Friday, December 11, 2009
Playing with the house's money
In a post last Thursday ("Buying a lottery ticket to bet against gold") I mentioned buying a few puts on the gold ETF GLD. Those puts I bought were the Jan 10s with a strike price of 108, GCZMD.X. I got them at $0.74. Sold half today at $2.92 for a gain of about 390%. Letting the other half ride a little longer.
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2 comments:
Great trade, Dave, but here's the problem I have with great trades and with stock picking in general: how much of your portfolio did you put into this position? Ultimately, the performance of your portfolio as a whole is the only thing that matters. If you put 100% into it and made a killing, great, but you would have taken an unacceptable risk. If you put 0.5%, then it wouldn't have made a lot of difference, presumably.
These past 2 years I've become very aware of the biases that I bring to my own investing. Picking a little of this and a little of that is one of those biases. Unbiased thinking and discipline are necessary for an outperforming portfolio, but it seems to me that value investing has little to say on that.
Thanks. I didn't go too heavy into this one, because I saw it as speculative, and because the person I got the idea from saw it as speculative too. Better than a sharp stick in the eye though.
I'm not averse to taking big positions where I am more confident though. I'd have to crunch the numbers, but last time I checked, AYSI was about 30% or 40% of my stock portfolio. I think we talked about this via e-mail at one point, but I have been moving toward a more concentrated stock portfolio on the long side.
On the short side, I am leaning toward having relatively more, smaller positions. Perhaps as I get a better feel for that side, I'll have an equal number of short and long positions.
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