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Tightening Trailing Stops

I tried to close UVXY today but couldn’t find a buyer at an attractive price.

music selection:  “Planet Caravan” — Pantera

weigh-in:  205.0 +0.6

We have gone a long time in this bull market with a correction of at least 10%.  Perhaps, it is a record length of time.  Measures of investor complacency such as the VIX are at record lows.  I think it is time to play a little defense.

Except for three positions in oil and gas that I entered with larger than normal trailing stops, everything is at a 25% trailing stop loss.  Today, I updated my spreadsheet to calculate a 15% trailing stop loss.  Nothing was triggered for an immediate sale.

Most of my short positions are currently in the red but I’m holding them open.  They should perform well when the inevitable 10% or larger correction finally arrives.  I am also being strategic to raise cash.  When I unload my UVXY puts, I’ll redeploy at a 8% portfolio allocation instead of 10%.  I want to have some dry powder to write puts with when the correction comes as steep (irrational?) risk premiums will be on offer.

In the meantime, I am well positioned to play defense.  Approximately 40% of the portfolio is in fixed or semi fixed income type positions.  Another quarter or so is in strong dividend payers.  My projected twelve month dividends, distribution, and interest income is 27,254 or 110% of my projected budgetary need.  I’ll continue collecting some modest options trading income, but now is not the time to go all in with selling options as the remarkably low VIX is suppressing premiums.

I hope to be back tomorrow with a successful UVXY trade.  Depends on finding a willing buyer.

Devour your prey raptors!

{ 5 comments… add one }
  • Chris B August 8, 2017, 3:58 am

    A concern I have with writing puts on UVXY is the performance of SVXY. If trading frictions supposedly doom the long-term returns of UVXY, one would expect the same for SVXY, right? However SVXY has doubled YTD. Would UVXY do the same if current volatility trends reversed?

    • The Lizard King August 8, 2017, 4:14 am

      SVXY is not necessarily the inverse of UVXY. If a stock falls 50%, it has to rise 100% to break even. It is a peculiar reality of arithmetic. I wouldn’t go long SVXY. But I’m totally OK with being short UVXY. UP/DOWN. Not proportional…

  • financialfreedomsloth August 8, 2017, 11:49 am

    I was glad to get out of the UVXY trade when I did. Have actually been thinking to get back into it, but first want/need a strong move up before doing it.

    I went a bit heavy with the leverage in July but I am going to reign that in as well during August and keeping the cash ready for any opportunity that will present itself. It’s not really because I think there will be a correction but more that everything is so damn expensive at the moment ..

    • The Lizard King August 8, 2017, 2:09 pm

      I have a little leverage too but I think its the right kind…short positions! I’ll be looking for more good shorts.

      • financialfreedomsloth August 9, 2017, 5:32 pm

        All my leverage is long. But the biggest one could take a 15% drop before going in the red.
        the other ones will be gone by the end of the year.

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