What are you buying today?

[james22]

BRK @ $198.75

[TwoCitiesCapital]

"Cash.

 

Following the sale of 20% of my S&P 500 puts. Waiting for 30+ VIX to sell more."

 

Did you make money with your puts? If so, which ones and at what price did you buy them (SPY level?).

 

It is pretty tempting this morning to buy puts with the VIX way down, S&P up almost 1% and a huge down gap on the chart from yesterday which could be hard to fill, at least in the short term.

 

The SPY was at $277-278 last evening until the Chinese decided to fix their currency a little higher. Then we have Kudlow saying that Trump is flexible on tarrif this morning.

 

Of course, it would only take a little round of golf between the two to make the market reverse way higher but, there seems to be too many issues now, economic weakness and too little value for the SPY to clearly break to a new high.

 

Historically, I have found that cash is the best hedge (if you are worried, it will be there and not budge) while I have had very mixed results with puts.

 

So very curious as to how you do it?

 

Cardboard

 

I have also had mixed results with puts. I made money in late 2015 with them, but have definitely lost more than I've made over the years when I've had them on.

 

The puts I had purchased were the 1/2020 contracts @ 250 strike. I had been accumulating for the last few weeks  between $2.50 and $2.25.

 

My overall view is that we're on the cusp of the recession with market activity in January and December confirming a market topping process. We also have economic data confirming the forward looking concerns of stocks and bonds.

 

I've been building cash since March or so  - went from fully invested to 60/40, but when I saw the VIX was as low as 12, I couldn't help myself but to speculate buy purchasing puts.

 

Worked out alright this time, but still figuring out the strategy to determine how best to implement in the future.

[alpha]

SU.TO

[gfp]

SU.TO

 

I was wondering if Suncor was one Berkshire would consider acquiring (in its entirety, they already own a small position).  I had noticed a bunch of private jet traffic between Omaha and Kelowna, but since Suncor is not located there I suppose it is unrelated...  Only other frequent/recent NetJets trips to Omaha were from Van Nuys.

[Jurgis]

Only other frequent/recent NetJets trips to Omaha were from Van Nuys.

 

Charlie finally started flying corporate.

Or Warren visiting Charlie (hmm, I could make sad inferences...  :-\ ).

[Spekulatius]

"Cash.

 

Following the sale of 20% of my S&P 500 puts. Waiting for 30+ VIX to sell more."

 

Did you make money with your puts? If so, which ones and at what price did you buy them (SPY level?).

 

It is pretty tempting this morning to buy puts with the VIX way down, S&P up almost 1% and a huge down gap on the chart from yesterday which could be hard to fill, at least in the short term.

 

The SPY was at $277-278 last evening until the Chinese decided to fix their currency a little higher. Then we have Kudlow saying that Trump is flexible on tarrif this morning.

 

Of course, it would only take a little round of golf between the two to make the market reverse way higher but, there seems to be too many issues now, economic weakness and too little value for the SPY to clearly break to a new high.

 

Historically, I have found that cash is the best hedge (if you are worried, it will be there and not budge) while I have had very mixed results with puts.

 

So very curious as to how you do it?

 

Cardboard

 

I had some Oct SPY $285 puts. Bought it with SPY at 3000 about 2 weeks ago. In sold them yesterday when the SPY his 2850 (too early). So far, I had good luck with SPY puts but then again, I am playing with a small sum (0.15% portfolio position). It was a 2.5 bagger.

 

One thing I look out for when I buy puts is low volatility. When volatility goes up, the put prices quickly gets prohibitive. I regard these puts as partial portfolio insurance when I consider the chance of a drawdown to be high.

[TwoCitiesCapital]

"Cash.

 

Following the sale of 20% of my S&P 500 puts. Waiting for 30+ VIX to sell more."

 

Did you make money with your puts? If so, which ones and at what price did you buy them (SPY level?).

 

It is pretty tempting this morning to buy puts with the VIX way down, S&P up almost 1% and a huge down gap on the chart from yesterday which could be hard to fill, at least in the short term.

 

The SPY was at $277-278 last evening until the Chinese decided to fix their currency a little higher. Then we have Kudlow saying that Trump is flexible on tarrif this morning.

 

Of course, it would only take a little round of golf between the two to make the market reverse way higher but, there seems to be too many issues now, economic weakness and too little value for the SPY to clearly break to a new high.

