Wednesday, February 6, 2013

The Trend is your Friend...so don't fight it!

The markets continue to move higher. I thought for sure we were finally set for a decent correction of 5-7% after Fridays move lower of more than 1% on the S&P 500. But mine along with all the hopes and dreams of the market bears were crushed after Fridays gains were all but a distant memory as the bulls came in to support the market back near 5 year highs. As tempting as it is to get short, I am fighting the urge and sticking to what has been working...and that is to remain long.

I have a short hedge in place, that is very small compared to my long position. But I also have the downside protection from the calls I have sold agains my positions, as well as the extra cushion I am receiving from the dividend from those positions. All in all I am protected in the tune of a 15-20% down move in 2013 based on the positions I have on. So I feel pretty comfortable with the positions I have on. As I have no expectations of a move so sever this year.

I am conscious every day I check into the markets to leave a sizable amount of my portfolio in cash for future opportunities (currently around 35%). The last thing I want is to be fully invested when the market does decide to correct. Or at the very least to be ready when some decent volatility comes back into the options market, so that I can sell some premium.

I tentatively have plans to get a little more short if we get to all time highs on the SPY of around $157, and not earlier unless the markets significantly change their tune.

So for now I continually remind myself that the trend is your friend....until the END!

Good Luck Trading!

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