A Couple New Risk-Averse Positions

All cash lasted a while, didn't it?

I liked the price action in 2 ETFs today: TLT and XHB

iShares 20+ Year Treasury Bond Fund (TLT)

TLT is looking overbought, which isn't surprising given that stocks are getting hammered. Today though was just ridiculous. TLT flew higher and then closed below where it opened, which to me is short term bearish. the 10 year treasury bond dipped underneath 2% today for the first time since June of 2013, as it become more and more apparent to traders that the Fed obviously isn't going to raise interest rates.

Today I bought 4 of the Dec14 122/123p for 0.60... that's a max risk of $240 or 1.2% of capital.

SPDR Homebuilder ETF (XHB)

This is both a support play and a (kind of) hedge. Home builder stocks are pretty interest rate sensitive; if rates rise, mortgages are more expensive, demand for housing declines, they build less homes... and vise versa. XHB tagged its June 2013 double bottom lows, and is outside of its weekly BB range, which are much stronger ranges on weekly candles than daily. The fact that it closed up 1.66% today was a good sign given that stocks had their worst day since 2011... but even they pared losses to close down 0.75%.

I bought 5 of the Dec14 28/29c for 0.47 shortly after XHB reacted to that support level. They're now at 0.55, so I've logged paper profits of $40 already.

The hedge works like this: if TLT declines, XHB might as well. If TLT goes up, XHB might as well. Since XHB trades off of interest rate changes (mainly the 20+ year rates), it may react in tandem with TLT since that is a proxy for 20+ year rates.

Why the hedge? Well, check back to my post on October 1st, I called for the Russel 2000 to "fall precipitously and swiftly right down to 1040" if support around 1080 was broken. Yeah, I was totally right. But I didn't make a position! How foolish! As my SPY calls were getting destroyed, I could have been making a killing in IWM puts!

So, as long as the market is bleeding out, I will attempt to hedge my bets. It's been a long while since stocks have seen volatility like this, so there's no reason to start throwing money around.

Additionally, other opportunities that I was looking at and totally missed were GLD and, um, a SPY short! Instead of getting out and going short I started to defend why I was long the SPY... a mistake. I've been bearish on stocks all god damn Summer. Yet, there I was, pretending to be bullish because I had a long position. Lesson learned.

Here are the charts to go along with:

SPDR Gold Trust (GLD)

SPDR S&P 500 ETF (SPY)