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Time in the market not timing the market. - here for future reference
by aplummer 7y ago
Time in the market not timing the market.
- here for future reference
- tempsy 7y agoI have been holding S&P puts as a hedge since the S&P was at 3330, and my portfolio value is at the same level as it was near early Feb highs because of them even though my stock holdings are down. The idea that you should just sit back and be ok with a 20% haircut isn’t something that I will just “take” if I can help it.
- markus_zhang 7y agoIt's a smart move. What's price of the put BTW? Did you feel that people were concerned about an immediate fall that Put was expensive at that moment?
- tempsy 7y agoI’ve bought and sold at different strikes and late March/April expirations for last 2 weeks. At end of Friday I entered $270p for 4/17 at around $6 or so.
- farnsworth 7y agoI bought S&P puts at the wrong time so many times that I just gave up, didn't trust my gut in early Feb, assumed the market would find some strange way to keep going up. Oops.
- gfodor 7y agoWhat’s the point? Instead of spending money on stocks and puts against the same stocks (which costs money), why not just allocate less to stocks in the first place? The reasons I could imagine is if the stock is illiquid (401k, lockup, etc)
- markus_zhang 7y agoOP might not want to lose his positions I guess.
- tempsy 7y agoI’ve sold some stock earlier this month but not everything. I don’t want to sell some that I’ve been holding for a long time for tax reasons.
- bickfordb 7y agoTaxes on reallocating
- nostromo 7y agoCongrats on winning the lottery. Long term yours is a losing strategy.
- remote_phone 7y agoMe too. I bought 10 contracts on SPY puts 5 days before the drop, expiring January. My first target is the Dec 2018 lows but I expect a 50% drop before the end of the year. I love how people are self righteous about the timing but I have been wildly profitable over the last 20 years picking my spots like this.
- empath75 7y agoI agree with that but do you know you’re going to take a 20% hair cut? What if you get out of the market after it drops 6% at the bell tomorrow and then it goes up 1% the day after and 3% the day after that? Do you panic buy back in? What happens if someone finds out that a cheap readily available drug cures it and this whole thing is over in three weeks? I’m extremely pessimistic about the market right now, but I’m more pessimistic that if I traded that I wouldn’t lose more money. I’ve had a big chunk of my 401k sitting on the sidelines for months now. I’m going to wait to see how this virus thing shakes out then use it to buy back in after it looks like the worst is over. Until then, there’s way too much uncertainty to try and trade this. I’m not retiring for twenty years. Whatever happens it should bounce back in 2-3 years or so.
- tempsy 7y agoWell of course I can’t predict the future but we kept hitting all time highs even well into the coronavirus outbreak in early Feb and it didn’t make sense to me. I didn’t think the rally had any more legs to it and bought puts to hedge. As the market kept going down I kept or trimmed the options. The point of using options is that I’m still holding a lot of my stock, so if it bounces back up then it’s just my options that lose value.
- dmoy 7y agoThe market is (or at least has been, cue zombie apocalypse or Japan) almost always hitting or near all time highs. Literally over 5% of days are all time highs. A full third of days are within 5% of the as-of-yet all time high.
- everybodyknows 7y agoRay Dalio gave an interview a couple of days ago in which he predicted insolvency for some sellers of just such far-out-of-the-money puts. Any ideas who these might be, beside hedge funds? In particular, anyone systemically important e.g. shadow banks ...
- deleted 7y ago[deleted]
- hourislate 7y ago>The idea that you should just sit back and be ok with a 20% haircut isn’t something that I will just “take” if I can help it. You don't have to be an active trader to preserve your capital. I've been invested for years but around the 2nd week of Feb, I went 100% cash. This time I saw train and got off the tracks. My plan is to average in slowly over time as the market stabilizes and the news gets better.
