For the last two weeks I had wanted to take some of these positions off but could never commit or decide what to do. After watching them get the shit kicked out of them the last few days I decided to just end it while they are still profitable. I never expected the SLV to be profitable so while I screwed up and could have got more for them, I still got something for nothing. The XLE was put on a while back when I thought the world was in recovery and therefore energy demand would slowly increase again. I have no idea if that is what happened but this too was a profit with no cash outlay. The main reason for taking this one off is the intrinsic value was $1.50 and the time value was $2.50. With the clock ticking towards Jan 10 expiration that was all going to erode away. I've still got naked $45 puts on XLE that I'm not going to buy back.
In general I guess I'm happy that I made some $, I'll post the numbers later after I update my spreadsheet, but I also mismanaged the position by not having an exit strategy and not reviewing my positions once a week to see how I felt about them. This left me anxiety ridden as the market sells off. I shouldn't have any anxiety if I had a plan. I feel I have a plan with my other positions in that I'm will to take possession and sell covered calls long-term to create income. I'm still guilty of being involved in the market on a part-time basis. Sometimes I watch, sometimes I don't, this passive attitude will always lead to inefficiency.
If investors truly believed that the FED were sincere about their tone the market would not be rallying. The relationship between interest rates, the dollar and the market's behavior are intact. Investors are still betting that the FED will promote a devaluing dollar and an inverse asset inflation. Ultimately expect them to continue to keep the value of the dollar low until oil reaches levels that affect Main Street... watch out for triple digit oil. High interest rates will definitely kill the rally and the so-called recovery. Remember their MBS buyback program is set to end in March. Be careful about being bullish right now. The dollar may even continue to head lower even if the FED raises rates because countries are trying to depeg from our economy that is almost completely government subsidized. If you look into the GDP numbers a huge part of that was the "Cash for Clunkers" and real estate sales. Eventually the government will need to raise taxes and interest rates will rise which will put a damper on the economy as better opportunities arise from emerging markets.
ReplyDeleteIt's ironic that posting activity picked up when the market finally showed some life... which was completely technically expected. If this market cannot make a new high and also makes a lower low I will believe we are rolling over. This is a crucial time in the market. The government will need to start showing real fiscal discipline, the FED will need to start planning the first interest rate hike all while unemployment is still increasing and Main Street is feeling more nervous than other. The key is the consumer and I don't think he's coming back anytime soon.
To get a good read on the economy check out PIMCO's newsletters.
All that fluff can be summed up with watch the risk. This may not be the best time to go long.
ReplyDeleteWell that's basically how I feel, I don't want to be long right now. I was about 50% profitable of the max possible gain on my spread positions. That means I could double my money or lose it all in the next 90 days. I chose to take that risk off the table. If I'm wrong at least I'm still profitable.
ReplyDeleteThe drops are faster and steeper than the upswings so by the time you want to get off the ride it's already crashed. I did OK, but certainly could have done better too. I agree with you, if we don't make a new high I would be worried. Last quarter we were rallying on worse news, now we actually have some better earnings and we're not going anywhere.