Tuesday, January 24, 2012

Adding portfolio protection via SDS

CCI continues to look for ways to add a little protection to the portfolio.   One way to provide some portfolio protection over a short time frame is to utilize inverse, leveraged, ETFs.  Last year CCI had an almost unbelievable 14-0-6 record using this approach.  Hopefully we can be half that effective this year.

Today, CCI put on its first trade of this type for the year by buying one lot of  the double short S&P500 ETF (SDS ) at $17.68 after commissions.  Several reasons for initiating this position today.
  • The market has had a nice 4-5% run over the past three weeks and the general ebb/flow of the market might lend itself to a pull-back.
  • IMO corporate earnings seem to be coming in ok....but not great.
  • State of the Union tonight - One of CCI's thesis is that when politicians speak they generally disappoint. That is in no way intended to be a left/right political statement, but rather just a belief that in today's world it is challenging for any politician to make a speech that reduces uncertainty.  That can lead to market nervousness.

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