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.


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.


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


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


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


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.


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