Earnings Etouffe Redux

My very first recipe was Earnings Etouffe. In a nutshell, the strategy is simply to buy stocks that have raised their earnings guidance and sell them just before their next earnings release. In my April 7th blog, I mentioned 15 stocks that had raised estimates that I thought would be good candidates for this recipe. Since second quarter earnings season has just kicked off, I thought I'd go back to these stocks and see how well they would have performed.

Portfolio construction
The First Quarter Earnings Etouffe Portfolios were constructed according to the following parameters:
1. $5000 per position, giving a total portfolio value of $75,000 (15 stocks x $5000)
2. No margin was used; account interest of 2.5% paid quarterly
3. All transactions reflect end of day prices
4. $9.95 commission/trade (no other fees included)
5. Thirteen stocks were purchased on 4/7/08; MANT was purchased on 4/15 due to volatility and FCN was bought on 4/16 when it bounced off of support. (I mentioned both of these issues in the April 7th blog.).
6. Stocks were sold according to two scenarios:
Scenario #1: Stocks were sold just before their earnings were released. (This is according to the Earnings Etouffe recipe.)
Scenario #2: Stocks were held over earnings and sold on or after the date of release, depending on the time. (Companies reporting before the bell were sold at that day's market close; those reporting after the bell were sold at the close of the following day.)





Comparison of the two scenarios So, how did these two portfolios perform? Porfolio #1, the one where stocks were sold just before earnings, gained 3.5% (18% annualized return), while Portfolio #2 in which stocks were held over earnings gained only 2.3% (14% annualized return). What's interesting to note is that the field was evenly divided: 7 stocks fared better after earnings, 7 fared worse, while one essentially remained the same (FTD) . (See table) Although the percentage is even, the results obviously weren't. Two stocks, VVI and ASTE, dropped significantly which contributed to the underperformance of the second scenario. Now fifteen stocks is by no means a representative sampling but it still illustrates my point of selling before earnings.

Comparison with the S&P 500
Compared with each other, Portfolio #1 outperformed #2, but they both outperformed the S&P from April 7 - June 17. During that time, the benchmark index was down 1.6%. From this it seems that the tenets of this recipe are valid even in times of market decline. So if you're interested in playing this strategy, now is a good time to familiarize yourself with Recipe #1 and go stock hunting. Don't forget that you also have the option of using options, thereby increasing returns. There's still plenty of time to get in on this earnings season. Good luck and happy weekending!

Sexy Biotechs

For the past two days we've been judging best of breed among the drug sector. Tuesday's lineup included the Wholesale/Distributors and Generic drug makers. We found several decent plays but there was little else that warranted more than a passing yawn. The excitement quotient picked up yesterday with some attractive candidates lurking in the Ethical Drug industry (Big Pharma), and today's contest portends to be even better because on tap is the sexiest group of them all, the Biotechs.

The Lineup
There are hundreds of companies in the Biotech group ranging in size from micro- to large-cap with an estimated majority falling near the lower end of the scale. I looked at the chart of every single one and am happy to report that the most attractive stocks were found among the large-caps, although I did find a couple of decent small-cap stocks and one micro-cap. Okay, enough of the introduction and on with the show.

