Capital preservation - what is your strategy?

  • Posted: 23 September 2010 07:11 PM

    AAPL is doing well.  What are your strategies going forward?  Do you have a get out plan for the next black swan?  Please share.

    Still nervous about what happened.

    Thanks!

         
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    Posted: 23 September 2010 09:17 PM #1

    alice - 23 September 2010 10:11 PM

    AAPL is doing well.  What are your strategies going forward?  Do you have a get out plan for the next black swan?  Please share.

    Still nervous about what happened.

    Thanks!

    Alice, BLACK SWAN EVENTS, are by their very definition, unknowable, unpredictable, and not foreseeable.

    Hence, planning for them is utterly impossible.

    Best “exit plan” in the entire world is NOT TO PLAY THE GAME AT ALL.

    But then, you don’t have any chance of winning then, either, do you?

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    “Even in the worst of times, someone turns a profit. . ” —#162 Ferengi: Rules of Acquisition

         
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    Posted: 23 September 2010 10:07 PM #2

    Well put Tan, we are not promised tomorrow. People try to drive safe, watch their diet, look both ways crossing the street, then slip and fall getting out of the bath tub and crack their skull.  :bugeyed:

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    Adversity does not just build character, it reveals it.

         
  • Posted: 23 September 2010 10:46 PM #3

    Here is part of what I do.

    I do not put more than 5% of my money into short-term options.  I am currently holding Jan 2012 LEAPS and cash.  I liquidated all our Jan 2011 calls over the past two days.  I may re-purchase those on a pullback, but we are up a bit more than 80% in September and 36% for the year.  Time to take some profits.

    I typically buy to open calls/LEAPS that are in the money, or no more than one strike price out of the money.  The Jan 2012’s we currently hold have strike prices of $230 and $260. We are almost exactly 50-50 cash and those LEAPS as of the close today.

    My opinion is that there is a lot of money to be made with Apple over the next 18 months.

         
  • Posted: 24 September 2010 12:14 AM #4

    alice - 23 September 2010 10:11 PM

    AAPL is doing well.  What are your strategies going forward?  Do you have a get out plan for the next black swan?  Please share.

    Still nervous about what happened.

    Thanks!

    For aggressive current month option traders like myself, I tend to swap out of OTM call options into ITM call options as Apple rises. This lowers the percentage decline when Apple retraces, yet keeps me in the game for any further upside. You could also swap current month options for next month options which works to lower downside risk too.

    Likewise, when Apple falls to lower support levels, I will swap my ITM call options for OTM call options as a way to double down and recover from loses.

    This is all assuming you want to stay in the game.

    Sometimes I need a breather and some dumb luck, so I will go all cash and wait for a better entry point. That’s what I’m doing now after this month’s monster move. With any luck I hope to reload around 280-283, which we may never see again. Worst case IMHO is 275. I would then back up the truck and go “all-in” with OTM call options.

         
  • Posted: 24 September 2010 12:16 AM #5

    roni - 24 September 2010 01:46 AM

    My opinion is that there is a lot of money to be made with Apple over the next 18 months.

    Would someone please post roni’s comment on a billboard?

    I’m getting kind of tired of saying the same thing.  LOL

    Seriously, I believe we could see $500 per share in 18 months to 2 years. After that I’ll worry about capital preservation. If Apple were to split 10 for 1 and the shares were trading as $29 per share, few would call the investment expensive based on the fundamentals and growth potential. By the way, I’m not advocating a split.

         
  • Posted: 24 September 2010 12:36 AM #6

    DawnTreader - 24 September 2010 03:16 AM
    roni - 24 September 2010 01:46 AM

    My opinion is that there is a lot of money to be made with Apple over the next 18 months.

    Would someone please post roni’s comment on a billboard?

    I’m getting kind of tired of saying the same thing.  LOL

    Seriously, I believe we could see $500 per share in 18 months to 2 years. After that I’ll worry about capital preservation. If Apple were to split 10 for 1 and the shares were trading as $29 per share, few would call the investment expensive based on the fundamentals and growth potential. By the way, I’m not advocating a split.

    Well yeah, but you and all those other accurate independent analysts are, you know, fanboi uber-bulls smile

         
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    Posted: 24 September 2010 12:45 AM #7

    alice - 23 September 2010 10:11 PM

    AAPL is doing well.  What are your strategies going forward?  Do you have a get out plan for the next black swan?  Please share.

    Still nervous about what happened.

    Thanks!

    Don?t be nervous. Nothing serious happened today. AAPL printed another higher close 0.40% higher than yesterday?s. The VIX jumped today as people are hedging to protect capital. Just be cautious if trading, as the market is on a healthy needed correction from an overbought condition, however if you are long, AAPL is the stock to own for the long term.