 

Historically, I have found that cash is the best hedge (if you are worried, it will be there and not budge) while I have had very mixed results with puts.

 

So very curious as to how you do it?

 

Cardboard

 

I had some Oct SPY $285 puts. Bought it with SPY at 3000 about 2 weeks ago. In sold them yesterday when the SPY his 2850 (too early). So far, I had good luck with SPY puts but then again, I am playing with a small sum (0.15% portfolio position). It was a 2.5 bagger.

 

One thing I look out for when I buy puts is low volatility. When volatility goes up, the put prices quickly gets prohibitive. I regard these puts as partial portfolio insurance when I consider the chance of a drawdown to be high.

 

+1

 

I made the mistake of buying puts in December. Despite being early on in the drawdown, the vol premium was so high that I still lost  a modest amount despite having 3-4 straight negative days in the market following their purchase.

 

Had I held them long enough I would have turned a pretty penny, but it was too discouraging seeing the loss on the contracts even as I had the directionality of the markets correct for several days. The last thing I needed was a bounce from being oversold to crush the remaining position. 

 

That's partially why I went big this time around with vol @ 12. I think the last 18 months have shown that we're no longer in the "below average vol" phase, so it was insane to see VIX @ 12 despite trade tensions and deteriorating fundamentals coming down the pipeline. 

 

On the whole, was probably 2% of my portfolio @ cost for the whole put position and I had sold covered calls to generate the premiums to open it. 

[TwoCitiesCapital]

Also, while we're talking about options, I'd add that while TWR performance on these positions has been negative for me, the money-weighted return still has a good potential of being positive - particularly if I'm right about the direction of the economy and capture it with my current position.

 

I think we as investors get too focused up on TWR instead of $ made. Especially in our own portfolios.  A 1% position for me today is significantly larger than a 1% position for me in 2015. Maybe I lost 1% of my portfolio on puts in the past, but the 1% I made yesterday would be a significantly larger sum of $.

 

TWR would have that as a 0% return.The return from a "$ in my wallet" perspective tells a different story.

 

I think this will be the reason why I continue to hedge and try to work out a systematic approach to options hedging. The manager who loses 50% in a major 2008-like drawdown has not only wiped out a decade of returns on a TWR basis - but chances are his fund was near its highest AUM when the crash happened meaning there's a very good chance he lost more money on the way down than he made on the way up (because the 50% is applied to a much larger base than the prior gains were applied to).

 

Even with a negative carry proposition that occasionally holding puts portends, it can prevent you from losing more on the way down than you made on the way up in $ terms - even if it means sacrificing TWR.

 

Maybe that doesn't matter to open-fund managers, but it matters to me with my money

[Gregmal]

Great topic.

 

I dabbled with various VIX option strategies for a bit and saw what you guys pretty much described... it just isn't economical over the longer term. I'd need a pretty big hunch or gut feel to pull the trigger on something like that now and would probably go for longer dated SPY or bank puts.

 

In regards to the last post, which is a great one, I kind of have the opposite approach. I'm fine screwing around with my own money. No one ever went poor losing a few percent. You can always make it back, whether through earning it, or through investing. I take risks and make stupid speculative plays with my money that I would never do with someone else's money. Someone trusting you with their money is a very fragile thing built on trust and there's too many jackoffs out there who manage OPM in egregiously self serving ways. 

[TwoCitiesCapital]

Great topic.

 

I dabbled with various VIX option strategies for a bit and saw what you guys pretty much described... it just isn't economical over the longer term. I'd need a pretty big hunch or gut feel to pull the trigger on something like that now and would probably go for longer dated SPY or bank puts.

 

In regards to the last post, which is a great one, I kind of have the opposite approach. I'm fine screwing around with my own money. No one ever went poor losing a few percent. You can always make it back, whether through earning it, or through investing. I take risks and make stupid speculative plays with my money that I would never do with someone else's money. Someone trusting you with their money is a very fragile thing built on trust and there's too many jackoffs out there who manage OPM in egregiously self serving ways.

 

Agreed. To be fair, the most I've ever had in puts, dollar-wise or % wise, were my most recent positions which varied between 1-2% of the my total portfolio value at risk. Maybe some think that is a high amount because the the proposition for losing money is high and a 2% hurdle is hard to overcome, but it's not like I'm breaking the bank with these positions.

