| | Hi Iman,
Oh-oh, we're on the same page. The difference is that I feel like I'm going to get my clock cleaned. The problem with being hedged is that at some point you have to pick a top or bottom. The smart ones do it after it turns and I always catch the failing knife.
Now, you're saying to yourself, what the hell is he talking about. Oh yea, I should mention that. Like you I get nervous when evryone thinks the market is going down. So this morning (way to early) I cleared the hedges to the downside. Covered 2K CIEN, 1K BRCD, 2K NTAP, bought back 20 CIEN JAN '04 calls, 10 GX JAN '03 calls, 10 NTAP JAN '03 calls. That left long; 1K VRTS with 10 JUL covered calls, 1K GX, 1K NTAP, 2K CIEN (the CIEN and 1/2 the NTAP were boxed so I make my money if it goes up from here), 1K TTI with 10 DEC covered calls, 7K MFNX, 390 MFNX JAN '03 Calls (That one set me back a net of -$60K last month - never fall in love with a stock), and cash. Now, if I'm right and we rebound, I do very well. If I'm wrong, I've made money on the short calls and net short equities, but I could lose as much if I don't re-hedge the longs in time. A more prudent approach would have been to clear covered calls or shorts but not both. I realize most eyes have glazed over by now, but I thought I'd run through my approach. However, once some sort of bottom is in place, I'll start buying out of the money calls so that I can put in some short plays at a "top", and, if I'm bold sell the calls and my current longs. If I was fortunate, I'd have some puts protecting my longs (I bought them out of the money in June, but I cashed out way too soon).
Fortunately, I do have a hedge planned. I figure I have around $75K to $100K of exposure on a NAZ blow-up and if the NAZ falls through 1973, I'll put $50K into RYAIX which appreciates $2 for every dollar the NAZ falls. This has been a very profitable approach so far this year (trading range) although at some point, the range will turn into a trend and I'll lose money on one side of the hedge that I won't make back. I'm also going to take 1K of RFMD home today (don't remember why it's on my watch list <g>.
What's this got to do with T/A, you ask? I didn't think you'd get it. No, just kidding, I've done a lot my timings off Don Sew's T/A (I don't alway follow it, but I never trade against it), as well as boards like this. Even this (foolish) move of mine today wwas based on reading enough T/A that I thought there is a CHANCE of a reversal. But like you I'm really nervous when I see mostly bearish or bullish posts. I also don't trust AG not to meddle. I don't expect it but you never know if he'll spring that .25 on us that he forget in June (Not that I would expect more than a quick short covering rally.
Best,
Steve |
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