It's a bull market. No question. But that doesn't change the fact that I'd still like to add some downside diversification to my portfolio in the weakest names the stock market has to offer, just in case.
Today's short trade candidate appears to be hanging on the precipice of a potentially swift and brutal fall. This is as good an opportunity as I can see to help protect my portfolio in the event we see a market pullback.
Born with an entrepreneurial spirit and temperament, Michael grew up in a working-class community full of blue-collar, salt-of-the-earth people who worked honest days for an honest wage. And it rubbed off on him. How could it not?
In order not to be a financial burden on his family, he knew he needed to get out there and hustle. He shoveled snow, mowed lawns, caddied, and worked as a server and waiter. He worked 15 hours a week while in college so that he could earn a degree from Columbia University.
While his peers were coasting through school with trust fund cash bankrolling their adventures, the only free time Michael had was spent in the library, reading books, writing papers, and repeating.
His blue-collar work ethic paid off to this point. But making the transition into the “white-collar” world of finance wasn’t easy.
Recently, some of the best opportunities have been in the mega-cap space. Look at recent gains in Amazon, Google, Microsoft, and Apple.
People like to complain that “all” the gains are being concentrated in fewer and fewer names at the top of the pyramid. Why is that a bad thing? We can trade those names, can’t we? And why wouldn’t we?
In the past week, I’ve added more exposure in my portfolio to this area.
Related to the tail (big caps) that wags the dog (the market), isn’t this true of our own history of trades?
Don’t our small handful of large winners account for the lion’s share of our total gains? And don’t 80% (or more) of the rest just result in a net wash?
Kind of like the S&P 500, no?
Don’t hate. Participate.
We discuss all this and more in this week’s Jam Session:
If your house is anything like mine, you likely have an Amazon truck delivering packages to your doorstep at least once per week. In my neighborhood, the Amazon delivery truck does twice daily rounds. We're on a first-name basis. (His name is Henry).
Those packages have price tags attached to them. You'll find them in your credit card statements. It is likely not an insignificant line item in your monthly budget.
Today, the stock is making a move to fresh all-time highs, breaking out of a high three-month consolidation.
Franklin D. Roosevelt: "Comparison is the thief of joy."
Socrates: "Envy is the ulcer of the soul."
Ovid: "Envy, the meanest of vices, creeps on the ground like a serpent."
Seneca: "The envious die not once, but as oft as the envied win applause."
Aristotle: "Envy is pain at the good fortune of others."
Johann Wolfgang von Goethe: "Hatred is active, and envy passive dislike; there is but one step from envy to hate."
Antoine de Saint-Exupéry: "The one who envies, does not really know what he wants."
Alexander Solzhenitsyn: "Our envy of others devours us most of all."
These quotes reflect various perspectives on the nature and impact of envy, from ancient philosophers to modern thinkers.
In the trading world, I don’t think the evils of envy get discussed enough. And in today’s globally connected social media world, it’s a bigger problem than ever.
In today's Flow Show, Steve Strazza highlighted the strength we're seeing in the homebuilders sector. I immediately liked it because I don't have any homebuilding stocks in my portfolio, which needs to be corrected.
Last week, Lennar Corp $LEN released earnings, and the market pretty much yawned. I like that. Because the other name that we liked better -- D.R. Horton $DHI -- hasn't yet released earnings (scheduled for July 18th) and unless they come out with something truly shocking, my bet is the market will be similarly unfazed. This tells me there's an opportunity to take advantage of some overpriced options premiums currently being bid into $DHI options.
Flying down a mountainside on two skis while negotiating tight turns and ever-changing microclimates would be a terrible time to lose focus.
Todd Gordon knows this. If he hadn’t quickly learned this skill in his journey to competitive ski racing, he would’ve likely landed himself onto a stretcher and an air-lift back to base.
There was no other choice.
But for Todd, he’d have it no other way. From a young age, when he found an interest in something – whether skiing or finance – he’d go all in. Nothing else mattered.
And when he discovered the world of trading, he knew what he wanted to do. “There was never a question,” he said.
In college, between classes, skiing, and happy hours, Todd would trade options from his dorm room. It wasn’t a matter of IF he would be a trader, it was a matter of where would he start.
And that answer came right after college when at the age of 22, Todd headed west and joined a proprietary trading group based in San Diego. And from there, he never looked back.
In fact, it's not even called General Electric anymore. The company is now called "GE Aerospace."
I bring this up because the analysts had a debate today on whether or not $GE stock bumping up against levels not seen since the Great Financial Crisis even matter. Is it even the same company today as it was in 2008? The unequivocal answer is no -- it is not the same company.
Regardless, the only thing that really matters to us is the price action and its hard to ignore the run $GE has been on over the past eight months.
In today's episode of the Flow Show, Steve and I navigate some trade ideas that would help add bearish portfolio diversification in case the stock market wants to catch its breath this summer.
We discussed two specifically ugly charts, and we both agreed that Block Inc $SQ offers the best opportunity as an options trade.
At least, it sure looks that way at the index level as the biggest of the big caps begin new legs higher.
Though, curiously, the two short positions I have on are also showing signs of working out for us.
With $VIX readings continuing to remain low, most bullish bets I’m looking at involve buying options premium since it is quite affordable in this environment.
In this week’s portfolio review, I fielded an important question: “What’s an appropriate account size for trading options?”
Of course, there is no one-size-fits-all for options accounts. But I get into a number of considerations to mull over to determine what is the right size for you.
