More of the same
So the market was down again today. It’s earning season, that is the couple weeks every quarter when companies report their earnings. Most of the earnings were good, but the companies forward projections were murky. As a result, it did not really help the market or participants’ moods. Compounding the negativity was the release of The Federal Reserve minutes. The Fed meets formally eight times a year and minutes from these meetings are released three weeks later. Everyone pays attention to these minutes. Today it appears they were suggesting that the ‘Fed’ may begin to ‘taper’ soon (ie reverse the quantitative easing that was stimulating the economy and leaving it awash in cheap money). The market waffled on this news, until it took a decided turn for the worse. I don’t like the negativity. Feels like the market is talking itself into a slump. As a result, I am being cautious, not trading much. I do, however, have a shopping list of stocks I would buy if the market falls a lot and they go on sale.
When I feel like I should not be trading, I look instead to fine tune my investments (the stocks that form the backbone of our portfolio, the stocks I will hold for years). I check that I still like my picks, and decide whether I should trim these holdings (because they have grown too large in my portfolio or I have a lot of profit I don’t want to lose) or plan to buy more if the market drops. I check on the stocks I have on my shopping list to make sure I still like them, and confirm what price I am willing to pay for them. Given my cautious mood, I currently have about 15% of my portfolio in cash. I want to be ready to buy if things get ugly.
On days like today when I don’t trade a lot, I also garden and do laundry. I may even play hooky, read a book or something fun. I don’t like to let market slides get to me.
As an update, the speculative stock I bought yesterday was up slightly. It was negative when the day began but turned positive too quickly for me to buy more. If I get a gain of over 20% in the next month or so on this stock, I will probably sell it. A lot of people hang onto winners but when I am buying speculative stocks for a trade (some thing I am only going to hold a couple months) I tend to take my profits and run.
The NVIDIA puts I wrote yesterday were mixed. I made some quick money on one set when the market initially was up at the open. It then turned down and my other contracts went negative. There were a couple times I was slightly positive on the contracts but I decided to wait. NVIDIA was going to report earnings after the market close and I was hopeful that it would be a good report and there would be a positive reaction. Results were good and it is up over 3% in after-hours trading, so now I am eager to see what the contract value will be when the market opens at 9:30 tomorrow. I will likely close it in the first 5 or 10 minutes of the day at a nice profit. But if the market opens down, so could NVIDIA despite the good earnings. There is a bit of luck at play here.
I did manage to sell a couple calls on holdings I have, closed most of them before the day was done. Not making a lot but every little bit helps.
I had sold a put on Home Depot (HD) yesterday when it tanked on earnings. I often write puts on good companies that sell off on their earnings as the market often over-reacts to news. My strike price is well below where if traded to. The stock frequently pops the following day when people realize the market over-reacted. Even on down days, this strategy can work. And it did. Which gave me a little more profit.
Small profits can add up. I prefer to take what I can and then play again another day.