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Trade Alert: Taking profits on the IBB as fear rises

October 28, 2016 by Cody Willard

We’ve been fortunate to be very long most of the best performing big cap stocks for the last five or six years now. Those stocks have been particularly strong relative to the broader markets for the last few months and weeks too. That said, our index put hedges on DIA and QQQ are down because those two indices haven’t fallen much. We barely got started buying those index puts to hedge the portfolio, so the DIA and QQQ are an especially small position now that they’re down and getting closer to expiration.

On the other hand, our largest short, the IBB, has really worked well as a hedge and our IBB puts are now worth about double what we paid for them and our IBB short itself is proftiable by about 10%. Someone in the Trading With Cody Chat Room just posted: “I almost thought biotech was getting cheap enough…. Gild biib celg amgn…. But there is some fear right now…..”

And he’s right. There is some tangible fear in the biotech world today amongst investors and traders…

I’m going to sell about half of those IBB puts today and lock in some of those profits while keeping half the puts and all of the common stock short position in IBB.

 

Related posts:

Trade Alert - Fission with the Fusion-IO
Coronavirus Ramifications and Why It's Still a Good Time to Be Cautious
Trade Alert - Everything you need to know about $TWTR and locking in some $GSVC profits
Trade Alert: Adding to this storage position
Trade Alert: Taking more profits on puts as volatility begets volatility
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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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