The Beauty Queens
Winning in all departments (including the much-dreaded talent portion of the beauty contest) are the following:
Illumina (ILMN): 5000% is how much this stock has gained in the past five years. But is it too pricey now that it's trading just under $90? Maybe. It's P/E ratio is catching up to its growth rate. For now, the company is slightly undervalued but it won't be if the price goes much higher. However, the company said recently that it expects second quarter profit of 37 to 40 cents per share, topping the 28 cents expected by analysts. Perhaps this good news is being priced into the stock...? All I know is that the Chicken Little in me would wait until after their next earnings announcement on July 22nd before deciding whether or not to jump in.
Celgene (CELG): This stock took a tumble along with the rest of the market last October. It bottomed out in December (earlier than most) and has been rising steadily since. Poor drug trials by a competitive product have helped the company's bottom line. At $71/share, it's closing in on its all-time high of $75 and change. I'd look to buy it here. Note that an analyst at Jeffries just raised company EPS estimates as well as the target price from $77 to $81 per share.
Techne (TECH): This company develops, manufactures, and markets instruments and other products for use in biotechnology and hematology world-wide. It's revenue, earnings per share (EPS), and EPS growth rate have been increasing steadily along with its share price. The deca-levels ($10 levels) seem to form resistance for the stock. It cleared the $70 hurdle a couple of months ago and is now looking to take-out the $80 level. If it does that on volume conviction, I'd be a buyer. Earnings aren't until Aug.5, but if it reports much better than expected results like it did on April 29th, you could see the stock leap well over the $80 mark, if it hasn't surpassed it by then.
Emergent Biosolution (EBS): This is one of the small-cap companies I mentioned above. It develops and manufactures vaccines for a wide variety of applications including anthrax, an agent of bioterrorism. The stock plummeted from a high of $17.75 to under $5 last December. It dug itself out of the trench and is now trading at $12. The company is currently involved in a he-said-she-said type of lawsuit which doesn't seem to be affecting the stock price. A good entry point would be a bounce off its 50dma. Earnings will be reported later in August.
Savient Pharmaceuticals (SVNT): Since 1995, this stock has steadily risen from under $2 to a high of over $28 per share. It's now trading about a buck below the high; breaking that level would be a bullish sign. It's gout treatment posted positive phase III clinical trial results which sent Wall Street pundits into takeover speculation mode as this treatment has dollar signs written all over it. (See my note below regarding takeovers in this sector.) The company has not announced the date of its next earnings release but if it's like years past, it'll be somewhere late in July or early in August.
CombiMatrix (CBMX): This may be the smallest of the companies promulgated here, but it wins the bathing suit contest hands-down. The company fabricates material arrays, including DNA microarrays, which are used in a variety of applications. It is also involved in biodefense and nanomaterials development. Can this company stuff a wild bikini or what?! Although its sales are comparatively small, its growth rate has been enormous. It was recently added to the Russell Microcap Index. The stock is having a tough time staying above $11 and if it can do that, I'll be a buyer. Earnings are scheduled for late July or early August. Also, please keep in mind that the average daily volume on this stock is only 20,000 shares, so use limit orders when entering trades.

The Runners Up
Here's a list of more good companies that didn't quite make the grade, either because they're trading off their highs or are in the process of recovery. For one reason or another, their charts weren't as compelling as the ones above. You'll have to do your own research on these since I don't have the time nor the space, but for what it's worth, the MSN Stock Scouter gave them all an 8 (out of 10) which is very good and my investment software rated them all a “Buy" except for Gilead and Martek which were rated as “Holds.” In no particular order, here are the runners up: Myriad Genetics (MYGN), Martek Biosciences (MATK), Gilead Sciences (GILD), ViroPharma (VPHM), Onyx Pharmaceuticals (ONXX), and Alexion Pharmaceuticals (ALXN). Genzyme (GENZ) almost made the cut but I'm not quite sure if the stock's current rally is for real or just a head-fake. I'd like to see it break its $82 high first. As a consolation prize it's awarded Miss Congeniality.

Summary
Well, now you've got a nice list of drug stocks to add to your buy list. One thing I noticed in my perusal of this sector is the inordinate number of recent takeovers. Considering the large quantity of companies in this sector, it's not unreasonaable to expect a certain amount of consolidation, what with many of the major drug developers cutting costs as their key revenue drivers lose patent protection and face stiff competition from generic equivalents. With increasingly lackluster offerings, big pharma is turning to biotechs to help them beef-up their product pipelines. Of course, one could always play the take-over game by trying to identify those companies prime for the picking, but considering the sheer number of drug stocks in the micro-cap universe, that seems almost as impossible as pushing an elephant through a keyhole.

Frankly, I can think of better things to do.

The "Ethical" Drug Stock Pix (aka Big Pharma)

Yesterday we looked at the ugly ducklings comprising the wholesale/distributor and generic segments of the drug sector and found little to recommend. Today will be a different story as there are many beaten down companies that deserve our attention. I mentioned that before yesterday, the drug sector had been on a stealth rise and was perched in the number 12 spot. Because of yesterday's across the board gains, the sector not only made the Top 10 list but the Top 5 list as well. Yep. It's now Number 5 with a bullet. I can't guess how much higher it can go--trying to topple the utilities and petroleum sectors will be no small feat. But the drug sector isn't the only one that has done well as of late; so has its partner, the healthcare sector, which is currently sitting in the number four spot. (FYI, the Market sector composed of long and short ETFs holds the number three position.) Healthcare is a subject best left for another time for today we're going to be judging the best of breed in one of the other two remaining drug sector industries: the Ethical drug makers (don't ask me how the term “ethical” came to denote big pharma). Biotechs, the last industry, is left for tomorrow.

