I’m a bit more rambling today than usual, but it was an unusual day after an eye opening weekend.
A few years ago, maybe about 5 years ago at this point, I wrote an article about a lower maintenance approach to hedging a portfolio.
It involved the use of a well diversified portfolio of about 10 names. They would, ideally, all be high and safe dividend paying companies.
The idea was to use LEAPS and try to stagger the expirations and then just sit back.
Sit back and collect dividends and add that income to the premiums from having sold the options.
For the LEAPS strategy I had also planned on using a strike price that would reflect a fair amount of capital; appreciation over the year or two. Say 7% a year? 10%?
I may have written another article or two about LEAPS, but who can remember?
In the meantime, I was just having too much fun trading and trading and then also having the good fortune of writing about those activities and making some money in that latter process, as well.
But, I’m not quite ready for that approach yet, as I always saw that as awaiting my real retirement.
That “real retirement” would also include just not wanting to be tied to a computer monitor day in and out. I expect that at some point I will come to the realization that the full time task of trading a portfolio is pretty much like a job.
And mind numbing.
Back when I first started selling covered options more than a decade ago, I always had some index funds in the portfolio and sold options on those, as well.
I stopped doing that, at least the hedging part of it, but over the years I had accumulated the underlying index fund shares.
I would keep looking at those shares and would be tempted to sell options on them as time went on, but never did, almost as if they were really for my golden years, while the many individual positions were for playing around and keeping me off the streets.
Today, though, as we were closing in on a 144 point gain in the DJIA, I did a big cash raise.
I sold 50% of my uncovered index positions.
I don’t know what really possessed me, as I’m not ready to sit and watch the sun set quite yet, but I just am having a hard time seeing where the next leg up comes from.
In fact, these days, I’m even having difficulty moving a leg.
But that next keg higher, while coming, isn’t obviously telegraphing its coming tomorrow, or the day after, even as we hit new records upon new records.
But I do see it coming.
There’s also something else I see coming.
With the new cash raise, all I plan to do is to roll it back in, hopefully at lower prices.
But, as with whenever you find yourself with a big bolus of cash, I plan on doing it with a dollar cost averaging strategy.
That means I may miss the next leg up or at the very least may not be able to fully participate in it.
But by using a no-brainer approach to investing that cash, I don’t have to be reliant on that cerebral wasting asset in order to try and grow assets that may be more meaningful to my heirs.
At this point, I plan to hold onto that cash and wait until the S&P 500 has a modest 3% decline, to about 2375 and then slowly re-introduce the cash into something a little more exciting.
Right back into index funds.
Not very exciting, but more exciting than cash.
What I may do, if and when we reach that level, is to revert back to the days when I did sell options on those positions, as long as the will exists to stare incessantly at the computer screen again.
More importantly, though, I may be ready to start taking proceeds from any newly assigned positions and start the transition into a retirement portfolio.
It just may be time to grow up.
It’s either that or the message of mortality from this weekend’s news of the passing of Stephen Furst, better known as “Flounder” from that great era defining movie, “Animal House.”
When you start thinking about mortality it may be time to do something differently and at least give everyone a reason to justify them referring to you as the eccentric guy at the end of the cul-de-sac.
R.I.P Flounder and thanks for the wake up call.