Boeing shares fell sharply over the past few days. I'm pleased to report that on June 14,we spoke about the Boeing trade and bought January 10 45 puts. We were sellers of the stock even though (and especially since) it started to break out to the upside. If you don't have the extensive experience in being intimate with the stock market, you might have interpretted the spike up above the 52 level as a bullish indicator. Fundamentals don't look so bad at these levels too.
But if you have been following our monthly newletters (available by subscription only), you would have seen how the overall market is acting. In our May 31 Newsletter, we pointed out that there is a strong downtrend occurring in the stock indices. On tv, there was a lot of talk about the 200 day moving average. They spoke of how the 200 day average and stocks closing above this indicate that the bull market is at hand.
I have stressed heavily that you can't fight the trend. In the newsletter, we said that the Dow would do no better than be flat for the month and for the S&P, we were looking for a 900 target and in fact, sold July 900 SP calls. Those moments above the trend were strong sell opportunities or at the very least, a good time to add some short calls to your portfolio.
Seeing that the market was sure to fall soon, I wanted a stock that is above trendline and outperforming the Dow but with the same chart pattern. It could be likely that the stock would give up all of its excess gains and continue to trade down with the market.
IT'S FUN MONEY TIME
We have mentioned that our core stock portfolio was up nearly 12% at the start of the month. We have met more than our expections of 8% - 10% per year for targeted accounts. Our core portfolios are now heavy in cash, in-the-money buy/write positions, and ultra-short market positions. We have guaranteed a successful year by our standards. There is little reason not to take our targeted gains and protect them against risk for the rest of the year or when another compelling opportunity exists.
It's now when the market is really enjoyable. You have earned your requirements and have nestled it away for the remainder of the year. But now you have some fun money left over. This is when you can now rock and roll, have fun. For me, I'm going on vacation for the month of July. I'll be in Mexico, a little work but mostly travelling to Chiapas to see Palenque and other wonderful archaeological sites down the Usamacinta River. Then off to Merida to enjoy the wonderful colonial city and of course, make a stop at one of the newest wonders of the word, Chichen Itza.
If you are still worried about what the market is going to do next, then you should take a look at the targeted rate of return approach to investing. Earn your targeted rate of return with a minimum amount of risk. Be able to enjoy some time away from the market.
Be sure to catch my next market newsletter at the end of the month. If you don't receive it, send an e mail to me and I will put you on the subscription list.
Have a happy summer.