With the market falling – I need to add more equity exposure based on my Portfolio Rebalancing Rules. Looking at which sectors of the market are cheapest – Energy jumps out:
| Name | Ticker | Price | Fair Value | P/FV |
| Energy Select Sector SPDR® ETF | XLE | $60.46 | $71.84 | 84% |
| Financial Select Sector SPDR® ETF | XLF | $23.45 | $26.58 | 88% |
| Health Care Select Sector SPDR® ETF | XLV | $70.30 | $76.65 | 92% |
| SPDR® S&P 500 ETF | SPY | $201.88 | $219.08 | 92% |
| SPDR® Dow Jones Industrial Average ETF | DIA | $172.73 | $187.19 | 92% |
| PowerShares QQQ ETF | QQQ | $110.82 | $118.93 | 93% |
| Technology Select Sector SPDR® ETF | XLK | $42.80 | $45.59 | 94% |
| Utilities Select Sector SPDR® ETF | XLU | $41.79 | $44.39 | 94% |
| Consumer Staples Select Sector SPDR® ETF | XLP | $49.48 | $50.49 | 98% |
I know that Oil will probably keep falling – facing a lot of short term headwinds:
On Friday I decided to sell 10 January 2016 put contracts at the 55 dollar strike – that would represent another 9% decline from the current price of $60.46. That would put XLE at about 76% Price / Fair Value – which is close enough to my preferred 25% discount. I collected $1,000.00 in premium – so if I am put all 10 contracts, my buy in price would be *$54,000.00 ($55,000.00 – $1,000.00).
I feel I am getting a decent Margin of Safety with this trade – but expect a lot of drama in the short term.
*Profit/Loss calculations exclude transaction costs.
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