Focus aka non-Diversification

Updates on the previous short-put/long-LEAP-call strategy.

New thoughts:

• Reduce the number of positions; concentrate on a handful where there is a high level of confidence
• Forget the short Puts idea; it only adds distractions
• Focus on a few, specific underlying stocks
• Each of the underlying must have some special advantage, that's not widely known: new device, new technology, or new leadership
  
• The underlying must also be in an industry that has a global growth trend; e.g. for now, mobile-web, healthcare (e-Prescribing, e-Records)
  

Strategy: It's critical to have an Exit Plan

For every position entered, there must be a clearly-defined, preferably automated exit strategy for both profit-taking and stop-loss. These two exits must be defined when the position is entered, and contingency orders created where possible.

Exits for different strategies are given below.

Short Put
- P: Close out when cost of buy-back is down to 10% of initial premium.
- SL: If the stock hits the strike price, roll down and out if necessary.

Long LEAP Call
- P: ?
- SL: ?

Long Stock
Establish a core position, say x blocks, and a max position.
- Up: sell a block each time the stock goes up by 10%.
- Down: Buy a block each time the stock goes down by 10%, up to max number of shares.

Strategy: Stock up on LEAP Calls for the recovery

Main idea:
Buy undervalued assets

Strategy:
- Use account as collateral for selling near-term, expensive OTM PUTs for good underlying stocks
- Use the premium obtained to buy, over time, cheap 2012 OTM LEAP CALLs
- Underlying for LEAP calls must be a solid company (e.g. GE, INTC, HON, C) and consistent with an underlying mega-trend
- Use Stop-loss strategy to dump losing positions at minimal loss
- How to select: highest confidence level that it will rise + largest 3-month gain

Mega-trends:
- Secular economic recovery
- Mobile web / smartphone
- Health information, wellness, fitness, weight loss, chronic conditions
- Large-scale epidemics
- Declining dollar