Despite escalating trade tensions, dysfunctional politics, rising interest rates and myriad other concerns; the market is hanging in there so far in 2018.
While the S&P 500 is roughly flat year-to-date as can be seen above, small caps have performed much better on the year. The Russell 2000 has outperformed its larger brethren as small caps are less impacted by tariffs and other aspects of an emerging 'trade war'.
Earnings growth has been spectacular for this late in the bull market cycle with S&P 500 earnings projected to rise some 20% year-over-year in 2018 thanks largely to the impacts of lower corporate tax rates and a robust domestic economy. However, we can probably expect this 'sideways market' to continuing over the next few months or until trade tensions are resolved.
Despite having 10% to 20% of my personal portfolio in cash throughout 2018, it is up in the low teens so far this year. My secret? As I continue to highlight on SeekingAlpha, I am using simple options strategies, primarily Buy-Write orders to mitigate risk in my portfolio and also to take advantage of higher option premiums thanks to the increase in volatility in the markets this year.
I believe every investor should at least have a basic understanding of options and how they can be used to more effectively manage their portfolios. This is especially true for investors that delve into the high beta areas of the market like biotech. Options are where ETFs were a decade ago. Available but not widely used by most investors. I highly recommend all biotech investors have a working concept of at least simple option strategies. Any decent options book on Amazon can provide a decent understanding of these sort of simple ways to mitigate risk and enhance returns in your portfolio.
In addition, my colleagues at Investors Alley have just published a free report entitled '10 Simple Rules To Trade Options Like A Pro' for those that want to learn more about profitably adding options strategies to their investing 'toolbox'. It is now available free via download HERE. This is also a great primer in this area for those that want to add a new 'arrow' to their investment quiver.
Thank You & Happy Hunting
Founder, The Biotech Maven