Weekly Issue: Market Turbulence Is Good News for Our Protective Position
Key points from this issue:
- Sell half of the ProShares Short S&P500 (SH) November 2018 28.00 (SH181116C00028000) calls position, which will lock in some hefty gains.
- Boost the stop loss on the remaining the ProShares Short S&P500 (SH) November 2018 28.00 (SH181116C00028000) calls to 0.77, which will ensure a return of 250%.
- We were stopped out of both Universal Display (OLED) January 2019 130.00 calls (OLED190118C00130000) as well as the Amazon (AMZN) Feb 2019 2000.00 (AMZN190215C02000000) calls positions this week.
- We will continue to hold our United Parcel Service (UPS) January 2019 120.00(UPS190118C00120000) that closed last night at 3.65 vs. our 3.60 entry point. Our stop loss of 2.50 remains in place.
A few weeks ago, given the growing list of concerns that emerged during September, I added the ProShares Short S&P500 (SH) November 2018 28.00 (SH181116C00028000) calls to the Tematica Options+ Select List at 0.22. Over the last several days, those concerns — from a slowing US economy to the impact of rising Treasury yields, growing signs of inflation and more pain at the gas pump to what looks to even more escalation in tariffs between the US and China — came home to roost, leading to one of the more painful weeks in the stock market this year.
The biggest pressure was felt on growth stocks, particularly those with high valuations, but toward the end of yesterday’s 3.1%-4.1% drop in the major US stock market indices, few were left untouched. That move combined with the ones of prior days led to our being stopped out of the Universal Display (OLED) January 2019 130.00 calls (OLED190118C00130000) as well as the Amazon (AMZN) Feb 2019 2000.00 (AMZN190215C02000000) calls. The good news, if we can call it that, is our stop losses set at 7.00 for the OLED calls and 100.00 for the AMZN ones limited our losses to 20%-25% compared to what they could have been if left unchecked as of last night’s market close.
That downward pressure in the market popped our ProShares S&P 500 (SH) calls, leaving them to close at 0.90 – up more than 300% from our 0.22 entry point. That is a heckuva move, but given my concern to be had with the upcoming earnings season we are going to do the following:
- Sell half of the ProShares Short S&P500 (SH) November 2018 28.00 (SH181116C00028000) calls position, which will lock in some hefty gains
- Boost the stop loss on the remaining the ProShares Short S&P500 (SH) November 2018 28.00 (SH181116C00028000) calls to 0.77, which will ensure a return of 250%.
As we profit from these current tumultuous times, we will sit on the sidelines at both Tematica Investing and here at Tematica Options+ and wait as the ripple effect of the above concerns reverberates through growth expectations for the S&P 500 group of companies. The glass half full view is this will give us the opportunity to buy and trade quality companies at better prices. As Oscar Wilde said, “To do nothing at all is the most difficult thing in the world, the most difficult and the most intellectual.”
