Went to 100% Ultrashort Bond Fund allocation in the 401k today (had a small % left in an emerging markets index fund).
Bought 20 SPY MAR 19 2021 305 Puts this morning in the taxable account. SARS resulted in a 10% market dip, and killed fewer people in over a year than 2019-nCoV has in a few short weeks, without any quarantines of major Chinese manufacturing or shipping hubs. WHO confirming reports of virus transmission outside of China by people with no known travel history to China, and that 15% of infected patients contract pneumonia, with 3-5% of all infected requiring ICU-level care. Those statistics, assuming the WHO is accurate, would overwhelm all health systems globally in short order if this goes global (as it appears to be doing). Assuming Chinese official reported numbers of 2.4% death rate are accurate, that's 185,000,000 dead if this goes global (roughly 2.5x the total number killed in WWII).
(02-10-2020, 11:39 AM)Otter Wrote: Went to 100% Ultrashort Bond Fund allocation in the 401k today (had a small % left in an emerging markets index fund).
Bought 20 SPY MAR 19 2021 305 Puts this morning in the taxable account. SARS resulted in a 10% market dip, and killed fewer people in over a year than 2019-nCoV has in a few short weeks, without any quarantines of major Chinese manufacturing or shipping hubs. WHO confirming reports of virus transmission outside of China by people with no known travel history to China, and that 15% of infected patients contract pneumonia, with 3-5% of all infected requiring ICU-level care. Those statistics, assuming the WHO is accurate, would overwhelm all health systems globally in short order if this goes global (as it appears to be doing). Assuming Chinese official reported numbers of 2.4% death rate are accurate, that's 185,000,000 dead if this goes global (roughly 2.5x the total number killed in WWII).
Well that was kinda sudden Otter! I realize this is not all your earthly possessions by any means, but when did you start trying to totally time the market like this? I truly hope this thread isn't encouraging you to buy a lot of options. If it's a hedge you truly feel the need to do then fine. This thread is titled "conservative" for a reason. That is exactly what NilesMike and I are doing consistently. Everything is calculated risk to reward. There is a reason you don't see us posting straight up option purchases. Do it enough and you will definitely lose in the end. And this is ALL ABOUT the end goal right? I think I can speak for Mike and say we prefer the odds in our favor EVERY trade because we know it works after a hundreds of trades.
I agree the US markets are not showing enough respect for the "Big Flu". I've been mostly sitting on my hands with new money. I'm just trying to not force anything. BTW the ultrashort bond fund is about the best idea I have for parking money. You'll have your moments when it beats up a CD notably, and rarely underperforms a CD much when it's going wrong.
You're here now. If you get a market dip try some covered puts. Best way ever to make some income while you attempt to get forced long at cheaper prices than today. Lesson two is rolling that put forward if it ends up making sense.
(02-10-2020, 11:39 AM)Otter Wrote: Went to 100% Ultrashort Bond Fund allocation in the 401k today (had a small % left in an emerging markets index fund).
Bought 20 SPY MAR 19 2021 305 Puts this morning in the taxable account. SARS resulted in a 10% market dip, and killed fewer people in over a year than 2019-nCoV has in a few short weeks, without any quarantines of major Chinese manufacturing or shipping hubs. WHO confirming reports of virus transmission outside of China by people with no known travel history to China, and that 15% of infected patients contract pneumonia, with 3-5% of all infected requiring ICU-level care. Those statistics, assuming the WHO is accurate, would overwhelm all health systems globally in short order if this goes global (as it appears to be doing). Assuming Chinese official reported numbers of 2.4% death rate are accurate, that's 185,000,000 dead if this goes global (roughly 2.5x the total number killed in WWII).
Well that was kinda sudden Otter! I realize this is not all your earthly possessions by any means, but when did you start trying to totally time the market like this? I truly hope this thread isn't encouraging you to buy a lot of options. If it's a hedge you truly feel the need to do then fine. This thread is titled "conservative" for a reason. That is exactly what NilesMike and I are doing consistently. Everything is calculated risk to reward. There is a reason you don't see us posting straight up option purchases. Do it enough and you will definitely lose in the end. And this is ALL ABOUT the end goal right? I think I can speak for Mike and say we prefer the odds in our favor EVERY trade because we know it works after a hundreds of trades.
