JDH - Sell in May and Go Away (and Luck)

[davidslane]

Amen brother, amen!

[Croaker]

I am right with you there JDH.  I have two stocks I am holding and will be selling at least one of them in May to put me 95% in Cash, maybe both if the other one makes a run.  Still 50% minus on it and won't make a bit of difference if I sell it or hold it.

I believe this summer will be a down and bumpy road for the Market. I still am looking towards the fall for a better idea as to what the market will do.

Patience, Patience and Patience..........

[davidslane]

Once again, I encourage everyone to read John Mauldin's article for the week.

This one will make you want to sell in May:

http://www.investorsinsight.com/blogs/thoughts_from_the_frontline/archive/2009/05/01/sell-in-may-and-go-away.aspx

[onlooker]

Years ago, I got burnt in the markets in a big way, so I totally understand your current cautious investment strategy.  It makes great logical sense to me.

[Uboat]

JDH, as with many of your contributions, I also agree with your assessment of the current market.

On that note, I would like to express my appreciation for your active site, which has taken on a more dynamic content with frequent contributions from members such as SW, BF, 3j, and others.

Although I enjoy the current rally when most of my stocks move up consistently, I kick myself for not having invested more of my cash into this market for day, swing or longer term moves.

Regardless of which direction the market will take, with daily access to it and prudent stops, with several years experience of active trading, our aim should be to profit from any market direction, whether up or down, even in the dreaded summer markets and in a sucker’s rally.   

[Bottomfeeder]

You know what Uboat, that was just pefectly stated.

I think one has to look at all the time durations and directions, to truly be succesful over the LONG TERM.  It is not about being a long term investor but rather about being successful over the long term as an investor.

How to deal with the realities of you portfolio being in pertpetual motion.  How to stay in things you really believe in, and how and when to leave those you don't, protecting profits (more importantly protecting your portfolio), setting up postions, letting postions evolve, risk management, dealing with managerial mistakes effectively.  I am really enjoying all of these aspects, which are all crucial to active management, and long term success.

I will give you a good example, I should have sold a bunch of my U's two weeks ago at lower levels than they are now, to be able to record short term losses, as an offset against short term gains this year, just from the standpoint of wealth management and tax liability, even though it looks wrong on the charts....or in the "profit" column.  That was a pretty significant mistake on my part.

Gotta be mindful of the big picture and everything thats involved, as it relates to you, its not just about timing an individual security perfectly.

Thanks also for the appreciation, there is alot of hard work being done here by everybody.  If everybody isn't making you better than your not trying very hard is the way I look at it.  Everybody here is making me better, I also offer my thanks.

[sidewinder]

Don't worry JDH, you will get you chance.  Just not before the indicies hit their 200 day SMA.  Then they roll over in a waterfall .......      That's been the target for some time now.  All the "noise" day to day can distract so be alert out there.  lol

GLTA

[sidewinder]

Oh BTW cool splash screen fot TOS.   

[Bottomfeeder]

I dont know about that SW.....after market on the SnP was what 927, 5/8 high was 930, and the 200DMA is 928.  I would bet just about anything that 928 gets taken out next week.  I won't bet it, I will wait for it, but I don't think it will take long, maybe hours.

As you stated Friday's action was not about day traders, it was about big money committing to long positions.  Smart money IMO was waiting for that break above downtrend line (914), and when it broke it broke.  More smart money will more than likely recognize that and move this market much higher I believe.  There was just no reason to do it EOD on Friday, but I suspect more shorts just turned into bulls on that move.  I know I did.

[Peter518]

Quoted from JDH

"I sold June at the money call options against all of the optionable gold and silver stocks I own. I took in a premium for doing so. If my shares are at the same level or lower by the close on June 19, I keep the premium. If shares advance between now and then I lose my stock, but that’s a risk I’m willing to take for the insurance"

Good strategy!

Next week, the market may correct itself and hopefully it will go high again.

[Peter518]

JDH, 

The Canadian option market is not liquid at all.  If you are keen on selling covered call options, why not do that on the stocks listed on US market?  US market is much more liquid than TMX.   Moreover, seems the spread between ask and bid on TMX is too big.  Sometimes it is simply no bid or ask there. 

Any experience to share/comments?


" Quoted from JDH
For example, on June 4 I sold June 21 calls against K.TO - Kinross Gold Corp. I took in a premium of $1.30. If Kinross closes above $21 on June 19 (the third Friday of the month), I will be required to sell my shares for $21, which is roughly what they were trading for on June 4 when I covered. If the shares are worth less than $21 the options expire worthless, and I keep the $1.30, which helps mitigate my loss."

Quoted from JDH

"I sold June at the money call options against all of the optionable gold and silver stocks I own. I took in a premium for doing so. If my shares are at the same level or lower by the close on June 19, I keep the premium. If shares advance between now and then I lose my stock, but that’s a risk I’m willing to take for the insurance"

Good strategy!

Next week, the market may correct itself and hopefully it will go high again.

[JDH]

You have a valid point; the U.S. options market is much more liquid than the Canadian one, so yes, I could sell the options in the U.S.  The stocks I use for covered writing are large stocks, so there is usually a reasonable bid/ask spread, and I always place my orders for a specific price, not "at the market".  The reasons I don't cover my Canadian stocks in the U.S. are:

1. I'm lazy.  Since I'm Canadian and I hold Canadian stocks, it's simpler to simply use the Canadian options market.  Some of my stocks are listed in both the U.S. and in Canada, so presumably I could sell U.S. options on my Canadian listed shares, but I suspect my broker would be confused, and would think I'm writing naked calls.  Keeping it on the same markets makes it easier.  I could also buy the same stocks on the U.S. market, which would eliminate that problem.

2. I don't like currency risk.  Over the last few weeks the Canadian dollar has strengthened against the U.S. dollar, and I assume by the end of the summer it will be back to par with the U.S. dollar.  Therefore, I don't want holdings in U.S. dollars, since even if the stock or option improves, I could lose on the currency conversion.

Obviously if I was an American living in the U.S. I would be using the U.S. options market, for the reasons you mention.

[Peter518]

JDH, Thank you very much for sharing your experience with us.

Greater success and have a  nice weekend.