Good morning!

The RNS feed today is uninspiring, frankly.

To add to the gloom, the market is awash with red ink and is down by 1.3% as I write this.

In particular, I have a holding in British American Tobacco (LON:BATS), which is lower on news that cigarette consumption is reducing at a faster-than-expected rate, mostly because people are switching to alternatives more quickly than anticipated.

But the tobacco sector doesn't explain why the market as a whole is weaker. Mainstream media tries to help us understand the wider malaise:

The blue-chip index took a tumble after the opening bell on Wednesday, falling 0.7 per cent as traders struggled to find anything other than the US-China trade war to focus on.  

That doesn't help us much, I'm afraid. Oftentimes, it's not clear why the market is doing what it is doing - the only ones who know are the ones doing the big buying and selling on that day.

Whatever the reason, I've taken advantage of the improved pricing this morning to increase my FTSE exposure, via put options. I haven't got my buying boots on properly yet but I would if we saw the index back around 6500-6600. Might be waiting a while for that!

Here's my latest portfolio breakdown, including cash and the funds in my derivatives account:

  • Equities 85%
  • Fixed Income 8%
  • Cash 4%
  • Derivative account 3%

This doesn't tell the whole story, however, as my derivatives trades are leveraged to a significant degree. If I take into account the use of leverage and the underlying exposures, the breakdown looks like this:

  • Equities 73%
  • Fixed Income 7%
  • Cash 3%
  • Derivative exposure 17%

Quite a big difference, I think you'll agree!

If you have a spread betting or CFD account, I can't emphasis enough how important it is to understand the notional amount you are betting on. I'm sure most of you already do this, but if anyone out there doesn't do it as a matter of routine, you really should start doing it!

To emphasise the point: if you wouldn't spend £100k on a short-term trade with real money, then it might not be a good idea to do it with borrowed money, either. The losses won't be much smaller for doing it with borrowed money, but they might be a lot quicker.

I'm probably preaching to the converted here, but I just thought…

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