Dead Cat Splatz
> I'm playing the game differently. Bet the bank is not an option in this Market, and I'll allocate only about 20% of cash to any equity position...
...understood.
(folks/lurkers should know that we're talking about hit-and-run short term "position" trading; un-leveraged, cash-basis STOCK only; limited to the LONG side; within the confines and context of tax-deferred (IRA/401K) type accounts)
Yes, that is a significant change in style for you, TB. Last week, I was emulating you, (Berney is known for BIG block trading of BigBoy large cap stocks) ...and, at the end of the week I came away with similar feelings; ie., BIG blocks, not.
So, if, in this environment we're going to work with positions, say ~ 1/5th or, 1/8th the size we normally throw around - then, it seems to me TB that what we should do is switch from BIG blocks to in-the-money CALLs
perhaps LEAPs (DJ does this, though he doesn't really "trade") where the time-value decay is negligible, and implied volatility is actually supportive.
You made some gutsy damn trades last week (WCOM, SGP) and I was lucky, playing dead cat splatz; but, to be perfectly honest about it, the trade I admire most last week (in the sense of "most clever" or, professional) was Gersh's.
given the assumption that SPX-500 was gonna hold ~1080, what Gersh did was choose the DJX-30 horse to ride (with a CALL option). In retrospect, the only thing I would have done differently than Gersh - is that I would have chosen an in-the-money strike. IMHO, when you're surfing a short-term UpWave, (with apparent support but dubious potential amplitude ~ after all, we're surfing an UpWave against the intermediate DownTrend wind) we should use an in- or at-the-money strike, where we've got closer to a 1:1 delta with the underlying...
...there's still LOTS of leverage there because: a $30K in-the-money DJX CALL will make as much or more money than a $300K block of DIAmonds ;-)
IIRC, TheDonald almost always employs in- or at-the-money CALLs to ride his UpWaves -?
now, not all brokers allow options trading within tax-deferred accounts; I manage two (large, "platinum") accounts at SCH and sit on two (small tax-deferred accounts) at MWD, and neither of these houses allow uncovered CALLs or any kind of PUTs. The accounts at MWD are simply placeholders for long-term GE+DRIP core investments that just sit there (no activity other than Dividend Re-Investments). So, what I need to do is either talk Charlie into letting me work with options or, move a tax-deferred account over to some other House.
As good/lucky, whatever as you and I appeared to be last week, I doubt that we could sustain it, TB (I know I couldn't). And though Jury would love Gersh's DJX 100 strike {grin} imho the pro "let's grind it out, day after day" approach is prolly optimized by riding UpWaves with in-the-money CALLs, 1/5th to 1/10th the size of the BigBlocks of stock you and I normally employ.
As DJ once said to me, "trading 20% in-the-money LEAPs is the same thing as STOCK, with less kapital".
-Steve |
