My Positioning

I am of the belief that this decline could be bought into. As the market rose I trimmed some positions and wrote covered calls and naked calls as hedges. As we decline those calls I wrote act less as hedges and my long exposure increases automatically even if I don't do any buying.

I will give an example of what I mean. Yesterday, I wrote the SPY 120 Calls expiring tomorrow for $1.75 naked. When the market opens today those Calls will likely be nearly worthless, so I will already have recognized the vast majority of the benefit of my hedge. This makes me longer because I no longer have that hedge or very little of it.

I also want to emphasize to readers that my longs are very conservative companies that should do relatively well in a weak economy with rock solid balance sheets.

3 comments:

pics pics said...

Tsachy, are you still long WAG and CA ?
They are falling very painfully these days.

Tsachy Mishal said...

I remain long both. I am down a little over 10% on my cost basis for CA. On WAG Im very slightly up including the dividend paid yesterday but that is likely to change at the open. I would note that is one side of my portfolio as I was partially hedged by being short SPY down to 1260 on the S&P 500 and have written naked Calls and covered calls at times. These hedges have dulled the pain although my portfolio is at a drawdown from its highs.
I believe these stocks should show good absolute returns but my strongest held belief is that these stocks should outperform. At times I will look to hedge my market exposure.

Onlooker from Troy said...

You think the bombing has stopped?  LOL   Ouch

I just can't help thinking that at some point soon here those who've bought gold and Treasuries at this level are going to regret it.  The trade has become too easy and comfortable.  And therefore the assumed reverse for stocks.

 And realize I've been bullish on PMs and sold my gold position down at about 1750ish, after the first peak.

This should certainly get bearishness back up to peak levels, I'd think.  Of course there is the concern of the failure of a bearish sentiment buy signal, as Guy at The Technical Take points out regularly.  But that's an uncertain science, no doubt.