The Beautiful Swans, Part I: The “Ethical” Drug Makers
This industry covers most of the major drug makers and it also includes some of the smaller ones. First on the list is Vivus (VVUS). This stock was a darling ten years ago when it was trading over $40/share. The company develops and markets sexual dysfunction drugs for both men and women. In 1997, it came out with Muse, an erectile dysfunction drug. A short time later, Pfizer introduced Viagra which not only killed the market for Muse but for the stock, too. In just one year, Vivus lost over 90% of its value, trading under $3. However, since the middle of 1995 its been upward bound and is now trading just over $8. Its Qnexa drug is in stage III clinical trials for obesity and in stage II trials for diabetes. The results look promising. They also have a couple of other sexual dysfunction drugs in clinical trials and recently sold a menopause treatment to K-V Pharmaceuticals in May, 2007 which gave the stock a nice boost on the behind. Today, it's looking a tad overextended; I'd wait for a pull-back before placing my chips on the table. One cause for concern is that insiders have been selling quite a bit of stock over the past year. Is there something they know that we don't?

After losing nearly 50% of its value since fall 2006, AstraZeneca (AZN) made an about-face in the middle of March and is now trading at $48, nearly 37% above that low. This is one darn fine company, rated a 10 by the MSN Money Stock Scouter. Among many of its successful and lucrative products include the highly publicized Nexium and Crestor. The stock recently broke above its 50dma on a weekly chart--a positive technical event that signals a continued rise in price. Another good sign is that the company has been steadily increasing its dividend which now stands at $1.82 annually for a 3.9% dividend yield.

Other stocks that are rising from the ashes are Schering-Plough (SGP), King Pharmaceuticals (KG), and Novartis (NVS). I like the price action on the first two but am a bit hesitant about recommending Novartis. Sure, its price has increased by nearly 24% in the past several months but this is exactly the reason I'm being standoffish--at least for the moment. Its chart is looking toppy and I'd like to see it take a break before entering a trade. The other two companies have been steady eddies, and their consistent price pattern is something I find more reassuring. Schering blew out last quarter's estimates and is reporting good phase III test results with its hair follicle stimulating drug. King Pharmaceuticals is recovering from a two-year low. It recently broke heavy resistance at $10 and is rising steadily. The fundamentals on this company seem to be lackluster, but they did beat analysts' estimates for the past two quarters. I'm recommending this stock purely on the basis of its chart action.

There are three other stocks here that have been doing exceptionally well: Elan (ELN), Wyeth (WYE), and Valent (VRX). The reason that I'm not giving them two thumbs up is that they all look over-extended and are likely due for a breather, but I'd keep them on a watch list.

Summary
My plan for today was to include the biotechs but there are literally hundreds of companies in this group and it's taking me much longer to analyze than I had expected. Tomorrow I promise this will all be wrapped up, but you won't be disappointed 'cause there's quite a few sexies in the lineup.

Trading Note: I'm seeing large topping tails on the the PPH and the BBH (the pharmaceutical and biotech ETFs) and in many of the drug stock charts. This generally bodes ill for continued upward movement in the short-term. Keep this in mind if you're looking to buy either the ETFs or some of the underlying stocks. Patience, in this case, is a virtue and will ultimately be rewarded.

A Shot in the Arm or Another Bear Trap?

Who pushed oil and commodities off their lofty ledge? Hello! Is NOTHING sacred??? Geesh! Just when you think you've got this market all figured out...Is there nothing left to buy?

Maybe. There is one sector that has been rising stealthily, unseen beneath the blinding curtain of the falling dollar and rising energy and commodity prices. Just last week, this sector was 30th in the rankings but as of yesterday, it's now perched in the twelfth position. And if today's action is any indication, it could break into the Top 10 tomorrow. What is this sector? No, unfortunately it's not the financials--yet. It's another beaten down sector, the drug stocks.

