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5 Trade Ideas that Made 1,816% in 21 Days

INDU WEEKLYWhat a rally!

The markets are going up and up and up some more, which is exactly what we were guarding against on April 14th, when I wrote "5 Trade Ideas that can Make 500% in an Up Market."  At the time, the S&P was "only" at 1,588 (now 1,632) and, of course, the intention of our bullish hedges was not to catch a 3% move but, now that we are up 3% in 4 weeks – let's see how they are performing, along with my other 5 inflation hedges from the following week, which I will review tomorrow.  

At the time I had noted: "What's really been disturbing us is that our Materials indexes aren't following though. Not just oil and gold – those are silly things anyway – but copper and iron and corn and wheat and rice and rebar – things that are, traditionally, consumed in a healthy economy."  

Just today, we finally began to see serious signs of life in the materials sector and, of course, this morning we finally capitulated to the upside and redrew our Big Chart – maybe this rally IS here to stay.  We'll benchmark our trades by netting in a virtual $1,000 cash to each one and see how they performed.  Obviously margin requirements vary widely, but we went into that in the original post, so I won't waste the time here:  

  • DBA Jan $23/26 bull call spread at $2, selling $2015 $25 puts for $1.55 for net .45, now .65 – up 44% ($440)
  • X 2015 $15/22 bull call spread at $2.80, selling $13 puts for $2 for net .80, now $1.70 – up 112.5% ($1,125) 
  • CLF 2015 $18/28 bull call spread at $3.20, selling $15 puts for $3.10 for net .10, now $1.85, up 1,750% ($17,500) 
  • ABX 2015 $20/30 bull call spread at $2.95, selling $20 puts for $3.30 for a net .35 credit, now -$1.20, down 242% (-$850) 
  • 7 QQQ Jan $65/$70 bull call spreads at $3.24, selling 1 AAPL 2015 $300 put for $22.50 for net .20, now net $15.04, up 7,420% ($74,200).  

Wow, up $92,415!  Now, on CLF, we would not have made a commitment to buying 100,000 shares of them, even at net $12 so let's say 10,000 shares and drop the net return on $100 cash and call it just $1,750 profit and let's say we just committed to 3 of the AAPL positions and made "only" $4,512 – that's still a very nice $6,977 profit on 5 positions in a month!  The average gain was a crazy 1,816% on cash, a very nice rate of return indeed.  

I STRONGLY recommend you go back to the original posts, look at the charts for the positions we're discussing from those days and think about the logic we used to identify these trades.  As I often say to our Members – if you are not willing to buy when things are cheap, you are dooming yourself to always chasing stocks after they've gone up.   

FUNDAMENTALS give us a correct VALUE for stocks.  We don't care about PRICE – other than in so much as it's far enough below our value to indicate we should take levered trades like this these.

It's also very important to note that these are aggressive upside hedges that you can commit small amounts of cash to for very nice returns and your downside (see original post) is owning a stock you REALLY want to own for rock bottom prices but you WILL be stuck with that stock, so you'd better love it.  Even so, if you have a $1M portfolio and you commit to buying 300 shares of AAPL at $300 if that last trade goes bad, that's "just" $90.000 or about $45,000 in margin IF AND ONLY IF it's put to you.  Otherwise, the margin requirement for the short $300 puts (3 of them) is about $10,000.  That plus the $6,804 in cash required for 21 of the QQQ bull call spreads netted $4,512 profit in 30 days, still an annualized 322% profit and, of course, these trades aren't even fully valued yet!  

Obviously, when we do make this much money this fast, we like to take things off the table and, what we usually do with these in Member Chat for positions in our virtual portfolio is to take off the big winners (QQQ, CLF) and double up on our losing position (ABX) – especially if we still think it has legs.  

So that's the official "new" pick for May – the above ABX spread for a $1.20 credit.  Thats our ONE trade idea to make 500% in an up market.  I'll probably have a new one tomorrow – stay tuned! 


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  1. zeroxzero

    So ABX has legs? 

  2. jabobeast

    http://www.cnbc.com/id/100722182

  3. zeroxzero

    P.S. ABX — They have a decent-sized gold mine in the Carib that has been the subject of a dispute with the government over royalties; the local newspaper reported that it was settled today. 

  4. archer

    DBA/Phil – I don't show a profit on this at all.  From the quotes I looked up after closing today, the play is down 0.17 per contract currently as the short call has moved up more than the long call.  How are you figuring 208% gain?

  5. Investwizard

    Phil/ Well done! Fundamental analysis & Option strategies rocked!! There is still a long way for me to learn to improve my skills and knowledge!

  6. Phil

    ABX/ZZ – It's not about legs.  In reality, it's a long-term play like the others.  The others just jumped very fast and, so far, ABX didn't but they are all the same kind of value plays made to take advantage of an easy money rally eventually lifting all ships.  

    As to disputes and deals and what-nots – that's the gold business.  That's why it's so easy to spook people out of it because people buy ABX, etc. who have no concept of how miners operate so then they hear a story about an environmental dispute in Chile and the freak out.  How likely is it that ABX spent $8Bn developing a mine if they weren't sure that it would ultimately get the go-ahead?  They sell mines that are underperfoming or problems every quarter, they buy mines and choose to develop the best of them and this one was chosen and these guys aren't rookies – they deal with the political scum of the Earth and with every possible environmental or labor roadblock that can be thrown at them.  Gold makes people crazy, but it has been for 10,000 years or more – this is just more of the same to professional miners.  

    DBA/Archer – I see $3.35 for the Jan $23s, $1.25 for the Jan $26s (net $2.10) and $1.45 for the 2015 short $25 puts for net .65.  I think my mistake was I used the Jan $25 puts, not the 2015 but still a gain and that means that one is still playable as well.  

  7. lionel

    Phil/ The 7 QQQ call spread – AAPL put combo didnt return $74,200!
    The put went down from $22.50 to $11 and the 7 QQQ CS are less than $1 up
    We made almost $1800 on the trade :)
    Which is fantastic and thanks for it

  8. Phil

    As I said in the article, assuming you invested net $1,000 cash on each but, of course, at net .10, you wouldn't short that many AAPL puts so I used 3 sets as the final example (it's all written right there above). 

  9. Investwizard

    Phil/ 5 Inflation Fighters Set to fly~~ hi, I am wondering did you get a chance to review the trade ideas from that post? Most of my core positions from there. Thanks!

  10. Phil

    I just updated those in the morning post as I got caught up in that VC meeting last night.  That's the problem when I meet with VCs – if they know who I am (not just some guy pitching a plan), they often want to talk about all sorts of other things – which is kind of a rip-off for me, as I used to charge Fund Managers to do that!  

  11. Investwizard

    Thanks, Phil. Of course, people like to talk to an option guru like you! :)   In the morning post, you suggested us to cash the winners but probably remain ABX & DBA positions, right?

  12. Phil

    That's right.  It's good to lighten up on the winners but you don't have to get all out.  Just set prudent stops or get partially out as it's better to have cash on the side, of course.  

  13. Investwizard

    Thanks, Phil!

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