Bye Bye Buy List!
Oh, I have tried!
I have tried to be bullish, I have tried to get enthusiastic about this rally but I have been reviewing these picks for a few days and looking at the market, the charts, the sentiment, reading the news and studying the fundamentals and I'm OUT! Oh, I'll be back, we'll set up a new, aggressive $100K Virtual Portfolio next week for some fun shorter-terrm plays (still keeping the conservative one for the full year) to take full advantage of this insanity but it's going to be mainly cash through the end of the month as I do not trust this rally one bit and it will be so nice to head into the easter holiday with lots of cash on the sidelines.
We hit a perfect entry on Feb 8th, in our last round, and the market is up almost 9% since that day and I'm not expecting another 9% in the next 6 weeks so it's a very good time to take a break. We were able to roll and enjoy these trades since Christmas and we will be revisiting some, maybe even keeping a few but, on the whole, I want to do what I often counsel members to do, which is follow our simple two-step process to maximizing your profits in a market rally:
- Step 1) Take Money
- Step 2) Run
There – isn't that simple? Keep in mind that we LOVE all of these stocks so we'll be back in them if they go on sale and, perhaps, even if they don't and the market looks stronger through April earnings. Meanwhile, keep in mind that these are 6-week profits so 20% is A LOT for generally conservative plays. Not much else to talk about – let's just see how many of these suckers are worth keeping (noted in green):
AET (12/21 – $34.04, 1/9 – $32.70, 1/31 – $29.97, 3/18 – $33.24) They could not have done better for us, staying right in range and giving us 4 excellent sales but health care is passing this weekend and that's too wild for us to stick with. Our last batch is right on target:
- Apr $33 calls sold for $2.40, now .40 – up 83%
- Apr $30 puts sold for $1.50, now .02 - up 99%
- 2012 $25/35 bull call spread at $5, now $5.40 – Keeper if we sell July $34 calls to cover at $2.35
- 2011 $22.50s at $9.10 – now $11.60 – up 27%
- Apr $27 puts sold for $1.75, now .01 – up 99%
AGNC (11/24 – $26.20, 12/21 – $27.91, 1/9 – $26.50, 1/31 – $26.69, 3/17 – $28.01) is (gasp!) a REIT. But it’s a strange one that (according to them) "Invests in agency pass-through securities and collateralized mortgage obligations for which the principal and interest payments are guaranteed by a U.S. Government agency or a U.S. Government sponsored entity. The company funds its investments primarily through short-term borrowings structured as repurchase agreements." They pay a QUARTERLY $1.40 DIVIDEND (21%)! Last time we waited for the pullback and got them for under $25 and we're in this for the dividend and they remain a great balance to short IYR or SRS positions.
ATVI (11/24 – $11.40, 12/21 – $10.91, 1/9 – $10.90, 1/31 – $10.16, 3/17 – $11.96) I love these guys but I'll love them more on a pullback or over $13.
- Buy/write with 2011 $10 puts and calls for $2.70 were net $7.46/8.73, now net $8.66 – up 16% with another 15% over 9 more months – we can do better!
AYE (12/22 – $24.04, 1/9 $22.99, 1/31 – 20.95, 3/17 – $23.36):
- Buy/write with July $22.50 puts (calls were bought back at .80) netted $20.29/21.40 now net $23.06 – up 14%
CEPH (12/21 – $59.75, 1/9 – $63.01, 1/31 – $63.84, 3/17 – $71.02)
- 2012 $50/70 bull call spread was $9.50, and is now $12.70 – up 33%.
- 2012 $50 puts at $6, now $2.30 – up 62% (pair trade) The puts can be kept open because we'd be thrilled to own CEPH at net $44 but the low VIX says take the money and run!
CPLP (11/24 – $7.54, 12/21 – $8.80, 1/9 – $9.82, 1/31 – $8.93, 3/17 – $8.76) is an all double-hull tanker company that pays a nice dividend (21%). They are up 17% from our November entry and last time I said we’ll have to hope for a pulback from $10 and we got it but if you didn’t get in on the dip down to $8.18 last month, they are less sexy here.
June $10 puts sold for $2.60, now $2 – up 23% Worth keeping since we'd love an entry at net $7.40.
CUZ (11/24 – 7.06, 12/21 – $7.77, 1/9 – $8.15, 1/31 – $7.66, 3/17 – $8.09) They are a REIT that took some write downs and is raised some capital, now steady(er).
- Buy/write with July $7.50 puts and calls netted $5.76/6.63, now net $6.49 – up 13%.
