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


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