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Bring on the pullback



May 13, 2009 – Comments (8)

My CAPs portfolio is in the toilet today, my real life portfolio is in the toilet today, and I think we're going quite a bit lower before we go up, and I'm adding tickers to my CAPs game the whole way down, so it'll probably go negative at some point.  I'm shorting levered BEAR ETFs every day until I run out of ones to short or until the market turns north again, and as I've been saying for a while here in my blog, this could get ugly before it gets pretty again.

But..  I'm 40% cash in my real life portfolio and I've been waiting for a good chance to put it back to work, I've got a bit of a real life hedge which is the ONLY money I've made this week in stocks, and I am learning.  I have a better idea of what to do if stocks go below a certain level, and I've picked the level, and I'm ready to act if we get there.

So I've got another bottle of rolaids and I'm ready for the party!

8 Comments – Post Your Own

#1) On May 13, 2009 at 4:03 PM, goldminingXpert (28.63) wrote:

You are so early. I wouldn't think of shorting the bear ETFs until under 850 and that would be still early.

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#2) On May 13, 2009 at 4:05 PM, alexxlea (60.09) wrote:

Opening so low today and with the broad-based selling it's definitely a good idea to be in cash right now. Do you increase your hedge when you think the market is going down? It's risky, but definitely might help.

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#3) On May 13, 2009 at 4:16 PM, motleyanimal (36.16) wrote:

My only question: Why fight the obvious overdue correction?

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#4) On May 13, 2009 at 4:34 PM, synergize (29.24) wrote:

You can put trailing stops using the SafeZone calculator.

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#5) On May 13, 2009 at 5:16 PM, GenericMike (< 20) wrote:

Why in the world would you start shorting Bear ETFs now?

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#6) On May 13, 2009 at 5:41 PM, checklist34 (98.36) wrote:

average in, GMX.  and given a long period of time their tendency to decay basically guarantees that red-thumbing them is a win.  Remember, financials were several times lower in March 6/9 than on Nov 20, but FAZ didn't get close on March 9 to its Nov 20 peak (3x leverage) and SKF (2x leverage) only matched its Nov 20 peak. 

In real life, I haven't acted on any levered bear ETFs yet, but when the S&P breaks support at 875 I'm going to start looking for shares to borrow to short in real life.  Not trying to make alot of money there, just a little.  So I won't short alot of the shares (assuming I can get any.  I got some SKF to short in the 700's and i'm way, way, way up on that) at any given time, and I won't short a big position on them at all as I absolutely won't risk a margin call, but given time thats as close to free money as somebody can get, and I'll take what I can get.  I'm also, if we get a pronounced dip here, going to buy puts on thsoe things as far into the future as possible (again time decay works for you) and see how it goes.

I do not intend to bet against levered bear ETFs with alot of money in real life, but... given their propensity to decay, and given that the market's long term direction is still up, if we get a meaningful dip shorting them is just a good idea. 

As for betting against them now in CAPs, Animal, its just a game.

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#7) On May 13, 2009 at 5:49 PM, checklist34 (98.36) wrote:


      In real life my hedging strategies consist basically of these:

1.  buying puts on SPY, typically 4 or 5 bucks below the money as those are most volatile on severe negative days

2.  selling calls against SPY.  Thats risky as whenever you are short anything, your upside is rather unlimited.  So I do this conservatively.  I carried some short SPY calls into this week from Friday, but I closed them out yesterday so they didn't help me today, oh well.

3.  Selling covered calls against shares that I own. 

4.  Raising cash. 

I always average in to long positions slowly (well not always, but 95% of the time) in real life, although I've dumped everything of some ticker or another all at once several times. 

I vastly underestimated the magnitude of the recent rally because I thougth we would see a downturn with the onset of earnings season.  But Wells announcing record profits turned that around and instead we've had an earnings season rally. 

I do not have a good track record of anticipating the markets moves on a short term basis, lol

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#8) On May 17, 2009 at 3:21 AM, checklist34 (98.36) wrote:

i meant your upside, when shorting (stocks or options) is limited, but your DOWNside is unlimited.


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