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Trade Alert – Making several moves in the portfolio

June 24, 2013 by Cody Willard

All we know are the facts, ma’am. – Sgt. Joe Friday

On Friday, last week I asked, “Who’s more scared right now, the bulls or the bears?” We got hundreds of replies at our poll on WallStreetAllStars.com and by email and twitter.

Even before this morning’s market tanking, the poll results were skewed heavily towards the bulls, at nearly 80% of respondents saying the bulls are more scared right now vs. about 15% saying bears are more scared and 10% saying nobody’s scared right now. The big sell-off in stocks this morning is probably taking that “bulls are more scared right now” over the 90% threshold which means there’s probably a good trade to the upside this morning here.

I’m going to buy some DIA calls with strike prices from $145 to $150 which expire in August for a trade, paying about $4 for each call of the $145s to $1.25 for the $150s.

And I’m going to cover my old SPY ETF short position which I put on back in late March as hedge when I had a lot more net-long exposure than I do right now and which are now about break-even.

Which takes us to the Trader’s Deep Thought of the Day – Perspective is key and emotions are the enemy.

I know a lot of emotional traders right now, both long and short. Don’t ever let yourself be so overly invested in one direction or the other that a big sell-off like we are currently seeing take you out of the game. If you’re stressed now that the markets are down and you’re one of those scared bulls, make a sticky note for your computer that says, “Remember the pain,” so that you won’t let yourself get carried away the next time you’re on top of the world. Sell-offs are part of the market. And big winning streaks can be too, as long as you always keep yourself positioned to always stay in the game.

The S&P 500 has dropped nearly 100 points since Helicopter Ben Bernanke said the Fed was thinking about looking for somewhere to consider landing someday. I do not believe that the Fed has acted in time to stave off what will be a huge rush of inflation in many, many sectors of the economy, including food and gold and silver. I bought more gold and silver coins and bullion this weekend.

So think about this perspective for a moment — the DJIA is down 1000 points in a straight line over the last three weeks. The Nasdaq is down nearly 10% over the same time period. And as I mentioned above, I do think there’s an opportunity to buy some broad long exposure to short-term bounce — perhaps just in the next day or two or over the next week maybe. But do you realize that despite that 1000 point drop in the DJIA over the last fifteen to twenty trading sessions that it would need to drop another 2000 points to get back to where it was at the beginning of 2013?

A few other notes for you dear TradingWithCody.com subscribers. EWY, our Samsung-dominated South-Korea Index short position, and which is still our largest short position has cracked down through 50. I covered a “tiny part” of it last week and will cover another tiny part of it here this morning. It’s still my largest short position for now.

Treasuries are falling again today, and our IEF puts are up nearly double from where we bought them just about a month ago. I’m looking to sell about 1/3 of that position today to lock in some of those profits and further raise my liquidity/flexibility here. 

Finally, my smallest position in the portfolio, our latest Bankruptcy Flip-It Trade, is trading under a new symbol this morning, XIDEQ, and is down again. I’m going to put in a bid to buy another round of it at about 15 cents a share. It will still be my smallest position — remember these BK Flip-It Trades are VERY risky by their nature. I will sell all of it sometime in the next week or two.

Sure wish Sgt. Joe Friday were around to regulate and prosecute some banks. Eric Holder and Bernanke are a joke. Sigh.


Dragnet Jack Webb answers, “What Do They Pay You?”

 

 

 

 

Related posts:

Trade Alert: Trimming more puts. Stocks can go down.
Trade Alert: Increasing the size of winners and cutting a loser
Trades for the week of May 7th through May 11th
Trade Alert: Locking in more profits on several positions
Trade Alert - Buying some shiny (and some must-read links)
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Filed Under: Trade Alert

Disclosure: At the time of publication, the firm in which Willard is a partner and/or Mr. Willard had positions in some of the stocks mentioned above although positions can change at any time and without notice.

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This does not constitute an offer to sell, a solicitation of an offer to buy, or a recommendation of any security or cryptocurrency or token any other product or service by Cody Willard or any other third party. Furthermore, nothing in this is intended to provide tax, legal, or investment advice and nothing in this should be construed as a recommendation to buy, sell, or hold any investment or security or cryptocurrency or token or to engage in any investment strategy or transaction. You are solely responsible for determining whether any investment, investment strategy, security or related transaction is appropriate for you based on your personal investment objectives, financial circumstances and risk tolerance. You should consult your business advisor, attorney, or tax and accounting advisor regarding your specific business, legal or tax situation.

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