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Philstockworld April Portfolio Review (Members Only)

What a first quarter!  

When we last reviewed, back on Jan 22nd, the S&P closed at 2,271 and we were generally playing for a flat market and worried that we might be a bit too bearish but, now that the S&P is at 2,362 (up 4%), we're a lot more comfortable with a more bearish stance – albeit after adding a few bullish positions along the way.  

Before we get into a review I want to make a very important point.  Our Options Opportunity Portfolio (OOP) was last reviewed on March 15th, and it's a self-contained portfolio, with the hedges right alongside the long-term positions.  As I've noted on many occasions, when you have a well-balanced portfolio and you are practicing our system of BEING THE HOUSE – Not the Gambler, you shouldn't have to do much from month to month (see last year's Forbes interview for a good explanation).

We did add 4 bullish trades in the last two weeks (ATI, CDE, CHK & NLY) and, on the 15th, we called for 2 of our positions to be adjusted and one was closed (SONC) – that's it.  On March 15th our OOP was at $270,475 and, as of Friday's close, we're at $278,177 – up $7,702, which is 7.7% of our original $100,000 start (8/8/15) and that's just fine for two week's "work", isn't it?

Related imageInvesting doesn't have to be stressful – certainly not if you are on the house side of the table.  Mostly it's a matter of keeping ourselves well-balanced and letting the premiums we sold run down over time – that's what casinos do and they seem to do very well for themselves!  

You just need to accept the fact that betting on the markets is no better than betting on casino games – you may win or you may lose but, over time, the odds are rigged against you – especially with options so, logically, if we SELL options to suckers who think they can beat the house – we'll do very well!  That's it – that's the whole secret to our success.

Our last major Portfolio Review was back on Jan 22nd and, since then, we've been able to grind out a nice little profit over the past 71 days:

  • Our Options Opportunity Portfolio (OOP) is up $31,600 (31.6%) at $278,177, which is up 178% since it's 8/8/15 inception – our youngest portfolio and, as noted above, self-balancing.
  • Our Butterfly Portfolio is our steadiest performer and also one that has the least touching but it's been a poor two months, as we're only up $2,662 (2.6%) due to a few of positions moving out of our range – including our beloved AAPL, who are doing too well at the moment.  However, at $334,070, we're up 234% since our 7/29/13 inception and it's our 2nd best overall performer.  
  • Our Short-Term Portfolio (STP) is down $31,155 (31.2%), as it's supposed to be if our Long-Term Portfolio is doing well (hopefully it is!).  The main purpose of the STP is to protect the LTP so this is where we have our hedges and bearish positions which are, of course, not doing well with the market at all-time highs.  However, in the 3+ years we've been running it (11/26/13), it's up 353% because, when we do catch a dip – it pays very well! 
  • Our Long-Term Portfolio (LTP) is our largest portfolio (the only one that didn't start at $100K, in fact) and we started this one with $500,000 on 11/26/13 along with our $100,000 STP for the purpose of teaching long-term balancing and hedging techniques.  The other major lesson of the LTP is meant to demonstrate the concept of scaling into positions and then (and this is the hard part) LEAVING THEM ALONE!  We have barely touched to LTP in the past 71 days yet we're up $85,467 and, overall, up 159%.  Giving up 1/3 of our gains to our hedges (STP) is exactly right in this kind of market.

In addition to our 4 virtual tracking portfolios, we also have our Top Trade Ideas, which do not go into a portfolio and those were reviewed separately just last month.  In mid-February, we felt the need to add two hedges hedges for the first time – that should let you know where our mind-set is.  Perhaps we are too cautious, but that's a lot better than being not cautious enough.  

Image result for cash jokerAll of our Member portfolios are 60-85% CASH!!! at the moment and using 1/4-1/2 margin – leaving us plenty of room to adjust if the market does turn sour – something I feel is very likely to happen in the next two months and yes, I know I've said this before but, really, how much over our 2,100 top call on the S&P are we?  It's at 3,262, so we're 262 points over what I called a value top and that's 10% but, in fairness, the Dollar is down 3% and that explains a lot of it.

The rest of the pop comes from runaway expectations from the Trump Presidency but, with the failure of TrumpDon'tCare, the rest of the President's agenda is certainly not a lock to come through.  Of course, rising oil prices have boosted the Energy Sector but that's bad for consumers – it's a self-braking system and we're beginning to see cracks in Consumer Sentiment that isn't a danger yet, but could easily become one.  

