I am not a big fan of Marc Cuban by any means, but he said something on CNBC yesterday that I couldn’t agree more with. “I would rather have a lot of cash on hand for that time when things go bad”. This is not a sign to sell everything and get the hell out of the market, but our strategy moving forward needs to be one of a more cautious outlook and start to look to trim the portfolio down to a few core holdings and have some cash on deck for a larger correction which is inevitable at some point.
I posted on Friday that we were headed into a resistance zone and that I was closing out my “Long” trades. For a couple stocks, specifically on Apple and Kohls, in lieu of selling I simply shorted a couple call contracts. The major moves were already made and momentum seemed to be stalling especially with Apple. Both of these calls are stock covered. I have no intention of allowing Apple being called away (for tax reasons). I will simply take my loss if it moves higher. Kohls, on the other hand, is a stock I do not care to own during a major correction. I’m currently short the May 25th 62.5 call at 2.10 which is trading at 2.125 as of close which were added yesterday. Break even is 64.60 or 5.6% higher then yesterdays close. Kohls goes higher I simply allow the shares to be called away and I receive 5.6% higher than I would have received today. This is one way to trim down a portfolio using a simple options strategy.
Keep in mind it was more than just picking two stocks to sell Calls against. There is some inherent TA along with this.
However there are some stocks I would like to add regardless of a correction or not moving forward like IBM, Exxon Mobil and Marathon that I posted on previously. Another one is Disney which I am in the middle of writing about now and will post this week.
From our Friday post. “2744 is the first major level of resistance and a likely area for a bearish reversal”. Yesterday the high was 2742.10 and it appears that we are looking at a bearish reversal. Support has been adjusted for this level and is found between 2651 and 2686. This is the area to look for a bullish reversal and position accordingly. Medium term I have a target level between 2805 and 2861 initially. I am looking at some specific trades on a pullback and will post as I make them.
Disclosure Long IBM, XOM, MPC AAPL KSS, Short KSS 25May18 62.5 Call and AAPL 18May18 190 Call