**This post is in regard to a paper-traded investment and does not reflect actual trading activity**
The portfolio is mostly value stocks at this point. Generally speaking, I tend to prefer value stocks, but another reason the portfolio is in value stocks and cash is because growth stocks have really taken off in the past months and I am still wary of a pullback.
Pandora, despite having great growth prospects, has struggled amidst the volatility of 2011 and cost pressure from the music industry. I believe they have a strong business and see this as 'growth at a reasonable price'.
Given the high volatility and uncertainty around the stock, the method of investment I'm choosing is a short put at a strike of $11. I'm selling someone the right to sell me 3000 shares of P for $11.00, anytime between now and the 3rd week of May. If I substract the premium I'm receiving for this contract, my break-even price on P is $9.90. It's trading at $10.57 now. Also, the "should-have-just-gone long" price, a term I just made up, is about $11.70. I'm choosing to sacrifice upside potential for a lower entry price, and believe I'm taking advantage of overestimated implied volatility in P- time will tell whether or not this is correct- but they offer a unique and effective solution for advertisers as well as for music lovers. The intrinsic value I see is enough for me to enter here and commit approximately 3% of capital (assuming option exercise).
-30 P May 11 Put @ $1.10 (x100 per contract)
Cash Creditted: $3,300.00
APOL 400 shares
ARCC 1000 shares
ATVI 1000 shares
BRK.B 300 shares
TAP 500 shares
VZ 300 shares
P May 11 Put -30 contracts
Disclosure: I am long P.