So we are still shorting the Russell Futures (/TF) at 1,384 and Oil (/cl) at $50.25 and we'll see how those pan out into Monday's open.  Meanwhile, here's a review of our Member Portfolios and I'll try to note which trades are still good for new entries:

If it isn't bold and blue then it's a POSSIBLE adjustment, not an actual adjustment – keep that in mind.  

Short-Term Portfolio Review (STP):  $450,865 is DOWN $52,341 since our Nov 6th (election eve) review.  The S&P has gained 15% since then and we're down 52% but only 10% of the $503,206 we topped out at, at the time.  Our STP holds the hedges for the LTP, it's SUPPOSED to lose money when the markets are going up and our LTP at the time was:

Now it's $1,301,443 and that's up $259,228, which is 51% of the original $500K and 24.8% of the Nov 6th balance – so the LTP is moving right along with the S&P with a slight advantage due to our options leverage (a huge advantage actually as we're sitting on $963,190 in CASH!!!).  So the net of the 2 portfolios is +$206,887, which is 34.5% of our original $600K which is the 5% per month the portfolios are designed to make.

While we have many individual trade ideas that return much, much more than that – that's not what you do in a portfolio that makes up a substantial portion of your assets – for that we want to build our wealth safely and securely for the long-haul.  

The big difference is (and you don't see this until we test it and we haven't tested it in ages) that we STILL make that money in a down market and, more importantly, if you were to wake up tomorrow to find out a dirty bomb had blown up in midtown Manhattan and Wall Street was closed for 3 days and the Market opens 10% limit down and drops another 10% at the open – we'd be fine (financially).  If you went through the 2008 crash, you already appreciate the concept of hedging and, if you didn't – you will learn eventually…

Anyway, the point is, if you think we're too bearish, cut back on STP positions by 10% or 20% or 40% or however too bearish you think we're being but I am playing the portfolios according to the strategy we set up back in 2013, when 5% a month seemed like a reasonable rate of return to shoot for (ah, innocent times!).  That's how we run our LTP/STP combo portfolios and also how the Options Opportunity Portfolio is constructed.  

LOL – in the time it took me to write the above, the STP has gained $4,000!  It's not about the intra-day, nonsense – it's about keeping our overall goals on track if you want to build long-term wealth.    

  • DBA – Gamble that didn't pay off, dead money.  
  • JO – Another gamble that's not paying off and the clock is ticking.  We'll give it until expirations this month and then consider an adjustment but, if we do, it would move to the LTP anyway.
  • FAS – This one was killing us and now it's not but that doesn't mean it's smart to keep it.  The Jan $37 calls are $6.50 in the money and the current price is $9 so $2.50 in premium and we have bank earnings next week and this is a bet that says they are going to suck.  Not sure they'll suck – just disappoint.  We don't NEED this hedge (it's the leftover short leg from a bullish trade on FAS, in fact) and certainly not 50 of them so let's buy back the 50 short Jan $37 calls for $9 and sell 30 short Jan $45 calls for $5.30 ($15,900).  So we still have a $15,900 hedge but now all XLF has to do is not go much higher and we win (FAS also has nasty decay over time).  

  • AAPL – EZ money.
  • ABX – EZ money – good for a new trade. 
  • GOGO – EZ money – good for a new trade.  
  • SBUX – FREE money – good for a new trade

This is why I want to smack people who don't play options.  Even at the lower prices, you can collect $9,000 for simply promising to buy those 3 stocks at substantial discounts to the current price.  Even if you have $100,000 in cash laying around and don't really want to put it into the market – you can get a 9% return by simply pledging to put it in the market IF SBUX (for example) drops below $41.40 (the net of the puts), which is a 29% discount to the current price.  

If you have $3M in the bank that's paying 2% and you commit just $1M to this strategy ($2M in buying power) and you make 9% on the $1M and 2% on the $2M that you leave in the bank, you still go from 2% to 4.3% avg – doubling your interest while taking one relatively little risk (bonds aren't risk-free either). 

  • AMZN – Well there's where $14,000 went to!  We can adjust these and we'll start by selling 2 July $900 calls for $50 ($10,000), leaving the short April $850s for now, so double short.  The $880 puts are essentially worthless but let's buy back the 3 April $850 puts ($1.85 = $555) and take the 3 April $880 puts ($6 = $1,800) and roll them to 5 May $920 ($41)/$890 ($26) bear put spread at net $15 ($7,500).   So, on the whole, we're pocketing $3,745 on the adjustment and we've effectively doubled down on the spread (now $15,000 potential) and our net cash outlay is a $2,360 credit so our potential upside is now $17,360, which would be a $31K turnaround from where we are now – if all goes well.  
  • JASO – Looking like we're on track to collect the full $10,000.  