DF (12/21 – $17.68, 1/9 – $18.23, 1/31 – $17.63, 3/17 – $15.74)
- Buy/write with 2011 $17.50 puts and calls netted $13.43/15.42, now $11.74 – down 12.5% If we roll the $17.50 caller down to the Jan $12.50 caller we pick up $2.70 and that changes the basis to $10.73/14.12 which is not terrible enough to take a 12% loss since we do still like them down here.
- 2011 $12.50s/$17.50 bull call spread at $2.50, now $2.90 – up 16%
2011 $17.50 puts sold for $2, now $2.90 – down 45% (pair trade) I think kill the bull call spread and that brings net to $2.50 here which means net $15 if put back to us in Jan and that's not a bad entry to ride out with the naked puts. Stop if we fail $14.
ENP (11/24 – $18.02, 12/21 – $19.70, 1/9 – $20.76, 1/31- $20.22, 3/17 – 20)
- Sept $17.50/20 bull call spread for $1.40, now $1.80 – up 28%
- Sept $17.50 puts sold for $1.30, now .90 - up 30% (pair trade) The puts seem to be in no danger and be left as we'd love owning them for net $16.20.
ERTS (12/21 – $16.96, 1/9 – $18.40, 1/31 – $16.28, 3/17 – $18.50)
- 2011 $12.50/17.50 bull call spread at $3.20, now $3.55 – up 11%
- March $18 puts sold for $2.35, now .05 – up 98% (pair trade)
- Buy/write selling June $16 calls and June $15 puts for net $13.53/14.27, now $14.53 – up 7.4% Fine to stick with
EXC (12/22 – $49.10, Jan 9 – $48.30, 1/31 – $45.62, now $44.67)
- July $45 puts sold for $3.10, now 2.40 – up 25%
- 2011 $40/50 bull call spread at net $4.90, now $4.70 – down 4%
- 2011 $40 puts sold for $2.70, now $2.15 - up 20% (pair trade)
FLY (11/24 – $9.10, 12/21 – $9.17, 1/9 – $10.58, 1/31 – $9.61, 3/17 – $10.02) Sticking with the instructions from last time: They’re back! I was upset last time that they got away so quickly as they have a great business leasing aircraft and their competitors have a lot of troubles, which should help them long-term. No options on these guys and we’d like to get them for $8.50 but I doubt it so entries (20% scales) of 1x at $9.50, 1x at $9 and 2x at $9.50 averages $8.87, which is close enough for a long-term play and, of course, $10.50 is around where we look for the exits again.
FTR (11/24 – $7.83, 12/21 $7.56, 1/9 – $7.68, 1/31 – $7.61, 3/17 – $7.51) We are in this one for the dividend (13.4%) and they are a fine long-term hold.
- Buy/write with Aug $7.50 puts and calls netted $6.36/6.93, now $6.50 – up 2% (but they just gave us .25 on 3/5!)
GENZ (12/21 – $47.95, 1/9 – $53.81, 1/31 – $54.26, 3/18 – $57.41) Went to high and was a no-trade.
GLW (11/24 – $16.53, 12/21 – $18.98, 1/9 – $19.89, 1/31 $18.08, 3/17 – $19.24)
- 2011 $17.50 at $2.75, now $3.15 – up 14%
- March $18 puts sold for $1, now .02 – up 98%
GME (12/21 – $22.62, 1/9 – $20.29, 1/31 – $19.77, 3/17 – $21.16)
- 2011 $17.50/25 bull call spread for $3, now $3.70 – up 23% Keepable
- 2011 $15 puts sold for $1.20, now .80 – up 33% (pair trade)
GOOG (11/24 – $583, 12/21 – $598, 1/9 – $602, 1/31 – $529)
We played the 4 June $570 calls for $63.50 ($25,400), selling 5 June $600 calls for $46.70 ($23,350) – net $2,050, which was meant to be profitable from about $575 to $700. The June $570s are now $26 ($10,400) and the June $600s are $14 ($7,000) for net $3,400 – up 65%. That’s the power of doing these conservative ratio spreads – they are very tricky to figure out the best math but, as you can see from the ride we've had on this one, they give you TONS of room for error!
- 2012 $700/Jan $660 spread at $13.50, now $19 – up 40%
GPW (11/24 – $25, 12/21 – $25.16. 1/9 – 25.03, 1/31 – $25.02, 3/18 – 25.35) is a nice little (and I emphasize little) power company that pays a 5.75% dividend on $25 shares (no options). The kicker for them is they MAY qualify for state aid in building their new plants as they continue to expand and that could give them a boost as would an acquirer paying just a fraction over the $250M market cap.
