Wednesday, June 29, 2016

Position is Profitable: What Now?

Well the hardest investment question just got harder.  The large position I took in the S&P 500 on the Brexit drop on Friday, over which I was ringing my hands and discussing in this blog, is now marginally profitable.  (See chart below.)  So what do I do, take the profit?  This position was designed as a short-term trade and now it has worked to a degree.  Even though the market is not back to where it was before the Brexit decision, it is above the level to which it fell after the announcement.  Furthermore, I would not expect it to come all the way back.  After all, Brexit was bad news even if the market overreacted.  On net, it looks like time to unwind but the decision is not easy.  This is why most rational scholars recommend against trying to time the market!

Postscript.  As the profit rose further I decided to cover.  The chart has been updated to reflect the level at which the position was closed.

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