  • NFLX – Still on track.
  • SQQQ – We're in the money on our Sept calls and the Jan calls are just leftovers and no point cashing them while there's still a chance they could pay us.  Realistically, a 10% drop in QQQ will put SQQQ up around $50, which makes the calls at least $15, which is up $10 or $50,000 on a 10% Nasdaq drop and another $75,000 for any additional 10% drop after that.  
  • TSLA – Does not reflect the changes we discussed making on Monday but $300 was our target so absolutely should be done by now.  
  1. Looks like TSLA wants to hit $300.  Now you know why we can't play that one in the OOP!

  2. We're going to roll our 3 short April $265 calls ($25.50 = $7,650) to 6 short June $300 calls ($15 = $7,500) for about even and our April $290 puts ($9) can be rolled to the June $300 ($26)/$270 ($12) bear put spread at $14 so $5 out of pocket there means we're spending net $2,500 on the adjustment and we still have a $15,000 potential spread for net $6,740.  

    I vote for first selling the new short calls and waiting to see if things calm down before buying back the originals.  We risk losing $3,000 more if $300 breaks – we can live with that!  

TZA – Very aggressive and in the money here.  At $20, we're at net $50,000 and over $20, we gain $30,000 for each $5 move, which is up 25%, which is down 8% on the Russell.  So that's over $80,000 worth of protection for each 10% drop in the indexes – not over-hedged at all!   

Then we have AMZN and TSLA which could each flip $30,000 and FAS for $20,000 so figure we've got $130,000 covered on a 10% drop and a bit less after that.  Those are our hedges.  

Long-Term Portfolio Review (LTP):  As noted above, $1.3M at this point is up a massive $259,228 since the Nov 6th review so a bit less than 6 months is a hell of a pace off our $500K base.  Keep in mind, I run the portfolio with $500K appropriate positions.  We haven't tripled the size of our allocations just because the portfolio has tripled and we have $963,190 in cash (72%) and we're using just $917,250 in ordinary margin – well within the bounds of a $500K portfolio.

The best thing about the LTP is you can go back to the Nov 6th Review and see how little the LTP has changed in 6 months.  These are generally "set and forget" trades that are perfect for people who want retirement accounts or simply don't have time to mess with the markets.  Internally, we're averaging about 35% a year (the rest is compounding) using very basic strategies and primarily it's:

  • Sell a put in a stock we'd like to buy if it gets cheaper
  • Buy the stock and cover if it makes a good dividend or make a bull call spread if it doesn't.
  • Sell some short-term calls when we think the stock has made a good move higher to lock in gain.

And that's it.  The rest is running through these quarterly reviews and making sure the positions are worth keeping for the next quarter (and we rarely change our mind in between).

  • AGNC – On track, good for a new trade.
  • ATVI – On track.
  • BBBY – A bit low but I like them.  Good for a new trade. 
  • BRK.B – On track, good for a new trade.  
  • CBI – On track.
  • CCJ – On track but we've lost interest so let's kill it and clear the slot.
  • DNKN – On track
  • ECA - On track but we've lost interest so let's kill it and clear the slot.
  • ESRX – On track, good for a new trade.  
  • GOGO – On track.
  • INFN – On track.
  • INTC – Let's clear the slot.
  • KATE – On track
  • LLY – So far ahead of schedule it's not worth keeping. Let's clear the slot.
  • RH – On track.

  • SBUX - On track.
  • SKX – On track.
  • SLW – On track.
  • SPWR – Where we started, good for a new trade.  
  • TGT – 5 Jan $67.60 puts ($15.50 = $7,750) can be rolled to 10 2019 $57.50 puts at $10.50 ($21,000).  That's a net $3,350 credit and we began with a $4,300 credit so our credit on 10 2019 $57.50 puts is $7,650 or $7.65 per contract which makes our break-even $49.85.  Wasn't that easy to fix?

  • TWX – On track.
  • WATT – Right where we started, good for a new entry.
  • WFC – Way ahead of schedule and there is SOME risk to earnings so may as well kill this one 20 months early.

