Thursday, August 11, 2011

RSY XXXXII: Update


It has been a wild ride for the markets lately -- to say the least. One strategy on volatile market days is to “Buy The Dip”. For a prudent investor, it does mean having a strategy in place to know exactly what position to enter and at what seems reasonable for long term investing.

Another strategy is to double down when a favorite takes a dip. On the one hand, no one wants to be catching a "falling knife" but on the other hand if a stock is a good price at a certain price shouldn't a lower price be a better deal. If hamburgers go on sale, do we buy less or more? But for RSY, nothing in our portfolio seemed to scream out to add more to our current positions. Looking at our positions and Sabrient ratings below, most are hold or buy. And the Strong Buys were mostly in positions that RSY was "fully invested" in, that is it did not seem prudent to overexpose on those particular positions. The one exception was DLX, but RSY sold 2 put options, which looks like they might be called out.

Update:

The nice thing about dividend portfolios like RSY is that the dividends keep coming in no matter how volatile the market is. RSY recorded almost $400 in dividends for June and $470 in July.

In earlier posts, RSY had recommended some options at limit prices. RSY only recorded 3 of them at hitting the limit price. Instead of buying the long positions on the dips, buying back covered calls is one way to capture the volatility in the markets. RSY recommends trying to buy back the two covered calls at the following prices.
1. Buy to cover FL Jan 21 '12 $22.50 Call *2 at limit price of $0.70 (GTC)
2. Buy to cover ARLP Mar 17 '12 $80 Call *1 at limit price of $2.00 (GTC)
After either one is transacted, it might be a good idea to look to sell covered calls again at a lower strike price. The FL covered call transactions will bring that position to break-even at current price and ARLP will pocket us some profit.

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