S&P500 is currently down 15% vs start of the year or c-19% vs the February highs. (09/03/2020)
Many individual stocks are down more. I saw this coming, bought out of the money S&P 500 put options which shielded me from much of the damage. I remain flat ytd.
This is my first ever options trade. I bought puts 21/2 and sold 3/3. As the S&P did most of its falling and volume increased I did OK. (I put details up on twitter at the time) I now think I covered far too early.
Question is what happens now. In my mind, the most probable effect is that this dies down by the spring. Chances are that it can’t spread in warm weather. From what I have read there is also a good chance it is less deadly than is being assumed. This may be wrong and it doesn’t take much to overload hospitals – most of them are full, most of the time. OK, they can cancel non-essential operations but their capacities are limited and I wonder what the fatality rate will be if this really kicks off. Me being me I have already stockpiled some food, I try to be one step ahead.
Late last week I got back into / added to lots of Russian stuff, as I thought we had hit bottom. Got out a few days later, I thought we should be higher if we were going to bounce given the 50bps Fed rate cut.
My current position is c 50% cash, the rest I kept are ASTO – still my biggest position, CMCX (Added more as volatility is positive and good results, BEG as they profit from businesses going under, Beximco – pharma shouldn’t be too affected, AJOT. With a few other bits.
I am absolutely convinced this will bounce, but just not from here. Where we are is still about where we were a year ago, in the US. OK rates are lower but the outlook, even from supply disruption is not better. Targeting something like 2400 / 2100 on the S&P. I remain flexible though. Way to play it might be via options if we get a period of stability and the VIX calms down.
I don’t like being this macro / market timing heavy. Having said that I believe it is what is driving the market and I need to do it to keep / make money. But I do need to catch something approaching the bottom here. I will let you know when I get back in via my twitter.
I may try to play my usual Investment Trusts trading at a discount to NAV game if we see discounts widen, or asset heavy companies / things which shouldn’t fall. Ideas are welcome.
Begbies traynor – good example – they are an insolvency specialist in the UK. DTY – Dignity – funeral homes, CMCX – benefits from volatility.
As ever I will try to tweet when I can.
Stay safe. Comments welcomed.