Retail trader: Buying gold, blue chips on dips

Published Fri, Jan 23 201510:23 AM EST

The small investor remains bullish on the gyrating stock market of 2015, buying some blue chips such as IBM and Bank of America on dips after earnings misses but also using options and ETFs to hedge against the potential for short-term market declines, according to an early peak into the 6 million retail accounts at TD Ameritrade. The little guy is also getting bullish on gold. So much so that a leveraged ETF that tracks three times the returns of gold miner shares is among the top 20 traded equities by TD clients. "I would say our clients are cautiously optimistic," said JJ Kinahan, chief strategist at TD Ameritrade. "Just like many pros, our clients believe in the equities they hold, but want to hedge the downside." IBM shares are down 3 percent this year after issuing a disappointing forecast. Bank of America is down 10 percent for 2015, but off its lows for the year. Apple also continues to be bought on dips by the retail investor. That stock is up 2 percent for 2015. Read More Is this the start of a gold bull market? The Direxion Gold Miners Bull 3x Shares ETF , which tracks the NYSE Arca Gold Miners Index, is up 72 percent on the year as a breakout in the metal lifts companies that find and sell it. Gold, still watched closely by the retail investor as a safe haven despite its poor performance during the financial crisis, is rising as the European Central Bank becomes the latest to debase its currency through a quantitative easing operation. "They are finding different ways to express their opinions," said Kinahan. "Some people aren't comfortable trading gold futures so they are synthetically buying gold with the ETF." One word of caution on that gold ETF. Those early gains may look mighty appealing, but because of its leveraged nature, the moves to the downside are just as exaggerated. If gold begins to fall, those gains can be quickly wiped away so only those with the right risk tolerance should trade that highly volatile security. Read More New York trader: Beware head-and-shoulders chart Retail investors have been actively buying options in the CBOE Volatility Index , which have risen in value on the market's wild swings this year. They also purchased the iPath S & P 500 VIX Short-Term Futures ETN , which is supposed to track the rise in the VIX. "Volatility is starting to become a part of portfolios just as fixed income, equities and cash are," said Kinahan. One interesting battleground stock for the retail investor this year is Twitter . The social media firm is among the most actively traded stocks, but the buying and selling action is split right down the middle, according to TD.

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The little guy is also getting bullish on gold. So much so that a leveraged ETF that tracks three times the returns of gold miner shares is among the top 20 traded equities by TD clients.