The case for drugs
The chart of the PPH, the Pharmaceuticals Holder (an ETF), shows that it's up 4% over its multi-year low at $66.50, a number that it hit three days ago. But it has three resistance levels at $72.50, $75.50, and $77.50 to clear before I'd be a firm believer. The Biotech Holders, the BBH, paints a rather different picture. Sure, the daily chart has been trending up for the past six weeks, but if you look at the weekly and monthly charts, the forecast may not be as rosy. The stock has declining steadily since 2005, and the pennant that it's now forming can be construed as a bearish sign. Just to be on the safe side, I would personally wait until the price cleared $182 before I put on full positions in the biotechs.

The four major industries
I have no idea if this sector rally will hold, but it's worth a look just in case. What I'm going to do is to pick what I feel are the most compelling stocks in each of the sector's four industry groups: the Generic drug makers, the Ethical drug makers (the large-cap pharmaceutical companies are in this group), the Biotechs, and the Wholesale/Distributors. These groups are composed of many companies and to try to include them all in one blog is too much for me as I'm perenially short-staffed. So, the plan is to tackle the ugly ducklings today and leave the beautiful swans to tomorrow.

The Ugly Ducklings

The Wholesale/Distributors
This is the least compelling group of them all. In fact, with the exception of one stock, it's downright fugly. The two major names here are Amerisource Bergen (ABC) and Cardinal Health (CAH). Both are down over 30% from their recent highs and both are sitting at major support. McKesson (MCK) is the other major player. Its near 4% gain today is but a small step in the right direction. It's going to have to break $60 for me to even consider it. No, the only compelling stock here is Owens and Minor (OMI). The stock has risen almost 70% in two years and the bounce off of its $44 support yesterday combined with a nice gain today signals that a break to new highs could be in the offing. The company is in good financial shape, too. Zacks recently included it as part of its Discounted Fundamental Strength strategy which identifies stocks with strong fundamentals and low valuations. As an added plus, the company pays a dividend (current D/Y is 1.7%).

The Generics
This is another small group and only slightly better looking than the above. The biggest names look to be the most compelling. Teva Pharmaceuticals (TEVA) tops the list. Despite a disappointing trial result for its MS drug yesterday, it was upgraded today by a Goldman Sachs analyst. This left me scratching my head until I saw that Goldman owns 8.5 million shares of the company's stock. Okay. Now that makes sense. Chart-wise, the stock has been sliding away from its all-time high of $50 put in several months ago. It's currently bouncing off support and if it manages to keep moving in a positive direction, I'd hold onto it at least until it retests its high. On the other hand, if it continues in the downward direction, I'd dump it if it breaks below $42.
Nothing else in this space warrants a buy recommendation (and TEVA barely gets that). The “not-as-ugly-as-the-others” awards go to Perrigo (PRGO), Barr Pharma (BRL), Watson Pharmaceuticals (WPI), and Mylan (MYL). All have recently been trending up but hey, so have a lot of other stocks. There's nothing in this sector to get excited about at the moment.

Summary
Now that we've cleared the stage of the coyote uglies, we've got room for the real lookers--the biotechs and big pharma which we'll be judging tomorrow. 'Til then!

Handy-Dandy Financial Resources

For those of you who are “staycationing” over the Fourth and find yourself with way too much time on your hands, here's a short list of some financial websites that I use regularly for research and information that you might like to peruse. Now, most folks rely on one of the more common, comprehensive sites as their primary source of financial information such as Yahoo! Finance and MSN Money Central, but there are other sites that provide niche products that these don't. Since this is a holiday-shortened market day, Dr. Kris & Co. is taking off early. So without further ado, here are the sites that I find useful along with a few brief highlights.

The Do-All/Go-To Sites
The following sites offer a variety of resources, tools, and (mostly) free services: business news, stock charts, market stats, company descriptions, mutual fund/ETF/bonds/currency centers, earnings events and economic calendars, SEC filings, insider trading, analyst upgrades/downgrades, stock screeners, financial blogs, investment newsletters, email alerts, streaming financial videos, educational tools on all aspects of investing (including options) and personal finance including calculators and portfolio trackers. And the list goes on and on. You can easily spend several hours if not the better part of a day just getting to know one of these. Of the sites below, Yahoo! and MSN are the most comprehensive.

