In today's bearish market, I would not be a hero and play Long no matter how good the stock is - unless the stock benefit from an economic downturn. For shorts, which sector should we focus on then?
I would focus on sectors that had a good run recently and might be affected by the current bearish sentiments. One sector I'm focusing on now is Technology stocks. e.g. AAPL, RIMM, GOOG and many others had a very good run. While they are good stocks with strong fundamentals, they are not impervious to bad consumer sentiments. Since CSCO guidance yesterday, the tech stocks had been beaten badly yesterday. At market opening today, the bloodshed continues.
Since the market is volatile and the option premiums are somewhat expensive, I thought I should just play credit spreads and be less affected by the volitility (but less profit/risk). I opened 3 new positions yesterday, playing Bear Call credit spreads for Nov month (7 market days left) for the following stocks:
AAPL = Sell 185 Call , Buy 190 Call, for $1.80 when AAPL is around $182.72
RIMM = Sell 125 Call , Buy 130 Call, for $2.28 when RIMM is around $126.61
SPY = Sell 148 Call , Buy 153 Call, for $1.81 when SPY is around $147.60
For RIMM, I sold the 125 Call in-the-money. It is against what we have been taught (normally sell out-of-the-money). It is a higher risk play. But I reckon that since RIMM can move big, if I am wrong I would lose money anyway. I might as well collect more credits from my spreads and lower my risk that way.
So far, these new positions are positive. I may not wait for expiration Friday (Nov 16) to collect my profits.
Other sectors still bearish are Housing & Financials.
Note that SPY is not a Tech stock.
- PersianCat04 (Millionaire-in-progress)
Trade Like A Persian Cat reminds me that I should be like a Persian Cat, waiting for the right setup to trade and not act on impulse. This blog documents my trades, thoughts and reflections in playing Options in the US Market. "Bulls make money, Bears make money, Pigs Get Slaughtered, Cash is King"
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1 comment:
You have put in the positions at the right timing, it should be Thursday trade instead of Friday trade.
For the China stock market, there are already too many people saying it is too high from Li Ka Shing, Greenspan, Warren Buffer and etc. But we will need to look at a few factors :
1) Their corporate tax is going to cut from 33% to 25% next year, so more good profit is coming to be reported next year.
2) Their good companies are having growth of 30%-40%.
3) The economic growth at a strong 11% despite of government cooling measure.
So as long as the economic grow is maintained at high level and not slowed by half, a major market crash will not happen. Current pricing is just forward looking. Timely correction from time to time will still happen.
Chiu
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