Don't Sweat The Petty Things, And Don't Pet the Sweaty Things
We're Number Five!!!
Again, thanks to an increasing number of Subscribers and Viewers to Examiner.com, as this column celebrates its (Terrible Twos) anniversary, it breaks up into the top 5 of stock market columns.
Sell in May - in a pictorial histogram from Schwab that shows the technical study of Presidential (4-year cycles), every mid-tern year (as in 2014) has at least an 8 % correction, usually in the summer. Echoed in the recent Barron's, it is most likely in June, although other drops were in May, August, and September - and of course October is always a dangerous month.
With the U.S. economic picture and global problems, a minor correction would most likely be a great buying opportunity (selling puts?), although the Big One will probably be brought down due our huge debt. If the Flash Boys bring one down, it would most likely be similar to the 1987 Crash, which V-Spiked back up within a year. Chuck Schwab called the HFT trading a "cancer" and suggested putting a surtax on the faux Cancelled Trades, which should not affect day traders.
As regular readers know, I have been hedging for the past five years with the Deep-In-The-Money covered calls; due to lowered Volatility of the options from the steady rise in the Fed market, I switched last year to hedging with LEAPS- even more risk averse and more profitable. And although the major downturn has not occurred since 2012 and 2011, the Bull has improved the profitability and safety of both of the above strategies, by increasing the "cushion". As of Q1, the LEAP current track record: C, mid, P (Callaways, which are the max profit), mid-zone (between the LEAP strangle of covered out-of-the-money Puts and Calls), and P: cash covered sold Puts stand at 10 Cs, 8 mids, and only 3 Ps - bad choices of stock buys, at least for now - I have until January 2016 for the gold stocks to improve - else I write another collar (Strangle) at the lower price, taking on more stock - hopefully with higher dividends. So far, despite the laddering in of LEAPs month by month (not all starting at the start line like a horse race), the plan is up over 17% sans dividends. Not bad for a hedge!
Other ways to hedge include just buying Put options or Put spreads (cheaper) - if one has option approval and knowledge; there are several option groups in the Bay Area that have FREE or reasonable presentations on trading, without agendas. Despite Oscar Wilde's definition that a true friend in investing is one who stabs you in the Front!
One of the groups in the South Bay meets this week:
Silicon Valley Options Group (SVOG)” www.svog.org
– Apr. 10th, 2014 -- 6:00 PM to 9:00 PM
LOCATION: Elks Lodge Sunnyvale: 375 North Pastoria Avenue, Sunnyvale, CA
Directions & Map: http://tinyurl.com/ElksLodgeSunnyvale
Don’t forget ... Hotdogs and Sandwiches!! Avail6:00pm to 7:30pm
(Profits from these sales benefit BPOE charity projects. -- about $3.50 to $4.50 ea.)
THIS MONTHS MEETING:
This Months meeting will be in two parts, both linked together. and will continue our general discussion of how to trade successfully.
(1) The Art of Trading - More Profits in Less Time -- Mark Dannenberg, CEO and Founder,http://www.optionsmoneymaker.com
(2) Trading by Committee -- Rob Schmidt, SVOG Vice-President
Other ways to hedge a downturn, if one does not know options, include "Inverse" ETFs or Exchange Traded Funds which, as with Puts, improve as the markets descend: DXD, SDS, SPXU, which is triple strength ! These can also be risky, but not as much as "naked" shorting stocks or Call options - never a good idea.
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