Navigating an Unsure World Into Quarter-End

By Todd Harrison  MAR 20, 2013 10:02 AM

The goal when trading is to be in a position to use price to your advantage.

 


Editor's Note: Todd posts his vibes in real time each day on our Buzz & Banter.

It's a new day — and a new world, as evidenced by the traction in European bourses and the early stateside jig. 

We've spoken a lot this week about the potential for Cyprus to trigger the next phase of the financial crisis and assume the role of MicroStrategy (NASDAQ:MSTR), circa 2000, and American Home Mortgage (PINK:AHMIQ), circa 2007.

Clearly, that analogy — those analogies? — will only be known with the benefit of hindsight, but I thought it might be helpful to share the chart below. When Minyanville flagged AHM on August 29, 2008, the S&P (INDEXSP:.INX) rallied an additional 8% — before dropping 57% in value in the following year and a half. History doesn't always repeat — nor is it written that it must rhyme — but I offer this chart in the spirit of perspective.



I have been trading around some short exposure in the S&P — detailed here and here, and every day (all day) in real-time on the Buzz in Banter (click here for a free two-week trial). 

To top-line, I initiated a SPY short into the rally on Monday (25% position of a full position), doubled down into the early rally yesterday (bringing my exposure to 50%), and pared exposure — as a function of discipline — into the sharp sell-off yesterday. (I peeled out of 10% of my risk.) Yes, I should have covered more when the tape was in the hole, but if wishes were knishes, I’d weigh 300 lbs.

My plan is to add back some short-side exposure into rallies — and cover into dips, also known as “trading around a short-bias — under the all-important S&P 1580 level.

Against that exposure, I am long some BlackBerry (NASDAQ:BBRY), which happened to get a double-notch upgrade at Morgan Stanley today (the stock is trading up 7% in the early goings). Consistent with the game-plan shared in recent weeks, I intend to make some sales into the March 22 US launch of the BB10 — just trading, from the long side — as a function of yes, discipline.

As a reminder, Scooter McGavin (that's me with a bum hip in Disney) will be out-of-pocket next Monday through Wednesday, so at a point, that has to factor into my risk profile.  I normally prefer to flatten exposure while away from the fray, but that'll be a game-time decision as a function of time and price.

As I told my wife last night, "Who needs a roller coaster when I do board one every day in the global financial markets?"

Random Thoughts:

R.P.

Disclosure: Minyanville has a business relationship with BlackBerry.

Twitter: @todd_harrison

Position in BBRY and SPY.

Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at todd@minyanville.com.

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