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The Deipnosophist

Where the science of investing becomes an art of living

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Location: Summerlin, Nevada, United States

A private investor for 20+ years, I manage private portfolios and write about investing. You can read my market musings on three different sites: 1) The Deipnosophist, dedicated to teaching the market's processes and mechanics; 2) Investment Poetry, a subscription site dedicated to real time investment recommendations; and 3) Seeking Alpha, a combination of the other two sites with a mix of reprints from this site and all-original content. See you here, there, or the other site!

27 October 2005

Trading the market

So I decide I want to buy some AFLAC/AFL during this, its post-breakout pullback. My portfolio has sufficient cash, but is maxed out with the total number of portfolio holdings I allow. This is good discipline -- to limit my portfolio to only the best opportunities. Thus, a new position must trump an exisiting position.

What to sell, what to sell? Easy answer that -- Apple/AAPL. It looks likely to endure a "trader's break" of ~$5-15/share. In the swap, I sell AAPL for $56.74 and purchase AFL for $46.75, thus reducing net exposure to the market by $10 and selling one trending and acting toppy (AAPL, near term) for one just breaking out (AFL). Of course, I could re-purchase AAPL, especially if the shares do suffer that trader's break.

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