Man, I love selling puts.  Again, these are not hard concepts.  Keep a list of stocks we like, wait for them to get cheap and then sell a put that makes our entry even cheaper.  The biggest advantage we have over the retail suckers who churn the market every day is PATIENCE – by simply being more patient than they are we can make ourselves a nice, steady income.

Now we get to my second-favorite thing – Dividend Payers!  

  • CM – We were waiting for them to go lower to sell puts but they are holding up well though great call selling the $85 calls on 3/10!  They just paid an 0.95 ($285) dividend on 3/24.  That's 1.4% of our net entry for the Q!  Man I love dividend stocks!  
  • ARR – Paid a 0.19 ($76) dividend on 3/13 (they pay monthly).  These guys are right on track.  Good for a new entry.  
  • CG – Erratic dividends. Paid 0.16 on 2/16 (0.50 the previous Q) and otherwise on track.  Good for a new entry. 
  • F – Pair 0.20 ($400) on Jan 18th.  On track, good for a new entry. 
  • GME – Paid 0.38 ($380) on March 10th.  On track, good for a new entry.  
  • GNC – Paid 0.20 ($600) on 12/14.  These guys have dropped 50% since we started but we still like them.  The short puts force us to buy more at net $8.36 and our net on the stock was $10.  With a stock like this (any stock near $5) the sale of the options is where we'll make most of our money.  The short 2019 $12.50 puts are now $7 ($21,000)  but the $7.50 puts are $3.50 so that's a no-brainer for a 2x roll so we'll now sell 60 of the 2019 $7.50 puts for $21,000 and the net will be the same $12,420 we originally collected only now divided by 6,000 so $2.07 means our net entry on the put side is $5.43.  We can also buy 3,000 more shares at $6.78 ($20,340), buy back the 2019 $12.50 calls for $1.30 ($3,900) and sell 60 2019 $5 calls for $3.70 ($22,200).  That's spending net $2,040 and we initially spent $28,760 for 3,000 shares and now, for $30,800 we have 6,000 shares (net $5.13) with a call-away at $5 even though we started at $13.  This company made 0.69/share last Q!  
  • HOV – On track, no actual dividend paid – stock was just so cheap ($1.47) it was more reasonable than buying calls.  
  • NRF – Annoying split, waiting to be called away.
  • PSO – Paid an 0.424 ($424) dividend on the 5th.  Let's buy back the June $7.50 calls for 0.60 ($600) if we can (we should, bid is 0.25, ask is 0.90).  Later in the month we'll consider the rest.  

  • AAPL – Barely a profit at the moment but it's the 10 short Jan $110 calls that are killing us and we have 40 covers.  Let's roll the 10 short Jan $110 calls ($34.80) to 20 short Aug $130 calls ($16), so it will cost us $2,800 but we'll be moving up $20 in strike.  For balance, we can buy back the 10 short 2019 $100 puts ($3.60 = $3,600) and sell 15 2019 $120 puts for $8.25 ($12,375).  So net $9,500 in pocket will pay for our next roll of the short calls as well – if AAPL keeps going up and, if not, then I'm glad we have our short calls!  
  • ABX – There's no sense in the Jan $12 put (0.21 = $210), let's buy it back and we'll sell again if we get a dip.  Otherwise on track.  

It may not seem like a big deal but, aside from freeing up a slot in our portfolio, buying back the short puts reduces both our margin requirement and our downside exposure, which then lowers our need for hedges – all part of the balancing act!  The $210 is not worth even a 5% chance ABX could collapse over the rest of the year as we've already collected $1,840 (90%).    

 

  • AMGN – On track, good for a new trade. 
  • BX – On track. 
  • CHK – On track, good for a new trade. 
  • CLF – On track but I'm a little concerned with iron ore prices dropping so fast.  If $7.50 fails to hold, we may want to consider cutting them. 

  • CMG – Back to being a star as we're well in the money again.  Hopefully it sticks but hope is not a valid investing strategy and we're looking for places to lighten up so this one is obvious and we can cash the spread for $170/82 and we have 5 more longs than shorts so $170,000 – $41,000 is $129,000 which is all we ever expected to make at $430 2 years from now.  We'll move CMG to our watch list – happy to get back in if they go low again.
  • DBA – Disappointing and we'll need to adjust if things don't pick up but not yet. 
  • DIS – Stung by the short April calls but nothing serious.  There's no hurry but we're lookng to roll the Apri $105 calls ($7.70) to the July $110s ($5.20) if DIS is still over $110 at expiration but, if not, I'd stick with the July $105s for protection.

