Tuesday, October 25, 2011


More positive data from my DITM Proxy - my small IRA account - as compared to the overall market. Since the Oct.10, 2007 all-time high of 1562, the SPX has dropped 19.7% below; whereas my Ira (using totally DITM since May '09) has fallen only 3.6% from 2007. This along with much less Volatility due to the safety net of selling lower Calls.
Although I have recently been seeking to manage outside (non-family) funds and accounts to employ DITM, it has been put on hold as I seek more info on the new Dodd-Frank regs requiring more oversight (read gov't paperwork) at the state level. Data from last week's post exemplifies the critical need for an antidote to zero rates eroding middle class wealth, after taxes and Inflation (which will rise even more in the future).
Option expiry saw some activity in my DITM accounts, with more to come, as I expect higher prices through year-end, despite Europe's calamity and the Super Committee inactivity:
Sold a Nov. 70 Put to acquire KMB after its weakness Monday. Will write the Call if put to me before Dec.7 ex-dividend date.
Simon Prop. (SPG) was called away, as it had risen too far to roll out again. Return was 10.3% annualized, which was a rare occurrence that the the annualized (12 month) return was almost the same as the actual/realized return of 11 months!
MAT, WM, and SVU Calls were rolled forward, with ex-d dates coming up - SVU and WM are slightly under water, so I am writing the Calls above the current price, a la traditional CCs.
Regarding the TLT Trade of the Year I mentioned awhile back, it is still doing fine, but it dawned on me recently, that (as shown by charts in my book) the TBT is a very tightly correlated (inversely) ETF, that can be used to hedge the TLT, should it start to drop from the current level - $114 where I initiated the trade. Had I bought the TBT (speculative) when the TLT hit $125, more money could have been made. Any profits on the TBT if the TLT drops to 106 will be additional to the maximum received on the Buy/Write (since I'm not losing money on the TLT until 106). Conversely, since the TLT is capped, any upmove would lose money on the TBT, unlocking the 1:1 "freeze". Complicated?
Finally, KKR, which is slightly under water, looks to be heading up again, so I bought some more shares. It goes ex-d in early November at nearly a 6% rate; will sell the safety net call shortly for more premium.
That's all for now - stay tuned !

Tuesday, October 18, 2011


After visiting with my cousin in San Diego, who is a V.P. of Asset Management for JP Morgan, (and an unsuccessful try with Schwab's Laudus Funds), to set up a fund to manage based on DITM, I still haven't come up with anything solid. Based on 2 1/2 years testing, I still feel it is the best strategy for the current and near-future market environment.
My small IRA (which is the purest test tube for DITM) just hit a 3-year high, after all the turmoil in the markets since 2008. Although the S&P 500 has run 30% from when I started the DITM in May '09, my IRA has run 21%; however, based on the safety net provided by the lower call, since the April 2010 high, the SPX has just regained positive territory, up 1.5% for that span as of today, while my IRA is up 12.7% -as I said, to a new high since 2008.
I did pick up the 3rd Quarter report from JP Morgan, a great wrapup of information. For example, retiring Boomers (the largest population group to date)who spent the past 20 years (after raising families, etc.) saving for retirement, received the following annualized returns from 1991:
REITs - 10.5%
S&P500 - 7.7%
Gold - 7.2%
Bonds - 6.1%
Homes - 2.8%
Average Investor - 2.6%
Inflation - 2.4%
Although I've experienced a 10-13% consistent annualized DITM return, a realistic return (dead money, slippage, etc.)would be 6-10%. This is why I want to start a fund - to actually quantify the return.
Since returning I did a Buy/Write on COP, and the TLT -Dec.106 call still looks great.