$100K Hedged Virtual Portfolio Update
This week we made several $100KP Adjustments, which triggered during Tuesday’s chat.
However, only the entries on the new trades will be adjusted as the intention of the virtual portfolio is to do weekly adjustments only on trades once we hit our entries. We don’t trust the markets enough this week to add any sectors so we’re still just messing around with the financials at the moment but we did add our DBC and UNG plays with mixed results.
On Tuesday I did suggest a couple of changes to the existing positions:
- Taking out the C $3 calls for .30 (now .44 – up 46%)
- Selling 2 IYF $34 puts for 2.10 (now .80 – up 62%) and rolling the $36 puts down to more $34 puts.
- Not big deal if you missed it as the $36 puts are still on track to expire worthless.
- Selling 2 more JPM $28 puts for $2 (now .73 – up 63%)
- Stopping out the FAZ puts at $1.60 as that was a 50% gain – they are now back to $2.83 (up 77%) and THAT is why we take profits off the table!
It is a very choppy market and we can make fantastic gains like this making mid-week adjustments. If you are following this virtual portfolio – make sure you are signed up for Alerts (this one came Tuesday at 10:37) and our upgraded system will be able to put titles on the Alerts so future mailings should get your attention quickly when they are about the Sample Portflio.
Whether you made the adjustments or not, there are no changes to be made this weekend as we’re drifting into next week pretty much where we were at the end of last week and the puts and calls we sold are losing their premiums right on schedule. Our new trades are going well so far off the Tuesday entries and it really paid to wait:
- Selling 10 FAS May $6 puts at $1.20
- Now .57 (up 52%), need a stop at .65
- 200 GE at $11.28, selling June $10 puts and calls for $2.95, net $8.33/9.17
- GE is now $12.11 and the June $10s are $3.06 so very good so far.
- Selling 10 URE June $3 puts for .70 naked
- Now .43 (up 38%)
- 300 PGF at $10.23, selling May $10 puts and calls for $1.25, net $8.98/9.49
- PGF is now $11.22 and the May $10s are $1.90, also going well – don’t forget, this one is a dividend play.
- 10 DBC 2011 $15 calls for $6.30, selling 5 May $20s for $1, Now .45 so waiting…
- The 2011 $15s are $6.95 and we’re still waiting on the sale, now .65 for the calls.
- 5 UNG Oct $8 calls for $6.20.
- Now $5.55 (down 10%) but the sell-off seemed very strange with oil heading higher so we’ll wait and see. We can currently sell the June $13s for $1.23 and we do need to sell 3 if they hit $1 but hopefully that won’t happen.
With a leap like UNG that’s going against us, you need to start thinking ahead. We have lost .65 and we can sell 3 $13 contracts for $1, which is $300 back (.60 per leap). Of course we would be down more by the time it triggers but it will lower our basis to $5.60 and, 20% below that, at $4.40, we would be willing to DD, dropping our basis to $5 on 10 contracts ($5,000) and we can, in the very least, sell 5 July $13s for $1, dropping our net to $4.50 on the $8 leaps (at $4.40). That is what we consider on track and we would still have Aug and Sept left to sell and only a 1/2 cover into, hopefully, a summer run-up.
The bottom line is we have a plan down to $4.40 which means we’re not going to panic unless we clearly think that may not hold. The delta on the Oct $8s is .96 so we are going to move pretty much penny for penny with UNG so our tolerance is for a $1.15 sell-off from $13.12 (8.5%).
Other than that, everything else is in fine shape so no worries. As I said during Friday’s post, the only real adjustment I would make is to take additonal FAZ hedges by selling puts again, as we can always use them for long-term protection. Selling 10 $7.50 puts naked for $1.10, even $1, adds a nice $1,000 downside hedge and we can roll them along long-term in case everyone decides they love the stress test and the financials zoom up.
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