 

 

  •  EXPE – In this case, there's almost no chance the short puts will give us trouble so why pay $725 to buy them back when we don't need the margin?  The net of the spread is only $19 out of $25 possible and $6 more is 31% by the year's end – worth holding on to.
  • FCX – Here I do want to buy back the short calls (0.27 = $675) only because if FCX dips back to $10 (40% odds), then I'd much rather sell $10 puts but I can't do that if I already have $8 puts.  Since the 2019 $10 puts are $1.35 and the $12 puts are $2.25, that means I could get $2,250 instead of $675 so I'm "betting" $675 of potential profits against a 40% chance to make $2,250 instead.  If not, 2020 puts will be out in the summer….
  • FNF – Great job waiting to sell calls but this looks like a good place to do it.  Let's sell 10 2019 $35 calls for $4.70 ($4,700) and be very happy to lock in those gains (and collect those dividends!).  

  • FTR – In this case, we bought back the short calls and we're waiting patiently for a move up.
  • GILD – Waiting for Godot on this one.  The short Jan $90 calls are silly, let's buy those back (0.62 = $620) and let's buy back the short 2019 $82.50 calls for $3.90 ($7,800) as we're already up more than 50% and let's roll the 2019 $70 calls ($7.70) to the $60 calls ($12.50) for $4.80 ($9,600).  Ideally, we'd like to sell the $80 calls ($4.50) for the price of the $70 calls ($7.70) to re-cover.  

  • GM – Our newest edition.  Good for a new trade.  
  • GPRO –  We will watch earnings carefully.
  • HBI – Good for a new entry.
  • IBM – Same thing as we're cleaning up:  Let's buy back the short Jan $105 puts (0.85  = $850) but the $25 bull call spread is only $20, so we can leave that.  
  • LB – Let's roll our 10 2019 $55 calls ($4.40 = $4,400) to 20 2019 $45 calls at $8 ($16,000) and we'll buy back the 10 short 2019 $70 calls ($1.65 = $1,650) and we'll sell 5 more 2019 $55 puts for $14.50 ($14,500).

  • LL – No point in buyijng these back, so deep in the money.  These guys used to look like LB does now but with way worse press.  
  • MU – Also stupidly in the money and not worth cashing.
  • OIH – I'd feel better if we bought back the 2019 $25 puts for $1.05
  • QCOM – On track.
  • SLW – On track but let's buy back the Jan $15 puts for 0.58 ($2,300) just in case we get a better selling opportunity.  We already collected $16,900 on them so let's not be greedy.  2019 $20 puts are $2.25 so we could sell just 10 of those for the same money and 1/4 the risk.  Trade of the year and it's already up $25,000 – not bad!  
  • SVU – Good for a new trade and it's way over the top so GREAT for a new trade if you can get these prices (I think we're being short-changed).  
  • TASR – Something is wrong with the options, probably due to symbol change (AAXN).  I'll have to get it fixed.  
  • TEVA – On track.  We'll probably have to roll the short puts eventually.
  • THC – The stock has been weak but we had a good entry so no worries yet.  If I were not bearish on the market overall, I'd want to press this trade.  

  • TWTR – Losses are not so terrible so this is a patience play.
  • UNG – We're agreesively long and not being rewared so far. 
  • XOM – Good for a new trade. 

18 adjustments is the most we've had in a month since last May, when we cashed out many of the longs.  Like May, we are raising CASH!!! and we caught a 7% drop in June and hopefully we'll get the same this spring.  We certainly have plenty of things on our Watch List when we're ready to buy more. 

Butterfly Portfolio Review:  Slow and steady wins the race in our most consistent portfolio.  The Buttefly Portfolio is at $331,443 (up 231.4%), up $35,351 since our Nov review so right on track for our $5,000/month goal (it's really just a $100,000 portfolio with 3 years of profits).  This is our lowest-touch portfolio where we fully practice our "Be the House – NOT the Gambler" philosophy.   

Note:  I'm skipping the 2 loose shorts and will discuss in context of the full positions.

