The inauguration has arrived and the strong trend that emerged with the election has stalled. In terms of the portfolio, today is also options expiration day.
Based on quantitative set-ups, I've been selling puts on stocks for January expiration since Dec. 2, 2016.
Those positions include Goldman Sachs (GS) , EOG Resources (EOG) , iShares Russell 2000 (IWM) , JPMorgan Chase (JPM) , BlackRock (BLK) , Tiffany & Co. (TIF) , Bank of America (BAC) , Nvidia (NVDA) , Williams Companies (WMB) , and Apache Corporation (APA) .
Barring any significant declines today, it looks like we'll keep the premium from the sale of the options as all positions appear set to work out as planned.
Here's a chart of the SPDR S&P 500 ETF (SPY) :
Notice the strong up move following the November lows that's now gone sideways since Dec. 13. Nimble traders can trade that roughly month-long range, but for multi-day holds, I'm now keying on the December lows as the next fresh area to buy for a pullback. It's certainly possible that the range resolves to the upside, but this less bullish posture will allow for profits over a greater range of possible scenarios.
GS has been a strong participant in this rally, but has dipped recently. I was curious about how GS performs following similar events. Specifically, I ran a query for how GS fares after declining at least 1% on a one-day basis, at least 2.5% on a 10-day basis, while being up at least 2.5% on a 40-day basis.
The idea was to test a protracted swing down during a longer uptrend. Here's a table with how GS has typically performed following such a set-up since 2013:
These results are positive, but not overwhelmingly so, with t-statistics all less than significance levels of 1.6 or higher. I will continue to look for opportunities to buy leaders in the financials like GS and JPM, but right now I'm going to wait for a better setup.