Taking Profits on Stocks
With the (SPY) approaching an all time high, there are just a few pennies to go, I am going to take the money and run on my position in the SPDR S&P 500 (SPY) April, 2013 $145-$150 deep in-the-money bull call spread. At $4.97, there is only 3 cents left in potential profit, and I would have to run the position for another month to get it. We have already captured 93% of the potential profit in this position. The risk/reward here is no longer attractive.
The market is now up ten days in a row, the most since 1996, and has gained every day in March. Will it shoot for 11? It looks like it. By freeing up cash here we gain some dry powder to use on any market dips. That is, if they haven?t made selling stocks illegal, which the market apparently thinks they have. It also means you don?t have to rush out and change your underwear every five minutes if one of my predicted black swans comes in for a landing.
There is also the matter of being up 31% so far this year, I have outperformed virtually everyone in the hedge fund industry, except for maybe David Tepper (Thanks for the heads up, David!). With this trade, I have closed out 15 consecutive profitable trades. I have another six moneymakers still on the books, taking my own hot streak up to 21. The only trade I have lost money on during 2013 is with Apple (AAPL).
That means I no longer need to swing for the fences to make my year. Instead, I can settle back into the sort of ultra cautious, scaredy cat, type of trades typical for an investor of my advanced age. That is, unless, we get a 5% dip in the market, in which case, it will be pedal to the metal once again.