  • AAPL – We're getting burned on our short April calls but, fortunately, it was a half sale and we can work our way out of it.  Our $100/130 spread would be $90,000 at expiration and is currently valued at $63,000 so $27,000 left to gain if AAPL holds $130 and that's what the short puts are protecting.  Still, we can pick up more premium by rolling our 15 short April $115 calls at $26.65 ($39,975) to 30 of the June $130 calls at $12.60 ($37,800).  That will cost us $2,175 but moves the strike up more than 10% and we have 6 more quarters to roll after that.  
  • If AAPL has great earnings and goes higher, then we can buy more longs.  The 2019 $130 ($23)/160 ($10) bull call spread is only $13 and would give us $17 more upside protection and, if AAPL is going to keep going higher and we "HAVE" to keep buying spreads that make another 100% on the way up while keeping a solid hedge to protect ourselves – we can live with that!  
  • COST – This one blasted off on us but, fortunately, it was a partial sell for our initial entry.  The short puts will be worthless and we can roll the 3 Apr $150 calls ($20.35 = $6,105) to 5 July $165 calls ($9.05 = $4,525) and 5 short July $165 puts ($3.50 = $1,750) for a net $170 credit and we are well-covered on the call side with the 2019 $175 calls but let's invest $3.40 ($1,700) to roll the 5 2019 $125 puts ($3.35) to the 2019 $145 puts ($6.75) as this will make us more comfortable selling aggressive puts down the road.  

  • CTSH – Another new one and fortunately right on target ($1 is close enough).  We sold $4.55 in premium so being within $1.38 of our $57.50 target means we make $3.17 ($1,902) which is 70% of what we sold.  The net of our spread was only $4,560 so if we can make $1,900 per Q, we will be in fantastic shape once we pay back the $4,560.  That's why these trades are so powerful!  Meanwhile, we'll pay off the short calls on expiration day (there's still premium) and sell the June $60 calls for $2.50 ($1,500) and the June $57.50 puts for $2 ($1,200) so that's $2,700 AND a wider target to hit! 
  • DIS – Ahead of our expectations but we sold the May $110 calls for $3.85 and DIS is at $113.07 so, without the premium, we're ahead.  The April puts are expiring worthless and I'm not inclined to sell more from this altitude at the moment.  At $115, I may be inclined to sell 5 of our 2019 $80 calls to take $17,000 off the table and turn the trade a bit bearish that way though Guardians of the Galaxy is next up for DIS and likely to be another huge hit.
  • GIS – Took a big dive recently so the short calls will expire worthless but the April $60 puts are $2.75 ($2,750) and we will buy those back (into expiration, of course) and sell 10 July $57.50 puts for $2.50 ($2,500) and just 5 of the July $60 calls for $1.20 ($600) because I think GIS goes up from here.  We can also roll our 10 2018 $67.50 calls ($1.10 = $1,100) to 10 2019 $57.50 calls ($5 = $5,000) and we will sell 5 2019 $55 puts for $5.30 ($2,650) to help fund it.  So a bullish call at $57.50 for GIS!  

  • MSFT – Way over our $60 target for April but we sold the puts and calls for $6.06 and we're $5.50 in the money so, even with it going 10% agains us, we still make 0.56.  This is tricky as I think MSFT is toppy here so let's sell the  July $62.50 calls for $6.40 ($12,800) and the July $60 puts for $1 ($2,000).  We're pretty bullish on our longs with the $62.50/70 bull call spread and we can always sell 2019 puts (the $55s are $4) but, of course, I'd rather do that after a pullback – just good to know $8,000 is there if we need it to roll the short calls…
  • PG – Here we sold the puts and calls for $3.90 and the short Apr $87.50 calls are $2.30 in the money so another partial win, which is fine as the net of the spread was only $4.80 and we've already had many winning sales (old position).  There's no real need to roll our Jan longs until 2019 options come out so we can leave those and we'll sell the June $87.50 puts for $1.35 ($1,350) and the June $87.50 calls for $3.10 ($3,100) as I'm a bit bearish here.  
  • TGT – Another one I'm bullish on down here but no luck so far.  We're just going to roll the 5 short Apr $65 puts ($12 = $6,000) to 5 short 2019 $65 puts ($16 = $9,000) to pick up $3,000 and yes, it's an aggressive put sale but net $49 is a great entry. 

