To most average investors, the current markets may be scary. One word comes to my mind that many investment authors may use to describe the current market condition: “capitulation”. Capitulation basically described the knee jerk reaction that most average investors have in response to such rapid downfall of the stock prices. Such rapid fall actually, in my humble opinion, is often a golden opportunity for a leveraged investor to enter into positions. The current market is such an opportunity. Why? Well, think about it. Nothing has really changed from, say, 1 month ago. Basically it’s the same old story: US economy slowing down? US debt? Euro zone crisis? Tell me something that I haven’t heard as of yet. So, what should a smart investor do? I don’t know what you would don But for me, I’ll do the opposite or the contrarian way. When people capitulate and throw in the blanket, I’ll buy (of course, don’t forget your hedge). Believe it or not, the market will recover faster than you can think.
There has been minimal negative impact of current market downfall on my portfolio. This is because most of my stocks are deep in the money, such as BIDU, PCLN, CRM, LVS, SLW and MCP. The only stock in my portfolio that is out of money now is FFIV. I have some FFIV options that are due to expire Aug. 20. The majority of my FFIV options are to expire in Oct. Therefore, I won’t do much to my FFIV positions until at least after Aug. 20th when my first batch of FFIV options expire. At that point, I will re-assess the situation and decide if I’ll need to add more FFIV options for protection.
