The Magnificent Seven

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I trade a couple of different portfolios, and today I thought I’d talk about the smaller one, in which I trade principally options. To be clear, I am not at all a sophisticated options trader. I simply buy puts that tend to have three characteristics: (a) in-the-money (b) plenty of time until expiration – – three, four, or five months out (c) are against securities that look well-positioned to fall and have also illustrated their ability in the past to fall hard.

Here are the seven positions in this portfolio – – first up is XOP, the S&P oil and gas producers, which as you can see from SlopeCharts has a history of forming tops and tumbling.

slopechart_XOP

My favorite of all of these is the consumer staples ETF symbol XLP, which, if it can break that horizontal, is going to go into a free-fall.

slopechart_XLP

The financials (XLF) has a marvelous analog, as the red and green trendlines illustrate.

slopechart_XLF

The mid-caps (MDY) aren’t very heavily traded at all, but we’re at the extreme high of this year’s channel.

slopechart_MDY

Also not heavily-traded, but apparently at the top of a fairly substantial broadening pattern, is the Dow Transports (IYT).

slopechart_IYT

The last of these options positions is the Dow Industrials, DIA, which is the least inspired of my picks. This is just a “rent is too damn high” charts.

slopechart_DIA

Of the seven positions, the above six represent put options, but I do have one long position, shown below, which is the gold miners. I’ve been impressed with their ability to hold their trendlines (GDXJ, JNUG, NUGT) and good old GDX had a bullish engulfing pattern on Friday.

slopechart_GDX

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