PSW May Portfolio Review – Buying Those F’ing Dips

What a spectacular month we had!  

We're starting May off at new highs in both of our paired portfolios.  The Short-Term Portfolio finished up 123.9% at $223,925, up $2,535 (1.1%) since our last review 12 days ago.  That is FANTASTIC because that's our bearish portfolio which, fortunately, we had adjusted to be not too bearish as the S&P bounced hard off that floor and is now back at the top of the channel.  

Because we cashed out our aggressive naked index shorts and retreated to longer-term spreads where we are BEING THE HOUSE – Not the Gambler (our core strategy), the market chop ended up being good for our wrong-way index shorts since it was worse on the calls we sold than the calls we bought.   See what a simple strategy this is?  

Meanwhile, we went on a shopping spree in the well-protected Long-Term Portfolio, adding 3 new short puts, one new dividend-payer and one new spread for 5 new positions in 3 weeks and the LTP finished the day yesterday up 51.3% at $756,472 and that's up $8,898 (1.2%) in the same 12 days.  Making money on both our bullish and bearish portfolio at the same time is quite a feat and our combined total of $980,397 is now up 63.4% from our $600,000 start in late Novemeber of 2013 (17 months).  

Also, keep in mind that we went back to mainly CASH!!! so the 1.1% gain is more impressive as we only have 20% of our virtual cash committed (not even 10% of our margin).  The LTP, in fact, has $765,815 in cash and -$9,343 in net positions.  Most of the gains we've had since cashing out were simply watching our "losing" positions turn back into winners as the Materials Sector cycled back around.  

While the chart above serves as a guidline in "normal" markets, this market is far from normal – so take it with a grain of salt but I do want to illustrate that stock sectors do tend to have cycles and our very simple philosophy when we cashed our most of our Long-Term Portfolio on March 24th was that our underperforming Energy and Material stocks were going to come around if we gave them time and…

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