A recent question from an investor touched upon a number of aspects of building a portfolio and protecting it from losses. This is a very lengthy article at 5100 words. It will require 16 pages if printed. It is broken into 4 parts.

This investor had traded and earned $10,000 when a correction caught him unprepared and wiped out the $10,000 gain. His questions touch upon the issues of the importance of setting goals, reaching those goals and how to preserve capital. Let’s look at his questions and then view some answers. My changes and additions are in brackets.

Investor Questions:


Attached (below) is my portfolio with 120k in it.

My Goal:

  •      To make $1000.00 biweekly using the scheduling strategy with Apple and Visa. (this is part of the biweekly Put Selling strategy)
  •      Preserve Capital during down turns and not take a loss.

My Plan:

I am staying to (trading out just) 2 weeks (at a time) to be careful. (selling put options biweekly)

My speculative stocks are GILD (Gilead Science stock) and FB (Facebook Stock).  I am only trading one stock at a time.

The rest should be in stalwarts.

My plan (is to use no more than) 50% margin .5 * (At present this is $60,000) So I would reserve 30k for rescue and 30k for extra puts.

Please review my portfolio.  Let me know if I am allocated correctly, diversified enough and not over selling puts which I have a tendency to do.  It’s a portfolio margin account, so I have been using spreads more.

Any advice on preservation of capital would be great.  I just hate making 10k and lose it on a quick correction.  Thanks

Portfolio: $120,000.00 available capital

STO -4 ADM aug 22  46 put@ .49

200 shares (Bank of New York Mellon) bk 38.02

STO -2 bk aug 15 38 call @.9

STO -5 fdo oct 17 62.5 put @2.94

1000 sh fez @ 43.44

STO -10 Fez aug 15 43 call @.24

STO -7 fez nov 41 put @.94

STO -11 JNJ oct 17 $95 put @1.08

BTO 20JNJ aug 15 90 put @ .07  * this is the spread that went bad – I went and closed ½ and rolled the rest. Used 11 puts to keep roll positive

100 share (AT&T) T @ 35.26

200 shares WFC @51.52 * can I keep wfc as core position?

STO -5 wfc oct 17 52.5 put @ 1.9

STO -5 yum aug22 75 put @.55

Cash $52,478


My Answers:

One of the hardest things to do when offering advice is to review someone’s portfolio because almost always they will never match my own style and my stock choices but let’s look at the areas Fred is seeking advice in which are:

1) Is he allocating his capital appropriately.

2) Is he diversified enough

3) Is he holding (overselling) too many positions for the amount of available capital

4) Ideas on how to preserve his capital when trading.

Let’s look at each question and see what answers can be presented to assist Fred in his investing goal. There are no commissions taken into account in any of the answers presented.

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