I have sold nearly everything….

I don’t like the market…. I have sold almost everything…  I think USD is the place to be.  I want cash to get ready to buy when the market sinks hard.  This will take 3-9 months.

I don’t want to be short since I could be wrong but want to be ready to buy a lot of stuff at a compelling values later this year.

April close update

I was expecting at least one more push higher in the order of 5-10% more on the S&P but the market didn’t follow my expectations.   I have gave back quite a bit of money this month but still beating the overall market returns.  My plan since last October was to load up last year and sell it off this May.  Ok, so before things get out of control its time to start thinning the portfolio out.  Unfortunately I made the bad decisions and have added more risk to the portfolio this month.

Here is the plan that needs to be put in place…  The big plan is to reduce risk by 10% a week over the next 5 weeks but utilize theta decay to make some money until next October.   I will likely do this by crossing my options and selling covered calls on my stock positions.

On the plus side some of my option positions that I added was downside protections. I bought long dated calls on the Inverse S&P 500 EFT (SDS) therefore it will pay off if the market goes down.  Also I bought long dated calls on the VIX that would payoff if the stock market took a sudden tumble.  I am not focused on the “cash” position but more so on the “margin” requirement.  This needs to shrink to below 10% down from its current 24%.

As of the April 30th close the S&P 500 is up 12% for the year while my portfolio was up 17.1% year to date.  This gives the portfolio a year-to-date beta of 1.4 times the S&P 500.  My cash position is now at a whopping 40% of the portfolio due to recent purchases and the margin reserve requirement is up to a dangerous 23.9% due to additions of the JAN ’14 BAC and addition of some downside options.

Added Toyota Motors today (TM) and the Inverse Leveraged S&P 500 EFT (SDS)

I have bought a Jan ’13 lasso on Toyota today.  I bought the $82.5/$95 Jan ’13 call spread and selling the Jan ’13 $75 puts to fund the spread.  I make $.20/share upfront and can make up an additional $12.50/share.   The estimated 4 Sigma downside  risk is roughly $15.

I also bought a call spread on the inverse S&P 500 ETF.  This ETF is designed to go up twice as fast as the S&P goes down and vice versa.   This is a hedge play, ie it will make money if the rest of the portfolio starts to loose money and vice versa to help me sleep on bad days.  I have designed it to have asymmetric risk so it is more likely to pay off more if the market goes down.  The strikes I bought are the Jan ’13 $17/$21 call spread for $0.74/share.  I will be looking for a point to sell the Jan ’13 put to fund this position.

I Bought Transocean (Rig) and Precision Drilling (PDS) today

I devoted another ~2.5% of the portfolio to Transocean today…  A few months ago I was looking for a way to buy back my RIG Jan ’13 $60 calls, well the stock has fallen but the Jan ’13 $60 calls are still too expensive and I have too much cash, soooo…..  Just buying the shares outright neutralizes some of my calls, increases my net delta, and give me access to the ~6.5% dividend while I wait for it to print.  About 5% of the portfolio is now in RIG outright with another significant chunk devoted to options spreads.  My long term target is north of $80.

I am also back in Precision Drilling (PDS) that I sold last year.  It’s a few dollars cheaper than when I sold it so I re-initiated a position of ~1.5% of the portfolio.  This is a longer term play on oil development in North America.  The plan is to add more later if it gets cheaper.

As of the April 12th close the S&P 500 is up 11.1% for the year while my portfolio is up 20.1% year to date.  This gives the portfolio a respectable year-to-date beta of 1.8 times the S&P 500.  My cash position is now at down to 37.1% of the portfolio due to recent purchases and the margin reserve requirement is up to 14.9% due to additions of the JAN ’14 BAC positions.

Added some time (Theta) decay today to the portfolio to generate some income

I bought some more Apple (AAPL) today and sold more of the Jan ’13 $500 calls against it.  I get just over $25/share in premium giving me a yield of ~5% over the next 9 months or ~7% annual rate of return.  This is purely a time decay (income) play to make some money on my dead cash.  The return beats Treasuries!

I should also pick up ~$5/share in dividends by Jan ’13 jacking the yield up another 1%

New action for the new quarter… Bank of America Jan ’14 synthetic long

The market is getting hit hard today (risk off) and had a chance to start putting on some options for Jan 2014 today.  I was able to buy a January 2014 call spread on Bank of America (BAC) today.  I bought the Jan ’14 $10/$15 call spread for $1.05 and paid for most of it by selling the $7/$3 Jan ’14 put spread for $1.03.  I used about 5% of my assets to get into this position today looking to put on more later in the year.  Assuming it pays off before January 2014, I could make ~$5.00/share while only risking max loss $4.00/share .  My assumption is that $5/share is the max lower limit so in my risk models I am assuming $2 of value at risk vs. $5 or reward (I love asymmetric reward/risk).

Total capital commitments were $2 in margin requirement on the put spread and an outlay $1.05/share from outright purchase of the call spread.  Total committed capital ~$3/share vs current stock ~$8.5 giving me just under 3:1 leverage in this name.

I think today is just a dip/buying opportunity but I have been known to be wrong so I am only layering in.  I believe we will recover once earnings season starts.  I’m watching Spanish yields and the VIX.  On the Spanish yields I get nervous above 6% and sell everything above 6.5%.  When looking at the VIX I will likely get bearish if it gets above 22.5 and selling the portfolio if it hits 25.

For those who want to track the Spanish Bond yields use this Bloomberg link  http://www.bloomberg.com/quote/GSPG10YR:IND/chart

Thanks for the help with coming up with the Bank of America plan DP…

The Mark(et) Rush Q1 2012 Report is ready!!

Please click on the link below for the current edition…

Q1 2012

Regards,

Mark

Thoughts

I spent some time looking at the charts and in my small world this is what I concluded.

• The long end of the yield curve looks ugly; I may need to short some treasuries on the next bounce
• Australian dollar looks weak also, I am glad I sold all my position in that.  Get back in at 102ish?
• I like the looks of AIG
• I think Sears is over done to the up side now and may short it.
• I am uber long BAC and have a target of $14 by year end.
• I am thinking about taking profits in Apple right now, it’s been a good run. I still think it’s cheap but no one ever went broke taking money early.

The market is a bit choppy right now but window dressing and earnings season will be upon us.  It is probably a good time to buy a bit…  After earnings I plan to sell in May and go away.

Actions this week 3/11/12

I rolled my long BAC $10 calls from April to June and kicking myself for selling half the portfolio…

As of last nights close the S&P 500 is up 9.6% this while my portfolio was up 23.8% YTD and down 3.0% this month.  This gives the portfolio an aggressive year-to-date beta of 2.5 times the S&P 500.  My cash position is now at a whopping 48% of the portfolio due to recent sales and the margin reserve requirement is at 10.6%.

Oops!

I think I messed up by selling the other day! This is my first major faux pas this year…

What I did sell was mostly lower beta stocks and the Australian dollars (20%).  I am keeping the position as is unless the DOW breaks 13,000 and stays there.  No point selling the lows and buying the highs plus the portfolio is still very long via some options spreads.

As of last nights close the S&P 500 is up 8.1% this year but down 1.0% this month while my portfolio was up 21.5% YTD and down 4.8% this month.  This gives the portfolio an aggressive year-to-date beta of 2.6 times the S&P 500.  My cash position is now at a whopping 44.6% of the portfolio due to recent sales and the margin reserve requirement is at 11.0%.