- twiceaday 7y agoYou are waving around a winning lottery ticket as evidence of your strategy being better. What is your strategy? First of all, was this put even good? How much of your portfolio did you cover and how much as a fraction did it cost? But much more importantly, how many times have you hedged your portfolio in the last eleven years? Hedges cost money. Market goes up long term. You will lose money long-term by hedging. That's the steady state of your strategy. That's the obvious reason why people don't hedge. I'm puzzled as to why you didn't acknowledge this. Instead, you offer an outlier where hedging performed better. Seems deeply disingenuous.
- manigandham 7y agoYou don't have to do it constantly, and it would only lower your gains, not cause you to lose money unless you're over insuring. All-time highs, inflated money supply, dropping interest rates, trade wars, overbought stocks, overloaded repo markets, bond yield inflection, and more signs over the last few months are a pretty clear signal to engage in hedging.
- all_blue_chucks 7y agoThat analysis is true according to precedent. But we are experiencing an unprecedented event. That said, eventually we will have a vaccine, anti-viral, or effective test&quarantine system; and the time to buy is BEFORE we have this under control.
- everybodyknows 7y agoSARS was a close relative of Covid-19. No vaccine was developed: https://en.m.wikipedia.org/wiki/Severe_acute_respiratory_syndrome https://en.m.wikipedia.org/wiki/Severe_acute_respiratory_syn...
- all_blue_chucks 7y agoAbsolutely true. But a vaccine is not the only possible endgame, and there is no question that unprecedented resources will be used for this one.
- manigandham 7y agoSome basic timing is not all that hard and can easily double your gains. All-time highs after 10 year bull run + coronavirus pandemic is a good time to at least buy some puts or move into cash holdings.
- throwaway373438 7y agoBuying at a low point is lucrative, sure, but how will you know when we're at a low point? Should you have bought or sold Friday? Should you buy or sell this coming Monday? Answering these questions accurately is in fact hard.
- manigandham 7y agoWhy are you looking for a low? The market was at a high and what you should've been looking for was a downturn. Timing days is impossible. Timing a trend over months is what I'm talking about, and anytime in the last 2 months was a good time to allocate 1-5% on making money or protecting your investments from a market drop. At this point, if your investments have lost value then sell some covered calls to make income while you stay out of the market. We have an entire summer of disrupted global trade coming, don't buy in until that's over.
- throwaway373438 7y agoWhether looking for a low or a high the underlying challenge is identical.
- koonsolo 7y ago> Some basic timing is not all that hard and can easily double your gains. If it was that easy everyone would do it, or at least the "simple basic timing"-fund with twice the gain would be more popular than any etf. But probably more realistic you are just deluding yourself.
- manigandham 7y ago1) Plenty of funds have protected losses and even made gains with this market move. Buying puts as insurance, especially as volatility climbs, is standard operating procedure. 2) Hedge funds aren't open to the public and don't care about popularity. Their mandate is to limit volatility, not to maximize gains. That's why they might not match indexes in bull markets but outearn them in turbulent times. 3) There is an inflection point with capital where it gets much harder to make more because of changes in liquidity, transparency, and price action resulting from your moves. Independent traders can make 100% gains from large moves, a large fund could never do that unless it was an absolute perfect scenario. 4) I'm surprised that so many people find it hard to believe that months of constant negative news after 10 years of perfect bull run and frothy all-time highs does not signal a hint of a downturn. What more of a sign do you need? Nuclear war? 5) Ray Dalio did it in November 2019, and even made it clear that it was standard hedging: https://markets.businessinsider.com/news/stocks/ray-dalio-bridgewater-associates-1-billion-bet-stock-market-loss-2019-11-1028711471 https://markets.businessinsider.com/news/stocks/ray-dalio-br...
- skybrian 7y agoThis is true, but even long-term investors effectively do a bit of market timing when they buy, sell or rebalance. It's sometimes worth thinking about timing when there is a move you already want to make for better reasons.
- ISL 7y agoValue investors don't time the market, though it can seem like timing. To the extent to which one can assess a personal 'intrinsic value' to a company, one can buy when it is substantially undervalued and sell when it is substantially overvalued. One can see this in Berkshire's cash hoard. Expect to see it deployed in the year to come, when valuations may become more in-line with historical norms.