Hello to all!
A near bid-less market ushered in some key break points Friday. I think it important to make certain everyone understand that there are two main approaches to markets. Long-term investing or trading. Either of those two choices has numerous strategies.
Long-term involves averaging down, some dividend stocks, using put options for protection - all wrapped around the core determination of long-term opportunity for appreciation. Inclusive in these would be mass accumulation stocks. Innovation, technology, uniqueness and other variables determine whether a stock is a MA target.
Trading is much more strategic on a daily/weekly/monthly horizon. Options limit loss but require strict disciplines, and have near endless strategies (spreads, covered calls, naked puts, etc.) Trading shares requires more capital but a 20% loss threshold on large cap stocks is a good rule of thumb. Small caps can be more volatile, so if the stock immediately moves against you be disciplined with a tighter stop or trim to where you can sleep at night.
Right now, it's a trader's market. You can't point to very many stocks appreciating, much less even holding recent support levels. This is where long-term holdings gut check your portfolio. For traders it's primarily looking for technical trades, and those are going to be short-lived. My last option trade was $SPY calls followed by adding to my SPY put hedge. I tweeted the call set-up because it was technically supported, that an explosion move had set up. I suggested Friday calls on Wednesday and we got the next morning opening right at the 200DMA, so I tweeted I was exiting 100% of the calls. Once $444.71 was lost I added to May 20 puts. I didn't know that we would have a complete two day flush, but did believe that technically a flash open that fails below previous resistance broken (would be support if bulls were in control) meant that trend was decidedly downward. Someone responded to my exit tweet and said I crashed the market. If only I had that much power!
Friday, as stated from the beginning of this diatribe, was a near bid-less final 2 hours. I was contemplating closing out 50% of my puts but also expect a down early Monday, regardless of where it then goes. But then the after hours had continuation downward and at 14 minutes after the close, with one minute left in SPY options trading I closed 50%. $430 puts out to May 20 were in the money and I will either exit or roll out the remainder Monday because I don't like to hold in the money puts very long. The premiums a month out rocketed but those will come back into line so even continuation downward will reduce the ROI. Better to roll out and down to $420's while looking for a technical trade opportunity bounce IMO.
So WWR. Not much to report because nothing has materially changed. Stocks are taking a licking, so I don't allow emotions to cloud my portfolio. Ripping the band-aide off on certain stocks is not a bad discipline. If we hadn't had an unexpected spike on WWR to have a large net free holding I'm not sure I'd be looking at the drop any differently. Fortunately, WWR gave a few rounds of trading entry/exits on new shares before this current bottom fishing expedition. Still, a decision is to be made. Is it a long-term winner or not. I still believe it is, but the current market conditions are testing every long-term hold decision. I'm sticking with this one because the long-term outlook feed into the whole reason I targeted it in the first place.
Most of the entries made at the $1.80 level I sold 50% on the spikes above $2.35 and entered $2.50 covered calls on the rest. Taking $0.50 per swing trade and entering $0.35 $2.50 strike covered calls meant $1 profit on $1.80 invested or $1.45 net. So, while all recent strategies still leave me looking at net negative with the price near $1.40, I'm actually a nickel off entry. I've done nothing with core holdings and won't.
As far as long-term strategy goes, as big name stocks continue to drop the best and safest strategy is to move into big names with healthy balance sheets. AAPL, AMZN, OAKT type stuff. We could see a continuation breakdown into a bear market or find support and reverse trend. It won't be easy to know if any entries are bottomed even if markets rally a few days. This recent quick 2 day move up into a breakdown teaches everyone that.
Recognize it's a traders market. That doesn't mean you don't begin adding sidelined long-term portfolio cash into equities. But consider layering on a protective put; especially if you get a quick bounce. To your sucess!