  • TXN – Well over our target but it's a July target so no worries and we'll see how earnings go.  We're aggressively long into 2019 which means it's another protection game.
  • UNG – We're half in the money with 2 years to go but it's a disappointing spread and too volatile to sell calls against so let's pull the plug and close the position.
  • VLO – Moving back to our target range for June.
  • WMT – Fortunately a 1/2 sale and we were aggressively long.  They are June calls so we'll wait and see how earnings go.
  • WYNN – Fortunately, we were aggressively long in 2019 but the short calls are still painful.  In this case, we're going to sell 20 2019 $145 calls for $10 ($20,000) and buy 10 more 2019 $120 calls for $20 ($20,000) so now we have 20 2019 $120/145 bull call spreads at the same price as our 10 $120s were.  Now we have the cushion to roll our 10 short June $100 calls ($17.50 = $17,500) to 20 short June $115 calls ($7 = $14,000) so net net we spend $3,500 to push our short callers into almost 100% premium while doubling our profit potential above $120 (but capping our gains).  

Well, for the Butterfly Portfolio, that's a lot of work but that's the way it is once a quarter.  Now we can go back on our boat for 3 months!  

Options Opportunity Portfolio (OOP):  Wow!  We jumped up to $291,942, which is up 191.9% since our 8/15/15 inception at $100K but also up an amazing $80,487 (80.5%) since our November review and up over $21,000 since our 3/15 review – not bad for a month in a "conservative" portfolio!  

Of course, this makes me think we need to be more bearish as I certainly didn't intend to make $20,000 in less than 30 days so we'll be looking for ways to either lighten up or up our hedges into earnings season though we did add 4 new trades and only one (FXP) was bearish (but offset with a bullish hedge on CHL).

  • CHL – Good for a new entry.
  • NLY – On track, good for a new trade. 
  • SONC – On track.
  • TASR – This one is wrong so there's some money we don't deserve.  TASR has changed their symbol and PowerOptions hasn't adjusted yet.  Still, they are well on track for the full gain – just not yet.  
  • TLT – We're getting the bumpy ride we expected but on track.
  • WTW – Deeply on track.  Actually good for a new trade as $2.18 is simply silly for those puts.  

  • FXP – On track, good for a new trade.  $1,315 upside potential.  
  • USO – On track. $2,160 upside potential.  
  • XON – Dead and we're not going to re-play them.
  • AAPL – One day it will stop going up but, meanwhile, we sold the $135 calls for $8.75 so we're good to $143.75 and we're protecting $90,000 at $130 and the current value of that spread is net $58,605 so we have another $31,395 to gain at $130+.  We'll see how earnings go.
  • ABX – Fully in the money but plenty more to gain.  Good for a new trade but ask me and we can pick better strikes for a new entry.  This spread, at $20+ will net $14,000 and is currently net $6,225 so $7,775 more to gain (124%) just as it is.  Let's buy back the Jan $12 puts as they are only 0.16 and wasting space.  
  • ATI – Good fro a new trade and just about to break out too.  $2,463 upside potential.

  • CDE – On track, good for a new trade.  $5,025 upside potential.  
  • CHK – On track, good for a new trade.  $9,010 upside potential.  
  • CLF – On track. $7,890 upside potential. 
  • CSIQ – On track.  $7,650 upside potential. 

  • DBA – Slow start, good for a new trade.  $4,325 upside potential.  
  • DIS – The April $105 short calls are $8 in the money and we sold them for $5.20 so annoying but not a big deal.  We are protecting a $15,000 potential spread currently valued at net $13,225 so, if it were not for the short calls, we'd probably just cash out at this point with only $1,775 upside potential.  As it is, we'll roll the short calls to the July $105s ($9.35) and if DIS goes over $115, we'll add more longs.
  • FTR – This is a dividend play and they just paid us $210 in March.  Since our initial entry was net $6,200, that's 3.4% PER QUARTER for the dividend alone.  We're not into selling puts this low so patience otherwise.  No cap to the upside but let's aim for $4 to come back and that would be $8,000 of upside potential (because the puts would expire worthless).  
  • GM – One of our new trades.  On track and good for a new trade.  $12,112 upside potential. 
  • GOGO – On track.  $6,375 upside potential.  
  • JO – On track, good for a new trade.  $5,775 upside potential. 
  • KATE – On track. $2,375 upside potential.
  • M – On track, good for a new trade (about to pop).  $10,878 upside potential.  

  • SGYP – Big setback but good for a new trade now.  $4,375 upside potential.
  • SLW – Our trade of the year.  On track with a $12,930 upside potential and that's on top of the $5,000+ we already made – gotta love those Trades of the Year!  
  • SPWR – On track.  Good for a new trade.  $14,955 upside potential.  

