Thanks for the info. As I've said before, I don't really trade. I invest. I buy and hold and it's worked out very well for me over the last 30 years.
I do however look for ways to hedge and that's why I have started looking at things like the SQQQ. I do realize though that it's an ETF built for trading, rather than investing. I've also sold covered calls at times too, when I think things are possibly heading south. No, as I said, no way I would sell short and even with stop loss placed I'd not feel comfortable. I just don't like losses, period. If one of my holdings is going down, I want to figure out if it's permanent or just normal fluctuation. With quality stocks that I buy at lows, this has worked out well.
Sounds like you have your own investment profile pretty well figured out.
One way to really take advantage of any major correction, is to have cash on hand, and buy the dip when it comes. Great advice, but hard to call a bottom, and when it seems like the SHTF, it is hard to go all in, as you don't really know where the bottom is. I left a lot of $$ on the table this summer by being overly cautious on putting cash to work. But much like yourself, I don't like losses, so tend to be cautious rather than going all in.
The Najarian brothers, Market Rebellion, sold a lot of covered calls when the market tanked, and you can even do it on stocks you want to hold long term. I buy and sell covered calls as one of my main strategies in swing accounts I manage for my wife and parents, Really effective way to get your cost average down, and even if you do get called out, you can be comfortable knowing you have sold for a decent profit. Just be aware you can get called out BEFORE expiration, not common, but it does happen.
Heard covered calls described as earning rent on stocks you own, great description.
For those following along, and wondering what Covered Calls are - here is a brief example (prices might not be accurate)
I really like a stock and want to own it long term, let's use AMD over the last few months as an example
Bought AMD at beginning of August when it broke over 77.50. To sell a covered call on AMD, you need to own multiples of 100 shares, so for purpose of this discussion I bought 200 shares at 77.50 for a total of $15.5K, cost average 77.50.
I can now sell 2 x contracts of AMD calls (you do need to be approved Option level 1 to sell covered calls, but it is relatively "safe", and you can do this in your IRA if you want). Strike price refers to the price at which you agree to sell the shares. I sold the Aug 15 $85 calls for $2.00. 200 shares x $2.00 = $400 "rent" or income on those shares. So instead of my cost per share being 77.50, it is now 75.50. IF the stock is over $85 on August 14 (options expire on Fridays, or the 3rd Friday of the month if monthly), I can expect to be called out, and have to sell my 200 shares at $85.00. Am I happy? Well for paying $75.50 (cost average after income from covered call), and two weeks later getting $85.00, or $9.50 "profit" per share is around 12% return.
AMD goes up to 86.xx plus, on Aug 6th, and it now looks like I am going to be leaving money on the table. But who cares, I know I am in line for that 12% return in less than a month
AMD then goes back to mid 70's a few days later, and gradually retraces to 81.30 on Aug 14th, the day the contract expires. I don't get called on my shares, and the contract expires worthless (my ideal scenario). So now I can sell covered calls on my 200 shares again, lets say for Sept 18th expiration, and this time I sell the Sept 18th $90 calls, for say $3.00 per contract. I get 200 shares x $3 per contract (of 100) so $600 in income or "rent", and this now reduces my cost per share to $72.50 (77.50 less $2 Aug call income less $3 Sept call income). If I am called out at $90, I am looking at a return of $17.50 per share in a little over 6 weeks, around 22% (there are some minor costs associated with trading options, even on the commission free platforms), and I am damn happy to make more than 10% per month. AMD goes bullish, and runs as high as 92.xx at the beginning of Sept. At this point it looks like I am going to be leaving $$ on the table, and the person who bought my calls is pretty damn happy (although his cost will actually be $90 strike price + the call price $3 = $93) as it looks like the stock is going to mid 90's and he will only be "paying" $90 for the stock
AMD does AMD, and by the time the monthly options expire, Sept 18th, the price is back to 74.93, and the options expire worthless. I sell calls again for Oct 16, $85 strike price, but with the stock in the mid 70's I only get $1.50 for the calls (you want to sell your calls on days the stock is going up), so now my cost average is $71 per share, and IF I get called at $85 mid Oct, my profit is $14 per share, or around 20% return on my cost average. 20% return in 2 1/2 months is still a healthy return, even if I do get called out
Oct 16th and AMD is 83.xx, calls expire worthless, and it seems like AMD is stuck in a range between mid 70's and mid 80's, so I get aggressive, and sell the Dec 18th 90 calls at $6.50, my cost average per share is now around 64.50 (excluding all commissions and fees along the way). Stock goes on a run between the time I sold the calls, and today. AMD is currently 96.85 and it looks like I will get called out on Friday. Sure it looks like I am leaving 6.85 per share on the table, but lets compare
Buy 200 AMD in Aug for 77.50, sell at market price Dec 18th at say 97.50, $20 profit per share (No calls sold)
OR
Buy 200 AMD in Aug, for 77.50, sell calls as above, cost average now 64.50, and get called at $90 on Dec 18th, profit per share $25.50. The trader who bought my Dec 90 calls needs the stock to be above $96.50 to turn a profit ($90 strike price plus the $6.50 price of the option).
What is the risk?
Well the stock can tank, and you cannot sell the equity until you have cleared your covered call obligation. So AMD might tank to $65. the calls are worth pennies, and you must "buy to close" your options position before you can sell your shares. I bought AMD because I like their long term prospects so I may not sell when it tanks, heck it looks like a nice place to add another couple hundred shares and rinse and repeat.
The stock can go boom, let's say AMD runs to 120 before Friday expiration, now I really feel like I have left a lot of money on the table, and I have. BUT, remember at a cost average of $64.50, and a strike price of $90, I am still making over 30% return in about 4 months, or around 90% annualized return. not too many money managers can make that. I am happy taking my profits, and will just wait for AMD to back test or retrace, and buy in again.
The stock goes nowhere, moving in a very narrow range. The option strike prices will reflect this, and strike prices $5 or $10 out of the money will offer very little premium. So you might have to sell calls at $80, when the stock is $77.5, and you may only get $1 per contract, but if the trend of not going anywhere continues, the chances for the stock to be over $80 when the contract expires is also reduced.
You can also - sell the covered call when the stock is trending up, and if that changes, buy to close your position. You still own the stock, and have just made a few $$ buying the call to close at a lower price than you were paid when you sold to open. I do this a lot, often several times in a month. Nice little base hit trades.
I hope this makes sense, I certainly was never schooled in Fin stuff, and is just something I have learned along the way. Those smarter than me please chime in to correct me, or to explain in a simpler way. I really like the idea of earning "rent" on stocks I own, and like the idea of being called out at a price that guarantees a decent return. It is very satisfying to see what my cost average on some stocks are, having spent the last year selling covered calls every month or two. Really brings that cost average down
Paper trade this for a while until you are comfortable with what I describe. Use high volume stocks that are liquid, not low floaters, and be sure you at least have a basic understanding of options. Manage your risk.
Will take cold six packs but no IPA's 
after showing moderate to slight gains the first week of going more into BP/XOM/WES/EPD, all 4 have been rolling downhill for the last 2 weeks 
