I’m Dreaming of a White Christmas – Portfolio
Wow, what a market!
Maybe we closed out our $25,000 Portfolio too early last week, with a virtual gain of $105,000 (420%) for the year, but we still have our Income Portfolio, which was quite bullishly positioned and well ahead of goal as well as positions in our very aggressive September’s Dozen List that are winding down, so we decided to set up this new virtual portfolio with the goal of turning $15,000 in to $25,000 between now and Christmas to have a little extra spending cash for the holidays.
The strategy is the same as the $25,000 Portfolio, which is meant to be the aggressive, "risk" portion of a $250,000 or larger portfolio, utilizing excess margin to our advantage with the goal of making a series of hit and run plays, with the goal of making $1,000 a week for the next 10 weeks. Also like the $25KP, we take our winners off the table and work out our losers as best we can because, above all else, this is an exercise in adjusting and managing short-term positions.
This virtual portfolio will be available to Voyeur Members but trade ideas during chat will have their usual 1-hour delay. Premium members will get the trades with no delay Basic Members also see WCP-related comments with no delay as well. New trade ideas and updates will be copied into the comment section of this post or, assuming I write one, the updates of this post. If you are not a Member yet, now is a good time to join. Check out the subscription page – Our EXAMPLE trade on C closed up 200% and our ENP example returned 137% – not bad for free samples, right?
Our first official trade for the new portfolio was one we discussed on the weekend, GNW, which I added to the main post on Monday (and discussed that afternoon, in part, in my BNN interview). We’re not going to re-hash the logic for every trade here, this is simply a review post to track the trade ideas (and, while we do our best to be as accurate as possible, we do NOT include trading fees, which vary greatly so always take that into account) so we can see how they are doing and discuss how they can be adjusted but, of course, all the live commentary goes on during trading hours in Member Chat:
It was a very busy first week and we’ve already closed (and opened) the following positions:
- 10 SSO 10/28 $45/46 bull call spreads at .40, out at .90 – up $500
- 20 FAS 10/28 $13/14 bull call spreads at .60, out at $1 – up $800
- 5 AGQ Nov $70 calls at $2.10, out at $4.20 – up $1,050
- 10 DIA Nov $114 puts at $2, out at $2.15 – up $150
- 4 DECK Jan $115 calls at $6.25, out at $10 – up $1,500
- 10 DIA Nov $119 puts at $1.85, out at $2 – up $150
- 10 USO 10/28 $36 puts at .14, out at .15 – up $10
So, we have 7 closed positions with $4,160 worth of gains in our first week. That’s not too shabby but we have to also see how our open positions are doing and they can get ugly in the early stages of these portfolios as tend to take of our winning positions and let the losers ride – including the losing half of a spread – like the DECK short calls. These aggressive portfolios are not for the feint of heart, that’s for sure! In fact, here are my comments from Wednesday’s Member Chat:
As I have said early and often, the WCP is not meant to be played by people who only have $15,000. For one thing, you can’t day-trade $15K without getting flagged. It’s meant to be the RISK PORTION of a larger portfolio that should be mainly in cash in this disgusting market and that means margin should be a non-issue. If you do want to make a trade like FAS and you don’t have the margin then A) you probably shouldn’t be making such dangerous trades in the first place and B) you can sell something else for .65 ($1,300) that you can afford and that you REALLY do not mind having assigned to you for the net strike.
It is not appropriate to sell ANY short puts if you are not in a position to buy the stock – that is how you set yourself up to get forced out of trades at the worst possible prices.
Keep in mind we try to keep a balance of bullish and bearish plays – if we don’t have losers, we are probably doing something wrong. The worst thing that can happen in a portfolio like this is a break outside of our trading range which catches us off guard because we can get burned as we usually lighten up on the bullish side at the top of the range and lighten up on the bearish side at the bottom of the range (taking our profits off the table and waiting for the losers to bounce back). That’s what led to our decision to just cash out the $25KP last week – we were at the top of our range and, while we THOUGHT we would break through – we were already at goal for the year so it just wasn’t worth pushing.
So we banked our virtual $130K along with the $10K we took off the table earlier in the year which made a total of $140,000 off of last year’s $10,000 start. Then we take about 10% of that virtual cash out of the bank (and the bank can be a more conservative, long-term portfolio because Lord knows actual banks don’t pay you any returns!) and use it to gamble into the end of the year. Always remember – it’s not a profit until you take it off the table!
Our remaining open positions are:
- 10 GNW Jan $5/7.50 bull call spreads at $1.10 ($1,100), now $1.43 – up $330
- 10 GNW Dec $6 puts sold for .85 (-$850), now .50 – up $350
- 20 FAS Nov $11 puts sold for .65 (-$1,300), now .15 – up $1,000
- 12 DXD Nov $16/17 bull call spreads at .50 ($600), now .30 – down $240
- 2 NFLX Nov $67.50 puts sold for $3 (-$600), now .70 – up $460
- 5 DECK Nov $105 calls sold for $7.50 (-$3,750), now $14 – down $3,250
- 5 SCO Nov $45/48 bull call spreads at $1.10 ($1,100), still $1.10 – even
- 5 SCO Nov $42 puts sold for $1.60 (-$1,600), now $1.55 – up $25
- 5 DIA Nov $119 puts at $1.52 ($1,500), now $1.38 – down $70
- 10 USO 11/4 $35 puts at .33 ($330), still .33 – even
Not so bad actually, down net $1,395 is not catastrophic for our open positions and, clearly, it’s all DECK and we purposely made the very aggressive move (too early, unfortunately) of cashing out our longs with the intention of rolling the short calls up to 8 Dec $115 calls (now $9) as we really don’t think DECK will hold $115. This is one of those trades that you NEED margin ($18,000) to make and one of the great reasons to run these virtual portfolios – it gives Members a chance to experience many types of live trades as they unfold in real time (and I strongly suggest going back through the old $25K Portfolio to get an idea of how we work trades over time) so it can help you identify what kinds of trades are appropriate for your trading style BEFORE you commit to them. Also, of course, the trade could have been stopped out without dipping into margin, something we discussed earlier in the week, when it was up considerably early on.
Overall, our WCP is well on track with a net $2,765 profit in week one, not bad for a $15,000 cash allocation (18.4% for the week). Of course, our closed net $4,160 of winners brings our cash up to $19,160 and we actually SOLD another net $4,130 in our open positions, bringing our cash up to $23,290 – which is practically our goal for the year in our first week so the trick is now simply to close our remaining positions without giving any cash back!
That’s not likely to work out perfectly but already in the first week you can see how this strategy does work: We take a series of BALANCED trades – SELLING as much premium as we can so that time (theta decay) is always on our side. We take our profits off the table and, when we have to – we take our losses but generally we try to adjust the losing sides of our positions with the expectation that the markets will remain in a trading range and make the occasional reversals.
We continue to play that range while the Big Chart is below the +10% lines, which are still 5% higher than here. That means we will get MORE bearish as we move higher but, as I said, we BALANCE our trades so we WILL be looking for more bullish positions if we are over those +5% lines on Monday. Our bearish expectations are based on possible Yentervention by the BOJ, negative analysis of the EFSF over the weekend and LACK of additional stimulus by the US, China and Japan to match the strong but Globally inadequate EU contribution.
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