple is below $600?! How can that be?! Just kidding. $600 is just an arbitrary number that people got excited about because it ends with two zeros. $615 and $596 is pretty much the same thing — just 2% apart. Divide everything by 100 or by 10 in your mind when you deal with Apple […]”
Read the comments about Apple below, and see where I’ve inserted my own commentary. As for the answer about what to do about Apple, @eryba answers it for us when he writes:
“Listen to cody- if you have none, then use this correction to get your 1st portion of what you eventaully want to hold.”
Yes, always scale into any position and make sure you understand your time horizon. I’m not adding to my Apple position yet, because for now I’m comfortable with the size it is relative to the rest of the portfolio and the cash in the portfolio that I can use to buy more.
CODY: I’ve written many times over the years how I think most stock splits are a stupid waste of time that only makes money for the accountant and investment banks who peddle the new shares…but at least Google’s stock split is “essentially a stock split” motivated by a desire to keep control of the company. I’m also not a fan of voting/non-voting shares in public companies. But IMHO the main reason for the Google sell-off is more a reaction to the earnings call which wasn’t “good enough” and not about the stock split. Regardless, the sell off continues and I’m going to gently add to my calls today, looking out to September or later and using strike prices around $670 or higher. I’d like to scale into some more Google calls on further weakness but for now, just another toe in the water.
CODY: You “hate to say that Cody was spot on?” Sheesh, with friends like this, who needs critics! I don’t want to pretend that I had some crystal ball and nailed this sell-off. Yes, I was looking for it and yes I implored you guys to get ready for a major downturn while we were at highs, but much of what you’re learning and seeing me do is simply good money management strategies for building your stock portfolio up big over long periods of time. It’s not about the next 5-10% move in the markets over the next 30 days, it’s about the next 1000% move in your portfolios over the next 3000 days.
CODY: Good insights on both the markets and the risk/reward differences between common stock and option strategies from you guys in there. Thanks.And don’t freak out about near-term market moves.