Notice that many of our virtual portfolio trades are REITs and energy companies. While I feel that REITs are in big trouble and commodities are overpriced, they make good offsets to our more speculative downside plays on SRS, OIH or ERY. This is a very important part of virtual portfolio balancing, selecting a mix of stocks to offset your bearish ETF betting or vs. vs. so you are not likely to be ALL wrong when the sector moves one way or the other. In general, since I am pretty bearish on the economy, I like stocks that benefit from me being wrong on my macro view. These are, of course, also stocks I don’t mind being "stuck with" long-term, just in case my macro view turns out to be right.
INTC (11/24 – $19.39, 12/21 $20.09, 1/9 – $20.40, 1/31 – $19.40, 3/18 – $22.20)
- Buy/write with Apr $19 puts and calls netting $17.10/18.05, now $18.87 – up 10% As I said last month: It’s a nice 11%, 3-month profit if called away and a 7% dicount if put to you. That may not sound sexy but this is Intel – not some rinky-dink company that you’d be ashamed to own in 2020!
- 2012 $17.50/25 bull call spread for $2.75, now $3.80 – up 38%
KEY (12/21 – $5.72, 1/9 – $6.50, 1/31 – $7.18, 3/17 – $7.56)
- 2011 $7.50 calls at .85, now $1.30 – up 53%
- 2011 $7.50 puts sold for $1.60, now $1.25 – up 22% (pair trade)
LMT (12/21 – $76.27, 2/2 – $74.89, 3/18 – $85.94)
- Buy/write with Jan $75 calls and $65 puts for net $64.46/64.73, now $71.24 – up 10% $7.22 out of $10.54 possible 10 months ahead of schedule is not worth keeping.
- 2012 $60/80 bull call spread for $10.40, now $14.20 – up 36%
- 2012 $60 puts sold for $5.60, now $3.10 – up 45%
MBI (12/21 – $3.64, 1/9 – $5.32, 2/2 – $5.19, 3/18 – $6.04)
- Buy/write with Aug $5 calls and Aug $4 puts netting $3.39/3.70, now $3.64 – up 7% Seems safe enough to ride out
- 2012 $2.50/7.50 bull call spread at $1.75, now $2.10 – up 20%
- $5 puts sold for $1.95, now $1.50 – up 23% (pair trade)
MON (12/21 – $80.97, 1/9 – $86.65, 2/2 – $77.31, 3/18 – $72.03) They were wisely a no play last time when I said: "I’m close to dropping them but I would buy them back in the mid $60s so they’ll stay on here. Very wise last time to say out of them but, long-term, this is a nice company to own."
NDAQ (12/21 – $20.03, 1/9 – $20.23, 2/2 – $18.42, 3/17 – $20.73)
- The Jan $15s at $4.60, now $7.40 – up 60%
- June $18 puts sold for $1.35, now .30 – up 77% (pair trade)
NLY (1/9 – $17.53, 2/2 – $17.45, 3/17 – $18.50)
- Buy/write with the Jan $17.50 puts and calls for net $13.45/15.48, now $14.80 – up 10% This one is a keeper as there's a lot left to gain.
NRF (11/24 – $3.42, 12/21 – $3.27, 1/9 – $4.19, 2/2 – $4.55)
- June $2.50 calls for $1.70, now $2 – up 17%
- June $5 puts sold for $1.25, now $.85 – up 32%
- June $5 calls sold for $.75, now .20 – up 73% (legged in buy/write)
NSM (12/21 – $15.26, 1/9 – $15.26, 2/2 – $13.68, 3/18 – $14.88)
- 2011 $12.50 calls at $2.50, now $3.85 – up 54%
- May $14 puts sold for $1.30, now .40 – up 69%
ORCL (11/24 – $22.14, 12/21 – $24.43, 1/9 – $24.68, 2/5 – $23.11, 3/18 – $25.38)
- Jan $20s at $4.40, now $6 – up 36%
- March $23 calls sold for $1.05, now $2.40 – down 128%
- March $22 puts sold for .55, now .01 – up 98% (legged spread) The Calls can be rolled to June $24 puts and calls at $2.80 (+.40) and there's no reason to abandon this spread as it should continue to do well. Boring, but well!
