Part of the recent strong stock market action is most easily described as momentum. Momentum moves, both rallies and sell-offs, can last longer and go further than you ever think possible,. a large contingent of money managers that are underperforming the markets this year and they are hoping for a pullback. Meanwhile, the shorts didn’t do much covering at the February lows and are still expecting another major sell-off any day now. Not to mention the Fed is talking more easing, as I’ve predicted they would for the last 6 mo’s. All that provides fuel for this continued stock market ascent.
So many of our stocks have had huge rallies of their recent lows and are near or at new highs and that’s a testament to how well we’ve picked our individual names by and large with a few obvious losers along the way too. But by letting our winners ride and managing risk and losses elsewhere in the portfolio, our playbook has set us up nicely for the here and now.
Which means, we probably need to look at doing some trimming and/or hedging. Because you know what I’ve written before about “When you feel really smart…”
Anyway, I’m going to trim a few shares of Apple. I’d ended up getting placed with some shares via my March $105 call options as Apple closed a buck or two above those levels a couple weeks ago when those call options expired. I’m going to sell some of my Apple down, reducing the overall size of back down to where it was before I was filled on those options, but leaving it as my single largest position overall.
I’m also going to add another very small tranche of SPY puts, buying put options that expire out in June with strike prices around $195.