Down Days
The market was down today, again. It has trended down for the last couple of days and there is a lot of hand wringing going on when you listen to the pundits and economists. After weeks of record closes, today the sky was falling. All day I heard was; it’s only downhill from here, it was to be expected, batten down the hatches, lookout below. Sigh. Markets do go down, sometimes a lot and sometimes it drags on long enough to make people doubt it will ever recover. But so far it always has. Recently it has recovered quicker than normal, in part because there is a lot of money on the sidelines that is waiting for a chance to get in. The market has been so high lately that it has been foolish to jump into most stocks. But in the last couple years, if people have ‘bought the dip’ in the market, they have done very well.
The S&P 500 index is still up 20% for the year to day, even with the recent pullbacks. So far, 2021 is a good year. It could drop 10% and it would still be a good year. Do not freak out. Personally I lost about .5% of my portfolio’s value today. Always frustrating to see it fall in value, but as long as it drops less than the market, I figure I’m doing something right.
I did not trade much today. I bought one speculative stock I had my eye on, but only 1/3 of the position I would eventually like to have. I will buy more if it drops more.
I did sell a number of NVIDIA puts (NVDA) with the hope of closing them tomorrow at a profit (markets often stage a bit of a comeback after a couple day drop) but I wrote them at a strike price well below where it traded today so I have time to see if it comes good. I don’t currently own NVIDIA but I would like to. I just find it expensive now and would like better at a price 20% below where it is trading today. When I sell puts, it is generally because I am trying to build a position.
I could not sell any calls, none of my holdings were up enough on this down day. If I write them when the stocks are down, I risk losing them if the market turns positive quickly. I will wait. I did manage to close call contracts on DR Horton (DHI) and Chargepoint (CHPT). Look them up on Yahoo Finance to see what each does. I bought both this year and the dividends are small or non-existent. While I have a bias toward dividend paying stocks, I try and make sure I have sold calls on those that don’t just to have money to make if the market, or the stock, goes down. Again, I set the call strike price at least 20% above what I paid, so if I do get called out, I have a tidy profit. So far this year I have made about 2.2% return on my calls on my DHI holdings (I also have a 12% return on the stock itself) and a 5% return on CHPT (which I currently have a 8% loss on). I expect both stocks will be profitable but the sale of calls makes me money while I wait. I make more on CHPT calls because it is more volatile, so its option premiums are little larger and I can trade in and out of the calls more frequently.
I will let you know how the NVIDIA puts do tomorrow…