Corona virus epidemic is a human tragedy. Nothing can diminish that.
But we are stewards of capital, and need to find a way to sail the ship through choppy waters. How are you guys trading this market? Holding cash? Waiting on the sidelines to buy once the market bottoms? Buying Zoom because people will have to hold meetings via video chat instead?
Curious to learn from you monkeys.
Sticking to my process that I have researched, understand, and trust. Having a strong process is how I handle volatility markets.
1.) making sure i have enough liquidity to ensure I am not a forced seller due to events outside my portfolio (probably too late to do this if one hasn't already); this helps to ensure one of the few advantages of an individual investor stays in tact (time horizon)
2.) relative value switches/re-balancing to the degree stuff has strayed from my desired asset allocation - simple stuff (equities, fixed income, real assets/alternatives, cash)
3.) re-underwriting how much "dry powder" i actually have
4.) picking levels at which I'd feel comfortable allocating said portions of said dry power: i.e. ~25% @ 10% lower than here, ~50% at 30% lower etc (illustrative figures but a nod to fact I can't call bottom)
5.) finding the specific assets/asset classes to implement #4
Staying the course with maybe a few extra deposits after the massive free falls.
I'm not a "trader" so all this dip does is slightly help my dollar cost averaging. I won't be taking any money out of my 401(k), IRA, or brokerage account for decades.
Mainly tinkering with exposures slightly. Not making any major changes as I don't want to be caught on the wrong side of a significantly volatile market. Some things I've done:
What did you buy for your gold exposure? I’ve been thinking about adding a small amount.
A bit diversified in terms of size, but with focus on strong balance sheet, while still well levered into the gold price movements. Generally large cap gold names, like Newmont, Newcrest and Barrick, some mid size producers, like Alamos, and a few minors with strong balance sheets.
I have not done anything recently nor do I plan to do anything in the near term. With that said, compared to the typical WSO person, I am an older monkey and have a relatively conservative asset allocation. Towards the bottom of the market in 2009, I reallocated aggressively and I am glad I made the change. Now that I am older with a somewhat lower risk tolerance I am not as eager to get more aggressive. Eventually, I probably will reallocate into more aggressive investments and deploy some cash but not yet.
I am very hesitant to say this time is different and everything is going to be okay but I am not so sure. I do think that regarding the health issue, we will figure out a way to get through this and this should not be a long term concern. However, while we are figuring it out, the economy will likely suffer substantially. There were economic issues in 2008 stemming from the real estate market and loans but I feel that the economic issues could be much more widespread during this crisis. The probability of a recession is much higher now than it was a few weeks ago.
Selectively adding to core long term positions. But also doing a few shorter term trades, e.g. looking to short the VIX, buy triple levered SPX, calls on highly levered beaten up names.
Buy call options on companies with high debt. If the virus news settle down the equity portion of these companies will rebound massively, calls amplify that return profile. at least that's the idea ;)
How has the recently volatility affected the prices of the calls? High volatility would imply higher costs but the bearish tone of the market might offset the high volatility
Generally, I am waiting this out with my existing positions and holding off a while longer to average down. I still believe there is more runway going down here and that the impact of index rebalancing and more institutional sell offs haven’t fully materialized + more selling from Corona.
With that being said, I’ve been doing small short term SPY puts and longer term SPY calls on the inverse of market sentiment at the start of day and end of day trading. It has been an interesting learning experience and relatively profitable, albeit gambling. Eg I bought short term SPY puts this morning on the pretence that the market would not tolerate the 7% gain at open for the rest of the day, Fed be damned.
Been following it since January/February. Anticipated shit was going to hit the fan when quarantine happened. Applied for margin. Never actually did anything.
I started lurking WSB in December after bonus
Strict value approach. Had some longs and shorts. As things tanked I started to roll off my shorts because some of them reached a more appropriate value. That left me long-exposed so I felt some pain as the sell off continued this week. But stuck to my approach and by today I am almost fully long. Enjoyed the run up Friday and am comfortable with the long term value of my positions.
My holdings are mostly names with high risk exposure to the virus. A food service vendor, a couple entertainment co’s, a senior living facility. These have gotten absurdly cheap and I know they can withstand a prolonged and deep slowdown without going bankrupt. Could get tight but no Chapter 11. And the long term stable cash flows value them easily at 2x-3x. Easy to find names like that right now, the real work is the stress test bc you don’t want anything where equity can be wiped out or forced to do something highly dilutive.
I actually went 90% into cash last December based on a gut feeling, took the rest out and my 401k is parked in st cash/FI. Granted, not really huge portfolio given that I was starting to focus my money towards savings/business ventures. I don't know how to trade this, but I have a list of 20+ companies who I have been loosely following that are starting to look like enticing valuations (staying out of tech), albeit no idea how bad earnings will plummet.
Likewise, a few commodities that I would like to start parking money in in 5-10% increments. Although, if something like a war or another media headline causes another 10% drop, I will probably hold off or invest in 5% chunks.
Probably a stupid investment decision, but 75% of the western world isn't acting rationally right now and its a better decision than hoarding 10k rolls of toiletpaper
Preface this by saying I don't know shit about trading or finance. I made some money last week buying and selling $SBUX, $AAL, and $DAL puts.
Buying the dips. Been easy so far with the choppiness of the market. This is on top of my routine dollar cost averaging strategy
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