PCS (12/21 - $7.55, 1/9 – $7.10, 2/5 – $5.81, 3/18 – $6.94)
- Buy/write with Jan $5 puts and calls netted $3.41/4.21, now $4.14, up 21% No sense in killing this one early with .86 coming (another 20%).
PDS (11/24 – $6.80, 12/21 – $7.18, 1/9 – $8.72, 2/5 – $7.79, 3/18 – $7.80)
Buy/write with Sept $7.50 puts and calls netted $5.29/6.40, now $5.80 – up 10% Worth keeping with 32% more upside.
PGH (11/24 – $9.70, 12/21 – $9.64, 1/9 – $10.38, 2/5 – $10.42, 3/18 – $11.25) They are a Canadian trust that pays a MONTHLY .07 dividend.
Buy/write with July $10 puts and calls netted $8.77/9.39, now $9.85 – up 12% Worth keeping with the monthly dividends.
PRM (11/24 – $3.20, 12/21 – $3.93, 1/9 – $3.60, 2/5 – $3.15, 3/18 – $3.92) No options, just a stock.
S (12/21 – $3.77, 1/9 – $3.95, 2/5 – $3.41, 3/18 – $3.80)
- Aug $3/4 bull call spread for .40, now .55 - up 37%
- Aug $3 puts sold for .40, now .20 – up 50% (pair trade) Fine to leave this one.
SB (11/24 – $8.93, 12/21 – $8.27, 1/9 – $8.86, 2/5 – $7.90, 3/18 – $7.36) Another no play last time but we'll keep our eye on them.
TNK (11/24 – $8.18, 12/21 – $8.87, 1/9 – $9.37, 2/5 – $9.15, 3/18 – $11.50)
- Aug $7.50/10 bull call spread at $1.20, now $2.20 – up 83%
- Aug $7.50 puts sold for .50, now .25 – up 50%
Keep in mind that with the artificial buy/writes – we don’t care if we get assigned. TNK above is put to us at net $8.20 and we WANT to own TNK long-term for $8.20. If it keeps going up and we don’t get it, then we will sadly take our 157% profit and move on to something else so don’t let the fact that you "miss out" on the dividend bother you on these plays. If I want to buy 1,000 shares of TNK at $9,370 and I hope to make a $400 in dividends through August. There is no good protection with the Aug $10s at .40 and the Aug $7.50s at $1.60 (no premium) so you risk $9,370 to make $400. My proposal is you just buy 10 of the above spread for net $700 and you make a profit of $950 if TNK just holds $9.15! Do NOT be afraid of these plays – they are fantastic ways to leverage your virtual portfolio WITHOUT taking on additional risks (on a per-position basis, if you take 5 times more positions, rather than keep the cash handy, then don’t fool yourself – you are taking on more risk!).
WFR (12/21 – $13.05, 1/9 – $15.02, 2/5 – $11.60, 3/18 – $14.48)
- Buy/write with July $12 calls and July $11 puts netted $8.90/9.45, now $11.13 - up 25%
- 2012 $10 puts sold for $2.15, now $1.30 – up 40%
- 2012 $10/17.50 bull call spread at $2.60, now $3.45 – up 32%
WHX (11/24 – $16.25, 12/21 – $16.26, 1/9 – $16.93, 2/5 – $16.89, 3/18 – $18.80) is an interesting little REIT. They are a subsidiary of WLL that seems to be nothing more than a vehicle to funnel profits off land leases out of the parent company to be distributed out as dividends through WHX. That makes the income fairly uncertain as it seems tied to oil revenues but they have no debt at all and the dividends work out to over 15%. Sadly – no options but up 15% on the stock since we entered as a nice bonus to the dividend!
Wow, it's really hard to let go of some of these. So many good stocks and such good entires. Still, we don't grow if we don't learn to let go and move on and 4 months is a long time in the stock world. We have a huge benefit from a declining VIX, which we anticipated correctly in setting up these plays but it's time to recognize that we're at an inflection point and what worked really well on the way up, may not work as well on the way down or, even, on the way up higher.
There were 66 different positions in this virtual portfolio on 37 stocks and, in that whole batch, there are just two (2) that are down with average gains in the high 20s. I would urge members, especially impatient members, to go back through the Virtual Portfolio section and read back on the list and read the original reasoning for taking these trades and think about the strategies that work and give you 64 winners out of 66 picks. We are not taking chances, we are not gambling – we go for solid stocks AFTER they pull back and (as we are doing right now) we make non-greedy exits and get back to cash so, when the next opportunity comes along – we can do it again!