Yahoo! Finance: http://finance.yahoo.com/
They have a new feature called Tech Ticker that is basically one big blog along with streaming video clips.
MSN Money Central: http://moneycentral.msn.com/home.asp
Offers a stock screener and email alerts that Yahoo! doesn't.
Google Finance: http://finance.google.com/finance
This site isn't nearly as comprehensive as the other two which may be a big plus for you "less is more" type folk.
CNBC.com: http://www.cnbc.com/
You can enter their over-hyped contests from here.
Zacks.com: http://www.zacks.com/
Offers a nifty free screening tool plus two weeks free use of their research wizard. (Note: Some of their stock screens are subscription only.)

The Niche Sites
These are a few of the sites that I use to find specific info fast.

Full Disclosure (now Earnings.com): http://www.fulldisclosure.com/
Bare-bones site featuring economic highlights, previous and upcoming earnings estimates and results for all listed companies, earnings/conference call/splits/dividend/economic events calendars. I use this site all the time.
Street Authority.com: http://www.streetauthority.com/default.asp
Good investor education tools including a comprehensive financial dictionary, a description of each market index, and a free options course.
Morningstar.com: http://www.morningstar.com/
The Uber-Site for ETFs and mutual funds. They also offer in-depth reports on over 6000 hedge funds. It's by subscription but there's a two week free trial.
TheStreet.com: http://www.thestreet.com/
Have some fun in the financial horoscope section which includes celebrity horoscopes and a money matchmaker.

Options Sites
The CBOE offers free online options tutorials and courses and is the place to go for options pricing and everything else options-related. The OIC also offers free options classes as well as downloadable options software. Both links are at the top of the page.

Summary
The above sites are just the tip of the financial information iceberg. If you've always wanted to learn options, this weekend would be a great time to sit in front of your air conditioner with the baseball game in the background and your computer tuned into an online options course. I just may do that myself and brush up on a few strategies...or I just might lie on the beach and read.

Have a safe and fun Fourth!

Five More Tasty UltraShort ETFs

In yesterday's blog I mentioned five ultrashort ETFs that look especially compelling under current market conditions. However, I feel that five just isn't enough choice for a hungry bear so I'm introducing five more that I find particularly attractive. But beware! One of them is the ultrashort basic materials fund that has leapt up 10% just today. What this means is that if you want to buy it but are already holding some stocks in the materials sector, you'll be working at cross-purposes. To avoid being looked upon as a schizophrenic by your broker, this might be a good time to take your profits and exit your long positions.

Okay, here are today's picks.

More Ultrashort ETFs
(Note: Prices quoted are current at the time of writing.)

Materials (Ultrashort/Long): SMN($32.30)/XLB($40.) The materials sector has had a great run-up but has been running out of gas since May 19th, the bear market tipping point. The XLB broke major support a couple of days ago at $42 and is making a beeline for its next support line at $38. This translates into a 10% move in the SMN placing it right at its next resistance area at $35.

Semiconductors (Ultrashort/Long): SSG($68.80)/SMH($29.10) The semi's have dropped by 17% since mid-May and are heading down towards their major support level at $28. Assuming that happens, we can expect a corresponding 8% rise in the SSG to the $74-$75 region. Note that if the SMH breaks $28, there's no telling how much further it might drop since it'll be flying without any safety net, at least until the next support level at $20.

Russell 2000 (Ultrashort/Long): TWM($81.20)/IWM($67.75) The death knell for the Russell 2000 sounded on June 5th, a couple of weeks later than for the rest of the market. The IWM is sliding toward its next support level at about $64.50, and if it reaches that, the TWM will have gained roughly 10% to $89.

Emerging Markets (Ultrashort/Long): EEV($79.50)/EEM($132.) The long ETF, the EEM, has been an outstanding performer since its inception in 2003, chalking up a 380% gain at its October 2007 peak. Since then, it's been in a decline and put in what appeared to be a double bottom in January and March. But like most of the overall market, it rolled over on May 19th and appears to be heading towards its $126 support level. If it can accomplish that, the EEM will be on track to reach the $87 level for a 9% gain.

S&P Midcap 400 (Ultrashort/Long): MZZ($57.80)/MDY($146.70): The chart pattern for the S&P 400 is very similar to the that of the Russell 2000 (probably because they both are composed of smaller-cap stocks). The MDY peaked on June 5th. The next stop looks to be where it put in its double bottom in the $135 area. This will give us a target price of $67 on the MZZ for roughly a 16% gain.

