I See a SPY Wave to Ride
January 4, 2013
I have increased my SPY position to 3,872 shares which is approximately 58% of the funds I have allocated to SPY type investments.
This is beyond the 37% reserved for straight up investments in SPY and poaches on the 37% I have mentally reserved for SPY Puts. And, why not. When SPY is rolling , the premiums on SPY Puts will be miniscule and the risk of accepting a higher strike price will be greater than when fear enters the equation. Conversely, when SPY noses down, and Put premiums expand, that’s the time to expect a relatively risk free strike price and higher premium.
So, I won’t be surprised if I step onto the shore concluding a SPY ride and almost immediately get ready to paddle out for a PUT ride.
As of this moment, including trades today, the SPY position is ahead 2% ( $11,215 ) on an average cost of $143.49.
Had I not taken my profits too early on my June 11 ride, I would be ahead $86,000 on a $1 million investment. That premature sale convinced me to impose mechanical restraints on my compulsive tendencies.
Depending on how I read the thrust of this ride, don’t be surprised if I invest more money into SPY, and use up the remaining funds nominally earmarked for SPY Puts.
And, I do like the 2013 prospects for mergers in the biotech ( FBT) and in the Regional Banks( KRE) sectors. And I may invest some money just to prove to myself that I can’t beat SPY and am only wasting time trying.
Richard Maurice Gore