MARKET Wisdom
January is at its end …looking back, the “January Effect” actually happened in December hahaha. So like I was telling you all, be aware of the anticipated moves and here we have some more coming. Before the US Fed started to taper, the markets fell, when it actually tapered / cut the bond purchases, the markets rallied and that all seemed fine, until, we got to this month when the effect of the tapering to the wider, financial markets began to spread out affecting the emerging markets. And I hope you got wind of my warning of capital moving away from the emerging markets. If that warning hasn’t sunk in, it’s “Don’t fight the Fed”. See all their actions since the recession has moved the markets in a big, big way. All we got to do is ride the wave, so it’s important to keep tabs with them.
To tell you the truth, I am loving the volatility right now. My sideways system is finding opportunities for quick wins in the rising and falling of the prices. So it is wise to craft systems that ride the markets happening, and if you want to know what these systems are, join my next webinar / event on low-risk high-reward investing happening in February. Email charmel@highheeledtraders.com for the details of this event.
MY POSITION
The position I had leading up to Christmas was a covered call option on BHPGK9, which I’ve put in when the price was $35.50 (during the pre-taper selldown) for a guaranteed profit of 75c per share to
1) cover the risk to my risk
2) I wanted a guaranteed income while
3) I sort out my workspace, transition and being busy with the children’s examinations just before their Christmas Pa and social activities.
It was very frustrating when the markets reacted positively to the tapering and the stock rallied to $38, but, I held on because that’s a trade I put in with the above reasons. Its profits that gotten away, but that was still December and I hoped to buyback the stock in January, and possibly roll up the option to higher strike price. I remember I had to get over being “too conservative with profits”. But like what I said I had that situation so the trade is right at that time. Fast-forward to January and lo and behold! The market had also fallen from the record highs, we were at $36.14 even below $36 level. So I am feeling pretty good, even if my worst case scenario happens (the option being exercised), I still pocketed my profits early on, and with the market volatility can still get back in at a price that is not far from my purchase price.
Traders Takeaway : Go with the flow while managing your risks. There’s plenty of market moves – choose your opportunity.
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