I agree the US markets are not showing enough respect for the "Big Flu". I've been mostly sitting on my hands with new money. I'm just trying to not force anything. BTW the ultrashort bond fund is about the best idea I have for parking money. You'll have your moments when it beats up a CD notably, and rarely underperforms a CD much when it's going wrong.
You're here now. If you get a market dip try some covered puts. Best way ever to make some income while you attempt to get forced long at cheaper prices than today. Lesson two is rolling that put forward if it ends up making sense.
It is a substantial bet, but one I can stomach. If I'm right, the returns could be substantial. if I'm wrong, it is annoying, but not the end of the world.
02-10-2020, 12:42 PM (This post was last modified: 02-10-2020, 12:43 PM by fenders53.)
Yeah, we understand what 20 SPY contracts that close to the money cost. It's a totally directional bet. I also do some things that don't make sense unless you consider my entire portfolio. But this, in combination with your ""I buy and hold most everything forever" strategy don't mesh together so well. It seems impulsive unless used in small doses as a true hedge. This looks much more like a directional market timing bet unless you hedge this hedge. Disclaimer, if your port is worth 10 milly then ignore me lol.
(02-10-2020, 12:42 PM)fenders53 Wrote: Yeah, we understand what 20 SPY contracts that close to the money cost. It's a totally directional bet. I also do some things that don't make sense unless you consider my entire portfolio. But this, in combination with your ""I buy and hold most everything forever" strategy don't mesh together so well. It seems impulsive unless used in small doses as a true hedge. This looks much more like a directional market timing bet unless you hedge this hedge. Disclaimer, if your port is worth 10 milly then ignore me lol.
This is straight up a directional market timing bet with a portion of savings, which is completely out of keeping with how I have invested new funds over the past decade. I have never before made a bet like this. I've also never seen China quarantine over 200 million people before and shut down their largest manufacturing/shipping hub, or a press conference like the one the WHO just gave today.
There's plenty of YouTube videos out there of Chinese authorities welding doors shut at large apartment blocks, telling people they must remain inside for at least 14 days. Also videos of hundreds of workers in hazmat suits entering various complexes there. With reports that the virus is highly infectious, can have up to a 24-day asymptomatic incubation period (during which it is transmissible), can survive on smooth surfaces for about as long (quite rare for viruses), is airborne, has been transmitted outside of China by people with no travel history to China , has a 15% pneumonia and 3-5% critical condition rate, I am inclined to believe the Director General of the WHO's statement that we may just be seeing the "tip of the iceberg." So, decided to make an investment based on that thesis given prior market reaction to SARS, which was a much less transmissible disease.
OK, so let's suppose you're correct. I understand this strain is nasty. So why do you buy very expensive options that expire 14 months from now? If this is as bad as you fear, it will take just a few weeks to know. Spring kills off the flu. At least it always has to my knowledge. Tesla and many other business opened back up today. Is China truly that delusional? That's not a rhetorical question BTW.
(02-10-2020, 01:48 PM)fenders53 Wrote: OK, so let's suppose you're correct. I understand this strain is nasty. So why do you buy very expensive options that expire 14 months from now? If this is as bad as you fear, it will take just a few weeks to know. Spring kills off the flu. At least it always has to my knowledge. Tesla and many other business opened back up today. Is China truly that delusional? That's not a rhetorical question BTW.
Spreading at the same rate in Singapore (tropical climate, at the equator), as it was in Wuhan when reported cases were around the same numbers. Singapore reporting community spread of the disease (i.e., no longer tied solely to travelers who have arrived from affected areas, but spreading within the community). Saw the reports about the TSLA Gigafactory in Shanghai, but Shenzhen (global center of electronics/telecom hardware) is still locked down, with Foxconn announcing that they are out of commission "until further notice." Schools shut in Hubei Province until at least March 1.
It takes a while for narrative to change. First reports of the new disease in Wuhan came out in late November. It took about two months for the seriousness of the situation to overwhelm public health authorities in affected Chinese provinces, and to garner global notice. If we are at a similar stage globally as Wuhan was in November, it could be March before similar effects are prevalent elsewhere. Real and lasting impacts may not be seen in financial reporting until starting in 3Q 2020 (although i suspect the market would react prior to that in the event a global pandemic is indeed underway).