From among these ten ETFs (including the five mentioned yesterday), even Papa, Mama, and Baby Bear should be able to find a few things that suit their palates. If you're finicky and don't like what you see here, there's plenty more tempting ultrashort funds on the menu, but please, no whining. Goldilocks is in no mood for grumbling!

FYI: I said yesterday that I didn't know how many ETFs are currently being offered. According to MSN Moneycentral, there are 742 funds on their ETF list.

UltraShort ETFs: Is there some play left?

This market has been especially frustrating for the traditionally long-focused investor, and as a favor to these types of folks who might be frightened about shorting stocks I thought I'd give them a chance to go long while taking advantage of the short side of things. How? By buying short-sighted ETFs allows one to effectively short an index by going long. As we've noted before, the ETF universe has exploded in recent years and there are literally hundreds (if not thousands?) of exchange traded funds that cover virtually every index imaginable--from niche industry groups to international markets, including emerging markets. The difference between a plain-wrap short ETF and an ultrashort one is leverage. Most ultrashort ETFs move twice as fast as their regular counterparts, thus enhancing returns. But of course, leverage is a double-edged sword as you can lose money faster, too, thus reaffirming the value of setting stop/losses. So what makes these ultrashort ETFs such an attractive investment strategy right now?

We're in a bear market. Get used to it.
As I've been mentioning for the past couple of weeks, the market has switched into bear mode with further downside not only possible but highly probable. Why do I say that? Because of the VIX, the volatility index. The VIX has been heading up for the past month and a half, passing from bullish to bearish in the beginning of June when it crossed the 20 level. Currently it's at 25, no where near its market capitulation level of 35 which it has touched several times in the past year. I firmly believe that we're not going to see any type of market correction until the VIX clears the 30 level at least. An increasing VIX puts further downward pressure on the market, and I don't think anything except for energy and perhaps materials stocks will be exempt from the carnage.

And that's why I think buying ultrashort ETFs is still a good move. But which ones?

The Ultrashort short list
As I mentioned above, apart from anything having to do with energy or materials (and perhaps a few other commodities), even a blind monkey could pick ultrashort ETFs that will make money. The field is that good, but the charts of some of them are more compelling than others. Here's a list of my favorite ultrashort candidates along with their long ETF counterparts for chart comparison. (Note that there can be more than one ultrashort fund per index. If there was a choice, I chose the more heavily traded fund.)

Technology (Ultrashort ETF/Long ETF): REW($64.50)/XLK($22.80). Major support on the XLK is at $20. This translates into over a 7% rise in the REW which is at $70. Major resistance is around $77 which is a 12 point move from current levels for an 18% return.

Dow Industrials (Ultrashort/Long): DXD($64.50)/DIA($113.60). The DXD made a new two-year high today. The next major stop for the DIA is at $110 which corresponds to roughly a 4 point move in the DXD (6% gain).

S&P 500 (Ultrashort/Long): SDS($66.90)/SPY($127.90). The S&P is currently sitting on minor support at 1280 (the SPY is at 128). If it breaks through this (and I think it will), the next support area is around 1235. Doing the math shows that the SDS is expected to reach close to its multi-year high of $72 for a 7% return.

Nasdaq 100 (Ultrashort/Long): QID($43.90)/QQQQ($45.75). The Q's broke support a couple of days ago and the next stop seems to be 42. If the Qs drop to that level means that we should expect the QID to reach $49.60 (or so) for a return of over 12%.

China (Xinhua China 25 Index) (Ultrashort/Long): FXP($85.90)/FXI($130.30). The FXP has already risen over 40% since the beginning of May. It's entering into a congestion area at 90 and if it can break through that, it may make a run to its old high of $120 which, coincidentally, is also a major support level for its long counterpart, the FXI. But even if the $120 support level holds for the FXI gives us a target price of around $99 for the FXP--a return of 15%.

Well, this is the short list. I didn't include the SKF, the financial ultrashort, which has already zoomed up 65% since May. Today's topping tail could signal a short-term decline, so I wouldn't jump in here just yet (if at all). I'm going to construct an equally weighted portfolio of these five ultrashort funds today and see how we do over the next couple of months. I have two target exit dates: 1. If the VIX rises above 30, my exit date will be the day it drops back below it, and 2. If the VIX never reaches 30, I'll exit the portfolio when it falls under 20.

It's good to have an escape plan.