 

In recent years, I've become more likely to take profits quickly (as I did yesterday despite my overall bearishness) and also don't stay hedged 100% of the time to try to help mitigate the cost of the hedging program. 

 

For example, I had some puts in 2011 where I lost 100% of the investment. I had them on through most of the earnings recession in 2015 and recouped some of the principal at the end of the year in the sell-off. I had them on again in late 2016 surrounding the elections where I thought I had made a small fortune on them the night of the election and removed them as it became more likely that tax-reform wasn't just a pipe dream and I had them on again in December 2018 and again over the last few weeks.

 

I'm not advocating for staying constantly hedged, but I think it makes sense at times to hedge when you view risks appear to be elevated and potentiall underappreciated  (I'd say the 2015 earnings recession, Donald Trump's "surprising" election victory, and low vol pricing at what appears to be the turning of the economic cycle all qualify IMO).

 

 

[SHDL]

I mostly agree with the above posts re: hedging via index puts.  For generic hedging I typically just buy deeply OTM index puts when they’re cheap.  Here, by “deeply” I mean like 25% or more and by “cheap” I mean (annualized) premiums that are ~1% or less of the contract’s notional value.  It’s basically disaster insurance.  I’ve never had these puts become in the money but there have been several occasions when I was able to sell them at good prices during big sell offs and use the proceeds to buy something else that was on sale.  It is always nice to have some extra cash when quality assets are cheap.

 

A suspiciously low VIX is, for obvious reasons, a very good indicator of when to buy these hedges, but if you strongly believe that it is volatility (and not the underlying index) that is mispriced then you may be better off trading VIX futures or options. 

 

I’m not selling my index puts yet BTW. 

[Paarslaars]

Bought some more BRK.B for my daughter @ $196.36 :)

 

And some WFC @ $46 for me.

[DooDiligence]

Again,

 

BRK.B & WFC

[spartansaver]

BIDU - Just seems cheap

 

[kab60]

Entercom (market puking like it's Burford!)

[Foreign Tuffett]

Entercom (market puking like it's Burford!)

 

Company is overly indebted + terrestrial radio is a no growth industry. That said, the price action today does seem extreme.

 

The amount of (very underwater) stock the Chairman of the Board has purchased in the open market since the CBS transaction is insane.

 

[Gregmal]

Busy day.

 

Opened ESGR, ILMN, added BUR

[BG2008]

Berry Global

[kab60]

Entercom (market puking like it's Burford!)

 

Company is overly indebted + terrestrial radio is a no growth industry. That said, the price action today does seem extreme.

 

The amount of (very underwater) stock the Chairman of the Board has purchased in the open market since the CBS transaction is insane.

Leverage is high, but as recently as April they issued bonds at 6,5% due 2027 and got more favorable terms on their term loan. Those bonds traded ABOVE par today, so there's a big discrepancy between bond investors and equity investors - I'm betting the equity guys are acting hysterical.

 

Also picked up some Gray Television (shoutout to Packer). Trading 15/share while generating 4 dollar per share in FCF - and guiding for higher next year. Those bonds are also trading like it's smooth sailing.

[kab60]

Berry Global

What are your thoughts on volume declines?

[RuleNumberOne]

Agreed. In times like this and 2008, the national motto is "In Buffett We Trust"

 

Again,

 

BRK.B & WFC

[boilermaker75]

Wrote some BRKB 195-strike, Aug. 9 expiration puts.

 

Wrote BRKB 197.5-strike Aug 9 expiration puts

[Saluki]

Bought some more BRK and PBF again today.  I have a resting limit order in for some IPI too, but hasn't been filled yet. 

[longlake95]

Added to BERY, KMI. Starting position in SNC.TO

 

[alpha]

SU.TO

 

I was wondering if Suncor was one Berkshire would consider acquiring (in its entirety, they already own a small position).  I had noticed a bunch of private jet traffic between Omaha and Kelowna, but since Suncor is not located there I suppose it is unrelated...  Only other frequent/recent NetJets trips to Omaha were from Van Nuys.

 

Berkshire always seems to be poking around the oil sands but never makes big direct investments, they seem more interested in selling the shovels. Kelowna is pretty popular with Albertans it could just be Abel visiting family etc...