Narrative could also change much sooner, and I can capitalize on the change in value of the option contracts if that does in fact occur.
Fair enough. While I am not inclined to make a big move, I am cashy enough to make it less necessary. I do think some companies will be coming clean soon reqarding the effects on earnings as soon as this quarter. I'm amazed the market is not discounting AAPL and others with a very heavy presence there. Maybe I should go sell something now lol.
Another slow day. Sold a new put in BWA and BP. Rolled a couple MO puts forward and down. Find myself keeping at least half of my new positions short in duration. Often only 10-15 days. More trades to make, but as long as the minimum monthly % return rule is not violated it seems to work out, and perhaps with a bit less risk.
02-10-2020, 09:06 PM (This post was last modified: 02-10-2020, 09:08 PM by NilesMike.)
At the risk of nobody being interested, here is a cheat sheet regarding options. This was given to me by a long time option trader (exclusively) who trades only his own account, 8 figures. I hope it helps someone reading it. (First line got cropped- OTM long calendars if bearish)
Reviving this sleepy thread. This is NOT a conservative option idea for sure. Not something I intend to do today. At some point in the fairly near future I am considering buying some long dated options. They used to refer to them as LEAPS. Someday soon I'll run out of spending money to keep nibbling long shares without violating the stock % of my overall port. It my age I need to draw that line somewhere reasonable. If I don't I'll put the first few years of my real retirement income in jeopardy which is only about two years from now. I'm too close to get reckless now and wreck my plans. All that said I think I will keep about $10K of capital back and buy a few calls. I'd like to target a small basket of deeply discounted high quality large CAP companies I believe have a high chance of a strong rebound if the economy gets better. A chance to leverage the rebound I believe will come when the current noise quiets down some.
So I guess my initial questions are....
1. Where should I target the VIX so I am not paying far more premium than I should for any chance of success.
2. Approximately how far out of the money (%) so a 10 month or longer DTE has a reasonable chance of working out half way to expiration, or even longer if necessary.
These will be stocks like CAT, MSFT just to throw out something to add context. A quality industrial, tech and a pharma perhaps for some diversification. Not some distressed stock looking for a miracle. Not a crushed commodity based stock. I'll play those long with a few shares so I can wait as long as necessary to be right.
(03-10-2020, 10:24 AM)fenders53 Wrote: Reviving this sleepy thread. This is NOT a conservative option idea for sure. Not something I intend to do today. At some point in the fairly near future I am considering buying some long dated options. They used to refer to them as LEAPS. Someday soon I'll run out of spending money to keep nibbling long shares without violating the stock % of my overall port. It my age I need to draw that line somewhere reasonable. If I don't I'll put the first few years of my real retirement income in jeopardy which is only about two years from now. I'm too close to get reckless now and wreck my plans. All that said I think I will keep about $10K of capital back and buy a few calls. I'd like to target a small basket of deeply discounted high quality large CAP companies I believe have a high chance of a strong rebound if the economy gets better. A chance to leverage the rebound I believe will come when the current noise quiets down some.
So I guess my initial questions are....
1. Where should I target the VIX so I am not paying far more premium than I should for any chance of success.
2. Approximately how far out of the money (%) so a 10 month or longer DTE has a reasonable chance of working out half way to expiration, or even longer if necessary.
These will be stocks like CAT, MSFT just to throw out something to add context. A quality industrial, tech and a pharma perhaps for some diversification. Not some distressed stock looking for a miracle. Not a crushed commodity based stock. I'll play those long with a few shares so I can wait as long as necessary to be right.
Once the market finds a bottom and stabilizes, I would think long-dated UVXY Puts would also be quite lucrative. They would have done quite well just about any time during the past decade.
I am intending to make a similar-sized bet to you at some point in the future, but don't think that will be for several more months (I don't think a V-shaped recovery is likely at this point). Long-dated blue chip calls seem like a solid bet. ADP, AMZN, JPM, MSFT, V, and stocks of similar quality seem like they would be a good fit.
