Weekly Issue: Market Turbulence Is Good News for Our Protective Position

Weekly Issue: Market Turbulence Is Good News for Our Protective Position

Key points from this issue:


A few weeks ago, given the growing list of concerns that emerged during September, I added the ProShares Short S&P500 (SH) November 2018 28.00 (SH181116C00028000) calls to the Tematica Options+ Select List at 0.22. Over the last several days, those concerns — from a slowing US economy to the impact of rising Treasury yields, growing signs of inflation and more pain at the gas pump to what looks to even more escalation in tariffs between the US and China — came home to roost, leading to one of the more painful weeks in the stock market this year.

The biggest pressure was felt on growth stocks, particularly those with high valuations, but toward the end of yesterday’s 3.1%-4.1% drop in the major US stock market indices, few were left untouched. That move combined with the ones of prior days led to our being stopped out of the Universal Display (OLED) January 2019 130.00 calls (OLED190118C00130000) as well as the Amazon (AMZN) Feb 2019 2000.00 (AMZN190215C02000000) calls. The good news, if we can call it that, is our stop losses set at 7.00 for the OLED calls and 100.00 for the AMZN ones limited our losses to 20%-25%  compared to what they could have been if left unchecked as of last night’s market close.

That downward pressure in the market popped our ProShares S&P 500 (SH) calls, leaving them to close at 0.90 – up more than 300% from our 0.22 entry point. That is a heckuva move, but given my concern to be had with the upcoming earnings season we are going to do the following:

As we profit from these current tumultuous times, we will sit on the sidelines at both Tematica Investing and here at Tematica Options+ and wait as the ripple effect of the above concerns reverberates through growth expectations for the S&P 500 group of companies. The glass half full view is this will give us the opportunity to buy and trade quality companies at better prices. As Oscar Wilde said, “To do nothing at all is the most difficult thing in the world, the most difficult and the most intellectual.”

About the Author

Chris Versace, Chief Investment Officer
I'm the Chief Investment Officer of Tematica Research and editor of Tematica Investing newsletter. All of that capitalizes on my near 20 years in the investment industry, nearly all of it breaking down industries and recommending stocks. In that time, I've been ranked an All Star Analyst by Zacks Investment Research and my efforts in analyzing industries, companies and equities have been recognized by both Institutional Investor and Thomson Reuters’ StarMine Monitor. In my travels, I've covered cyclicals, tech and more, which gives me a different vantage point, one that uses not only an ecosystem or food chain perspective, but one that also examines demographics, economics, psychographics and more when formulating my investment views. The question I most often get is "Are you related to…."

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