  • SQQQ – Our first hedge.  Oddly enough, it's green but only barely so good for a new trade.  $45,000 potential pay-off and currently priced at net $8,562 so $36,438 downside protection.  The short April $43s will expire worthless and I don't want to cover with more puts into earnings
  • TWTR – Very disappointing but we have a very low basis.  $5,315 upside potential. 
  • TZA – Our second hedge.  Also green.  $100,580 downside protection.  
  • UNG – On track.  $12,865 profit potential.  
  • WTW – On track.  $2,650 upside potential. 
  • XOM – On track, good for a new spread.  $2,850 upside potential.  

Damn, that happens every time.  This portfolio is so perfectly balanced I can't find anything I want to change and, since it's making $20,000 a month – I guess changing it for no reason would be silly, right?  

You can see why we make so much:  Our 6 short puts will make $11,631 if they expire worthless in a bull market while our other 26 long positions have the potential to make another $163,373 in a bull market, which is up another 160% of our original $100,000 and more than we need to make over the next two years (less the hedges expiring worthless).

Meanwhile, we have $137,018 in downside protection – so we'd be absolutely fine if the market were to collapse as well (in fact, we'd love it, as we could go bargain hunting with our hedge profits).   Isn't this a nice, relaxing way to trade?  

Read more about Being the House in my Forbes interview – it's really not a hard strategy to follow and the results speak for themselves.  

 

 


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  1. Well not sure if chat is still here or on Friday post, but just wondering Phil  if you still like your oil short into Monday? Last I saw you had $50.25 and price spiked to 50.85 late Friday? I guess you think with quarter done and approaching contract rollover we could see drops in market and oil?


  2. Could this pop crude up?

    ANCHORAGE, Alaska (AP) — An oil leak was discovered in Alaska's Cook Inlet on Saturday, causing a major oil and gas producer to shut down two of its platforms there, officials say.

    http://hosted.ap.org/dynamic/stories/U/US_COOK_INLET_OIL_LEAK?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2017-04-02-16-29-17


  3. Burr- since I'm shorting of course it will! Actually 19000 gallons doesn't seem like a huge amount in the grand scheme but I don't know if that is some abstract number that is an estimated total or a per hour/day amount so I am not sure. I expect oil to pop up to $51 or even $51.50 before dropping, if it does even drop. We shall see. 


  4. I don't quite understand all this, but it shows crack spreads and how producers are locking in profits.

    https://charts.stocktwits.com/production/original_79050106.?1491157184



  5. Burr- this is pretty much what Phil has been saying. One more small dip into contract rollover in next 2 weeks, then moving up into summer.


  6. That's what I'm playing for. 


  7. Scottmi – "If the Fed expected consumers to spend more because consumers are confident or inflation is up, they were totally off base. For the second month consumer spending was negative. This report is likely to take a bite out of first quarter GDP estimates."

    Hush, hush my sweet Charlotte… axiomatic, your spending is someone else's income. Lower real wages, more debt to make make ends meet. Squeeze. When the cost of loan funds rises (Libor) and the credit tap (credit card and housing ATM) runs dry, less spending, income, GDP, EPS. Rinse, spin and repeat,    it's a self reinforcing cycle. Two more raises coming this year. As they don't know money from mud, don't bother to tell the Fed. Get in the car and out.


  8. Mon 04/03/17 at 9:34AM EST there might be a slight pop up on the NDX or QQQ. TBD.


  9. CMG- Palotay mentioned the big move in CMG last week and I did some reading over the weekend to find out that the move was a reaction to the dismissal of a lawsuit to pay their management trainees overtime pay. There was also some speculation that they moght be able to win a similar lawsuit by their hourly workers to get out of paying them for work done off the clock. Seems like this is not necessarily a good reason for a jump in price, so we should take it with a grain of salt. Of course if they do win they will add to the bottom line and avoid some rather large expenses, but at the expense of a lot of disgruntled employees maybe.

    CL- made a slight move down overnight for a small win, but hoping we get a more substantial drop at some point. Tight stops for sure though.


  10. Forgot to mention the nice pop in KC this morning. Hope someone else was up with me to take advantage and make a few bucks on that one. Now waiting for the usual drop to add again.


  11. Good morning! 

    Ended up going skiing yesterday (too nice not to) so have to finish this later. 

    Not much going on at the moment., still in my /CL and /TF shorts, both not good at the moment.


  12. My kc order didn't fill to sell at 143.50. So still adding on drops and selling on pops


  13. Bombing at Russian train station