icandoitdon

Down to Three Positions, I'm Ready for End of Bear Market

16% loss tolerance might work fine in a bull market but not in a bear market as vicious as this. you can get stopped out before the day is over.

my approach has been selling deep out of the money put options on well capitalized, low debt level, dividend paying players, #1 or 2 in their niche. i've often hedged certain of these positions by buying puts. the past two months i've had to repeatedly roll my positions into lower-strike puts because of this relentless grinding down of all equity prices. needless to say i've lost money but my losses have been far less than being long stock.

the lack of a bounce is very bothersome and speaks volumes about the health of financial assets and the extreme levels of fear that exist. i was never a believer of "dow 6,000" but now i'm not so sure. we've traded at 7 times earnings before (early/mid 70s) and it could happen again. many strong players are already there, e.g. DE, ITW, DD, we also have brand name, well capitalized players at 3 or 4 x earnings, e.g. GCI, FCX.