Be careful with those longs......

  1. 1,741 Posts.
    Some of you have questioned my trading style. Im betting none of you know about "Modern Portfolio Theory". Because I seem to be the only person here hedging their bets and using risk management techniques. Some of you spend your time trying to pick tops and bottoms (mostly bottoms). Some very smelly fingers out there.

    I went long amp and ncp today. This is not because I think they are cheap, but because I needed to hedge my portfolio of puts and written calls. NCP because it is a proxy for nasdaq, and AMP cos it is a proxy for FTSE.

    If these calls rally tomorrow, I will write calls at a higher strike. This then means I cannot possibly lose money on the deal. I still make money if the stocks rally, but if they dont I lose nothing, and have obtained cheap insurance for the next month. This is exactly what I did last month. And it cost me NOTHING.

    If the markets keep tanking my puts and written calls will keep me laughing at hell for a while yet.

    By the way Hell, I have an ANZ strangle with optimal payout at 1900 on thurs (so i want anz to rally), and I am long CBA via those 3000 puts I wrote.

    Any rally will be a FAKE dead cat bounce. Dow should bounce at 7600 and run to about 8200-8300 before tanking to 7000. Dont go long with a medium term view.

    Stocks are cheap, but so is swampland.
arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.