Why I?m Going Into Cash
I am up 22% on the year.
I like being up 22% on the year, and I want to stay up 22%, or more.
I am pulling this off in the worst trading year in hedge fund history, beating funds that have hundreds of in-house analysts.
So I am therefore going to stick to my strict stop loss discipline and bail out here on my position in the S&P 500 SPDR (SPY) November, 2016 $203-$208 in-the-money vertical bull call spread for a small loss.
This trade will almost certainly be a winner, as there are only 12 trading days left until expiration.
I seriously doubt the (SPY) is going to trade below the 200-day moving average at 206.49 at the November 18th expiration, just below the breakeven point for this position.
The pinprick inflicted by this trade is more than amply offset by the large gains I took in with my hedges in short positions in the S&P 500 (SPY), the Russell 2000 (IWM), oil (USO), US Treasury bonds (TLT) and my long in gold (GLD).
This puts me in the enviable position of going into the November 8th presidential election entirely in cash. That has been my goal for all of 2016.
And I go into this cash position coming off an absolute tear in trading performance, making an eye popping 8.13% in October, enduring a flat September, and taking in a whopping 7.52% in August.
Those lucky folks who bought my service in July must think I?m some kind of genius.
I?m not. I just work very hard and love what I do.
Cash has an option value, and by maximizing my cash here I am creating the maximum amount of dry powder going into an extreme risk event, one of the biggest in a decade.
I think Hillary Clinton has the Electoral College locked up. It is mathematically impossible for Trump to win.
Of the 13 battle ground states, Clinton is winning 10 by large margins and breaking even in three. It is an insurmountable lead.
And Clinton has 50,000 ground troops to get out the vote, which Trump lacks.
Absentee voting in Hispanic neighborhoods across the country is coming in at levels 100% higher than in the last election.
Donald Trump finally pulled off what Democrats were never able to do on their own: get Hispanics to vote in large numbers for Democrats.
If you want the 50,000-foot view, this is all part of a century long transition of the United States from a predominately white to a multiethnic society where no single group has a majority.
That happened in San Francisco 20 years ago, in California ten years ago, and will take place nationally by 2040.
Our politics are changing as a result. Expect the road to be bumpy.
Even the betting polls are showing 70-30 odds in Clinton?s favor.
I have another poll to refer to that is even more valuable.
Of the 6,000 followers in all 50 US states and 135 countries who read the Diary of a Mad Hedge Fund Trader on a daily basis, I know of only two who are voting for Donald Trump.
After all, this is an educated, pragmatic, and opportunistic group who are primarily interested in making money.
Of the two who are going to vote for Clinton, one is a hard core conservative in Arkansas who is still fighting the Civil War (yes, that?d be you, Rufus!).
The other, in Oklahoma, believes in every Internet conspiracy theory that comes along, no matter how frequently they are proven wrong.
But I would rather read about the election outcome in the newspapers than in my portfolio. This is how you get to stay in the game for 50 years, as I have.
The last time I went 100% into cash was before the Brexit vote, and that worked out pretty well.
The goal here is not to be right, feel good, or seize the moral high ground. It is all about earning absolute positive returns at all times.
THIS IS HOW YOU DO IT!
Having said all that, and being out of the market, I?m now heading off to the Incline Village, Nevada Public Library to vote early. Nevada is a battleground state, and every vote will count, even mine.
I hear it?s going to be crowded on Election Day.
If you are uncertain about? how to execute this options spread, please watch my training video How to Execute a Vertical Bull Call Debit Spread