         
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    Posted: 24 September 2010 01:02 AM #8

    Brazil, one of my favorite classes in school was psychology. People as a whole feel worse when they lose money compared to how good they feel when they make money. In the last several weeks AAPL has made people a lot of money, they don’t want to give any back. I have been in the market since the mi 80’s, patience and tolerance while maintaining the ability to keep emotions out of buying/selling decisions takes a long time. This is why I stayed away from the forum while Tammy was recovering, I was tired and did not want to make a decision based on emotions.

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    Adversity does not just build character, it reveals it.

         
  • Posted: 24 September 2010 01:09 AM #9

    Thank you everyone for sharing. 

    It’s hard for me to forget late ‘07 & all of ‘08. 

    DT, it’s very, very nice to read your 300 & 400 calls.  I believe in AAPL but can’t help feeling nervous at times.

    I don’t have a capital preservation strategy so that’s why I’m asking.  I am hoping I can push the sell button before or the beginning of market crash and not ride down with the market as I did in 07 & 08. I like to have a plan instead of just hoping.

    To all - thanks again for sharing.

         
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    Posted: 24 September 2010 01:13 AM #10

    What do I do? I climb walls of worry, freak out often and fast and become greedy when people are scar’t. Today I nearly sold all of AAPL but I think we’ve got some game left in October. Meanwhile, I’ve rolled piles of money into high-yeild dividends. I’m not worried about missing cap gains because I can trade well when I understand the macro economic forces and I’m ready and willing to short this market as soon as I see that soon enough everybody will become concerned. For me, that time is not yet but the financial news in Feb and March and overhanging into April should be dire. However, I plan to be ready to game that and buy in Feb and March if the market goes south. If I’m wrong, then I miss out on some opportunity. No matter what, I’ve enough income coming in doing nothing to keep a tent pitched in somebody’s yard.

    What concerns me is that even my neighbors?although adding onto their homes and generally spending money?are talking about getting small in the market?and they’re the ones suggesting getting small to me!

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    Black Swan Counter: 9 (Banks need money, Jobs needs a break, Geithner has no plan, Cuomo’s grandstanding, .Gov needs a hobby, GS works for money, flash crash, is that bubbling crude?).

    For those who look, a flash allows one to see farther.

         
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    Posted: 24 September 2010 01:36 AM #11

    mbeauch - 24 September 2010 04:02 AM

    Brazil, one of my favorite classes in school was psychology. People as a whole feel worse when they lose money compared to how good they feel when they make money. In the last several weeks AAPL has made people a lot of money, they don’t want to give any back. I have been in the market since the mi 80’s, patience and tolerance while maintaining the ability to keep emotions out of buying/selling decisions takes a long time. This is why I stayed away from the forum while Tammy was recovering, I was tired and did not want to make a decision based on emotions.

    Eric just posted some of what I intended to write. Psychology of the heard is what we do all the time when trading and you understand better the trends than most with your studies. Fear is our ally and the only way to deal with it is having our emotions in shape as you say. It is much easier to lose money on the way down that on an uptrend when capital preservation is at odds with possible added gains.

    With technology trading is no longer a place for the faint of heart, as mistakes can be made at the touch of a button in milliseconds. There is no longer the advisor as a buffer to cool you down.

    Glad you are back and you have your loved one close by with you.

         
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    Posted: 24 September 2010 01:52 AM #12

    Only you can determine what the best investment strategy is for yourself.  What’s your risk tolerance?  How do you feel during certain times of the market?  Those might be good litmus test questions to figure out.

    If you’re a more conservative investor, due diligence aside, most of us play the game more aggressively, which might not be suited to your own investment philosophy.  And then you have multi-monitor trading platform types such as Eric who have the confidence to play all sides of the market.

    Anyone who knows Apple the company (especially those who follow it closely) know what they’re getting into by investing in AAPL the stock.  It’s a very bumpy road but those with patience, foresight and sometimes luck will do well over time.  Calls, puts, shorting stock, etc….entirely different sets of rules.

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    The Summer of AAPL is here.  Enjoy it (responsibly) while it lasts.
    AFB Night Owl Teamâ„¢
    Thanks, Steve.

         
  • Posted: 24 September 2010 03:03 AM #13

    Eric, Would you mind sharing some of your high-yield dividends picks?  I like to put some of my profits (when I sell some or all my AAPL shares) into high-yield dividend stocks.  Thanks.

         
  • Posted: 24 September 2010 07:46 PM #14

    I’m looking at a 1hour chart for the last 14 months. Why would anyone with a 30 day horizon or longer get out now. The slope is uniform for the entire period. If one wanted out of this pattern they could have exited anytime in the last 10 months and been happy with the gains. There should be no angst. We are riding the best looking horse in the race. These are the good times. Millions of shares were purchased this week during increasing daily ath’s. Sell a call if you must.

    drm

         
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    Posted: 24 September 2010 08:00 PM #15

    Dan, I was talking about that with a friend just an hour ago, What is hard is to decide the strike. Oct, forget it, no money. Jan 11 320’s go for $10. I can’t see writing a call right now for the very point you made above. IMO the trajectory needs to flatten out before considering.

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    Adversity does not just build character, it reveals it.