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A fresh five-session set begins today, and the bulls are staking their claim to upside fame in the early goings. Per my late Buzz & Banter
on Friday afternoon:
I've done better trading individual names lately (GW Pharmaceuticals (NASDAQ:GWPH), Twitter (NYSE:TWTR), etc.) than I have indices. As such, my inclination is to flatten my SPDR S&P 500 ETF Trust (NYSEARCA:SPY) puts today. While banks are underperforming, the SMART money index is screaming for attention, and vols are compressed across the board (not a timing mechanism), one would expect Ukraine worries to manifest into the weekend. The fact that they're not, coupled with my desire to keep a tight pad, is helping to move me in that direction.
I flattened that directional exposure (a push versus my entry price), with the exception of a tag-end's leave on the last tranche (it was a small position to begin with, as I expect volatility to pick up, and right-sizing risk is how one prepares for that). As such, I enter today's fray with the Twitter stock we scooped at $29.99 into the lockup expiration purge and a housekeeping item to clean up in the SPY. Soup to nuts, I'm ready for a brand new day
The SPY decision was an audible; we often say boredom isn't an actionable catalyst, and I thought about that before I pared the risk. I told Michael Sedacca that I'm not known for my patience (when trading; I suppose the same can't be true in life, as I was 41 when I settled down with a wife and three kids). Recall that I layered into a slew of Facebook
(NASDAQ:FB) puts late February/early March when the stock was trading $70, and after held that risk for a week or so. I subsequently flattened the position as it lacked a catalyst, and you know what happened from there.
These types of decisions are a fine line and why market timing is so tough. I remember rolling my Fannie Mae $70 puts month after month for a year before finally placing the stock on my personal restricted list. I must have dropped half a million in my personal account in that position; it was brutal. I moved the sidelines the week before
it began the slide to 70 cents, leaving seven figures on the table. A wise man once said you can pick a direction or you can pick the timing, but you'll rarely nail both. Twenty-four years into this wild ride, all I can say is, "Agreed."
I'm not playing as big these days; it's a different market, and I suppose I'm a different me
. Point being, the onus is on us to adapt our style to the market and adopt a stylistic approach that provides the highest probability of an advantageous outcome. Whether it's "hitting to quit it" versus "trading around a core," syncing your time horizon with your risk profile, taking the other side of conventional wisdom, or just waiting patiently for your pitch, there are different strokes for different folks
, and where you stand is a function of where you sit.
The landscape we laid out Friday morning
remains in play, so take a quick peek at that column if you haven't already seen it, and let's hit this week with positive energy and lucid thoughts.
Note the 11-handle CBOEO EX implied Volatility (INDEXCBOE:VXO); we're getting close to all-time support, per the first chart below.
Twitter was upgraded to a buy by SunTrust Bank this morning, which follows BofA Merrill and Morgan Stanley upgrades late last week. I expected more to the upside on the heels of this -- it's up a buck (3%) -- but my inclination is to hold it for a while. When I bought the stock in December at $57, I watched it rally $10 without making a sale and finally flattened post-earnings, when it popped back to $57 (my entry). So by no means do I consider myself a stud in this stock; I just think my entry this go-round is entirely more attractive than it was then.
Market breadth is about 4:1 positive; it's early, but see it -- we're a long way from Turnaround Tuesday.
As always, I hope this finds you well.
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No positions in stocks mentioned.
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 email@example.com.
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