Let's assume you were up 10% so far in 2016. (The green box labeled on the chart is a level where there are 10-days that close lower than that, so it is a fair level to call "the bottom" and the market is up 10% from that level.)
If you purchased the overall stock market when the S&P500 was 1880 back in Jan-Feb: What would you do now?
1. Cash out your 10% gain and walk away? 2. Sell "at the money calls" for Dec 31, 2016 and take in an extra 5% return? 3. Cash out the 10% gain and buy back after a 5% correction? 4. Cash out half and let the rest ride?
There are many other choices, but I'm curious to know what you all are thinking.
Comment
⋅
So far, #3 is the best option with the 5% correction being about spot-on for the bottom in June on Brexit fears.
Comments
AnbHfund
⋅
Cash out the 10% gain and short the market !!
kamisaan
⋅
Wait and See. S&P500 is approaching some important resistance levels. Fundamentally, nothing changes until april/may/june fomc meetings (or some unpredictable world event ;) ). The oil prices are also favoring s&p higher.
BizkitBR
⋅
FYI - I bought the lagging European recovery via EFA and I'm liking it a lot..! ! !
BizkitBR
⋅
I choose door number 3 -> Cash out the 10% gain and buy back after a 5% correction?
timwest
⋅
That was the best idea so far! Well done!
IvanLabrie
⋅
Either sell calls at the money for 5% or close half and let the rest ride...add more if it drops 5%. (with a reasonably wide stop loss, selling covered calls as my 'stop')
A-shot
⋅
I bought some stocka and sold them when tjey qere 10% up. Some wnt past that. Like AMD but still ik waiting for 10% correction again
timwest
⋅
Well done @2use. AMD has been so strong. I missed the AMD move.
charle5035
⋅
Do you guys have any thoughts on its future from here? I got in right before this last earnings report on a hunch and sentiment from the gaming world but am on the fence on what to do with it.
charle5035
⋅
Interesting that this hit my inbox so recently... I am now in this exact position and have been thinking about low-risk moderate-gain egress strategies a lot. I have been thinking about parting out the money into thirds:
1) I would cash out 1/3rd of my portfolio, selling majority positions in the riskiest stocks, and move half of the remainder into high dividend low volatility stocks with a stop loss equal to double its dividend yield in loss--basically, if it is low risk I do not want to be stopped out at a low I will automatically have compensated had I stayed in through the year. I would probably buy a basket of stocks with historically increasing dividend yields as a measure of stability.
2) The other half of my remainder would remain in current holdings I like, or go into ETFs because the diversity through ETFs would provide more stability. I would sell etf funds to buy good opportunity stocks when the time is right (ie, mildly mitigated from correction damage due to its condition as oversold, but a growth opportunity without a correction). Set limit sells based on charts with relatively tight stop losses.
3) With the last third that I cashed out, I would probably have it on hand for my pick of unconventional investments:
- A portion to cryptocurrencies, which I have found decent mid-low triple digit percentage gains in
- A portion to trade oil, which would probably keep me more tapped into global utilization in industry. My track record with oil isn't bad either-- I texted my friend that I thought we hit the bottom of oil on Feb. 11th... the actual bottom happened to be the next day (trading WTI).
- Precious metals if the price is right. The only current candidate for me would be platinum, as gold and silver recently experienced large upswings (Fed sentiment makes me feel as though it would be highly dependent on too many external factors and global policy; platinum has an ancillary use in industry so it is buffered a bit more from market mood swings than gold/silver). Historically, platinum is worth more than gold by a fair margin in non-volatile periods, and palladium and copper are too tied to industry to succeed as a low-risk option.
- If I don't find it too difficult, I would also consider learning how to trade the forex markets during this time to get a deeper understanding of global financials to make me a better overall investor.
Now I hear a lot about people using VXX as a direct means of hedging against volatility; however, I have found that the safer and much more lucrative play is to have cash on hand to buy inverse volatility, which acts more logarithmically in recovery than regular stocks and does not suffer from backwardation as the VXX currently is. The nature of how the VIX is structured makes it so that you can make several quick but fairly profitable trades within short amounts of time, allowing you to buy in again if volatility spikes. Within the short span of time from Brexit to today, it has yielded a 50% gain, which I have been selling in segmented limit intervals (the last of it I sold today). On an unrelated note, I also think our current lack of volatility is misplaced (the VIX is pretty low), almost as though we oversold our fear in the market through the scapegoat of Brexit. It doesn't feel right for how dependent we are on global economics and how indirectly dependent the world is on US politics.