JANUARY 5, 2018-FRIDAY
WHOA HORSEY! Good lord people who is out there buying everything on the planet? It appears…everybody!! They said the orders at the close of market were 2 billion to BUY. Wow…
AND THEN CAME THE CRASH…
I’m a natural bull. Let’s face it, my web domain says it all. I’m a bull, I’m an optimist and I always think things are going higher. However, even I’m skeptical of this market. It’s too far too fast. It has been too long since a descent pullback and I’m being very careful.
I’m warning all of you that what goes up must come down. The harder and faster it goes up, the harder and faster it comes down. It’s common sense: every Joe Blow in the country heard their buddies talk about how much money they made during the holidays (I was one of those buddies) and now everybody wants in the market.
The problem with this mentality: much like everything in life, once everybody wants in it’s already too late. You cannot be late to the show in the market. The big guys are pulling money and taking huge gains while the little guys are buying their positions and taking the loss when it crashes…just to have the big guys buy it all back when the little guy capitulates.
WHEN AND WHAT WILL HAPPEN?
No one knows. I don’t know. Maybe the market doesn’t crash until this time next year? 2018 could be a wonderful year for all investors…until it’s not. The market will correct. It’s a guaranteed fact. All I’m saying is be careful. Do not trade on margin. Do not execute or hold any trades that you are not willing to hold long-term or be forced to purchase.
I play it safer these days than in the past because I have learned that consistent profits, even small profits, are better than huge, random gains. I hold only what I am willing to purchase. If it’s options it is only the amount I can afford to buy in cash and at strikes I am willing to pay. I own good companies and do not speculate on penny stocks or things like Riot Blockchain or Bitcoin. If I wanted to truly gamble I would just go to a casino…you have the same odds.
I would prefer to be net short premium during this time. Meaning, I want to get paid to wait regardless of what the stock does. Selling puts is the best bet in my opinion. Sure, it’s not the best return or greatest profit and it’s frankly boring, but it’s safe. Wait, be patient and pick a stock that’s having a down day and sell the elevated put premiums. If the market continues higher you make money. If the market sits still you make money and if it goes down you get the shares (or sometimes still make money and you can buy your way out). Regardless, I do not want to hold a depreciable asset such as a long call. I want something that appreciates as time passes.
WHAT I DID TODAY-FRIDAY
I sold everything except 3M, Nvidia and Intel. Below I will explain what I hold and why:
INTEL – I actually hold two (2) bull put spreads on Intel. The January expiration 40/45 put spread expires two (2) weeks from today and I will make maximum profit if Intel closes above $45 per share two (2) weeks from today. Max profit is $1260.00 with a break even of $43.74. The second spread is the March expiration 38/48 put spread expiring in a little more than two (2) months and I will make maximum profit if Intel closes above $48 per share two (2) months (roughly) from today. Max profit is $1470.00 with a break even of $45.06. I have owned the second March spread for several weeks.
Intel pays a good dividend and put premiums are elevated due to this chip security scandal. Intel will be fine long-term and I don’t mind owning it at $43.74 or $45.06 so I’m prepared to take the shares. Intel closed today at $44.74 per share. Yay!
NVIDIA – This is my largest holding and we could see more upward movement next week during the CES Las Vegas show. The CEO will kick off CES Sunday night and provide information on new products and technology. Should be fun! Can’t wait!!
My holdings include long calls and another bull put spread. I executed the long calls yesterday and opened the March 160 calls for $54.45 each making my break even $214.45 per share. I purchased ten (10) contracts for 1000 shares worth for a grand total of $54,450.00. I am currently up 3.9% or $2125.00 at close today. I was up nearly 10% at one point during today’s session, but Nvidia sold off at the close. Why did I buy the long calls? Because I owned 1000 shares of stock for $214,000.00 and sold them at the open today. Instead of burying myself in stock and cash requirements I chose to buy long calls that break even at nearly the price I owned the stock for 25% of total cash required. Notice, I paid 50k roughly for the same exact stock at nearly the same price per share instead of $214,000.00. I personally like having more in cash and this is why I like options!
I also hold the March 180/210 bull put spread. I opened this trade a while back knowing Nvidia was heading back to $210.00 per share…I had no idea it would do it so fast! I am profitable to say the least and my break even is $195.54! Max profit is $14,500.00 and Nvidia needs to stay above $210.00 until the third Friday of March to have max profit. Hopefully, this run to $215.50 today is just the beginning of a gradual move up to earnings on February 8th.
3M – I wanted to buy 3M last year this time when it was below $200 per share. A couple of days ago I purchased two (2) contracts of the March 200 calls. I really wish I had purchased ten (10), but oh well. I’m up 3.19% today. I did not purchase more than two (2) because I was thinking the market might sell off at the end of this week, but that did not happen. I was planning on doubling down at the very least.
EXCELLENT TRADING WEEK…