Thursday, October 16, 2014

Forecasting More Choppy Seas for the S&P 500

When I wrote my monthly summary a couple of weeks ago, we'd already seen a couple of downward trading days - and I summed it up to the effect that October would likely be spent sailing choppy seas.  So far this month, that's exactly how it has turned out.

I have rolled out all of my October positions, so my plan is to wait it out.  Over the last few days, I have considered rolling out some November contracts, but with the market trading in this direction I would either have to go farther out - say to March contracts, or begin rolling down my strike prices.  Instead of attempting to outsmart things with those kinds of reactions, I will simply stay put and deal with my November expirations in November.

Also, starting last February, I had been building a cash reserve that ranged from 25% to 35% of the account - on October 1 it was around 30%.  Now I have begun to think about putting some of that cash into some quality stocks, which appear to be bargains at the moment.

Two choices I have done well with before are QCOM and DIS.  Two 100-share positions in these stocks would put about a third of my reserves back to work with good prospects for meeting my annualized return goals.

On the other hand, the S&P is not yet down 10 percent from its highs.  That's a rule of thumb I've been using as I think about next steps.  So I may wait a few more days before I pull the trigger with a few more buy-writes.

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