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Philstockworld January Portfolio Review (Members Only)

Image result for one million dollars animated gifWhat an amazing first year!  

As of Friday's close, the LTP alone is at $1 Million, finishing the day up 101.1% from our Jan 2nd, 2018 start date.  We've spent a lot of time in December discussing our system as we had a lovely real-World situation to see how it works in action in a market reversal that occurred in weeks, rather than months.  

The way our system is designed to work is to force you to buy low and sell high through the discipline designed into our trading pattern.  First of all, we SCALE into our positions, usually starting with a short put sale and then, if the stock gets cheaper – we initiate our initial long position but it's usually just a 1/4 allocation and we don't get to a 1/2 allocation unless the stock gets EVEN CHEAPER as we roll and scale into a larger position.  

That means we are buying when things are low – that's the plan from the minute we buy and we don't buy unless we think we have a bargain in the first place.  If we get our Fundamentals right and the stock does turn back around – the rewards can be incredible – especially as we're using option positions to greatly leverage the stocks bullish recovery.  

But, in order to ride out a 10-20% market correction, you have to have CASH!!! and you have to have margin in reserve and that means you have to NOT over-extend – even when things are going very well and that means we are also forced to cash in our positions when the market goes too high as well.  So, following our system simply forces you to do the most basic thing any stock guru tells you to do (more or less) – buy low and sell high!  What can be simpler than that?  

As you can see from the S&P chart for this year, we've had 3 times when the market has fallen 10% along with one 6.66% correction so it's not at all rare that we get a chance to add to our positions on dips.  Also you'll note that the 2,600 line on the S&P (/ES) held the first 3 times and fortunately, that's where we tended to flip more bullish – cashing in the STP hedges and pressing our LTP bets EXCEPT for this last time as the Macro Fundamentals got worse with the continuing trade war with China, Brexit chaos, the Government Shut-Down, weak early earnings reports and deteriorating economic data – that lead us to keep our hedges for another 10% drop but then, since we had factored in the new items – we flipped bullish once again in later December.

So the abnormal returns are due to our very good timing along with the very high volatility this year in the index.  Usually we aim for 20-40% gains for a year, don't expect 100% gains under normal conditions!  Our picks were, for the most part, very good as well as even our untouched Money Talk Portfolio, was up 95% for the year – and we hardly ever adjust that one (only once a quarter, live on the show).  As with all our portfolios, BALANCE is the key and the one underperforming portfolio is the Butterfly Portfolio – which became unbalanced as we made a big bet on Apple and lost (so far).  

There's no real review for the Money Talk Portfolio since we can't make adjustments but I'll be on the show next Wednesday (7pm), so we'll be making a few changes then.

That was from our Live Member Chat Room on Jan 17th and, not even 7 days later, those same positions are now up 6.2% for the week.  When your portfolio is capable of gaining 6.2% in a week – you don't need that many good weeks (15) to be up 100% and we've had 54 to play with since starting this portfolio:

If you go back to the October 24th Review of the MTP, that was the last time we made changes and I did an extensive review including how much money each position was expected to make by Jan 2021 (another $70,015) and we added a few new ones, including the TZA hedge to get us through the market correction and, without being touched since, the porfolio came throught the correction and is up another 10% for the quarter – despite the turmoil.

Another portfolio that's supposed to be self-balancing is our Butterfly Portfolio but, for good or bad, as Apple (AAPL) came crashing down, we turned it into an aggressive holding and, at the moment, that position is sucking up a lot of our profits, as is OIH, which we also flipped bullish on but also still believe will do well (LNG exports need infrastructure and the Oil Sector has underinvested in drilling for 3 years now).  So by circumstance, the OOP went off-mission and paid the price but it will all look very clever once they turn around, these are just arbitrary snap-shots along the way – and that goes for all our portfolio reviews – what matters is how they hold up over the much longer run…

Here are the rest of the reviews, as they originally appeared last week:

Butterfly Portfolio Review:  $109,404 is a bit of an improvement from our last review (12/13),  when we were down $5,564 but AAPL is still killing us, sucking up all of last year's gains though we do now have a Hell of a nice position – if they ever do improve.

More importantly, having 15 AAPL 2021 $120/210 bull call spreads means we can sell 5 short calls any time we want, as aggressively as we want and really, with the 11 short puts that are killing us too – we can sell 10 short calls with very little fear of damage.  

Going out 90 days, the AAPL April $160 calls are $6.35 so selling just 5 of those generates $3,175 so selling those 8 times would be $25,400 – so we have that to look forward to, at least.  Of course, if the spread goes back in the money, it can be good for $135,000 vs the current value of -1,097, which means we have a Hell of a lot riding on this Apple position.  This is not meant to be the strategy of the Butterfly Portfolio but it was dictated by circumstances as AAPL went on sale – we don't pass up on opportunities to buy good stocks when they are cheap. 

  • AAPL - The short $200 calls will expire worthless but the 6 short $210 puts are $53 in the money ($31,800) so we'll have to roll them and we already have 5 short 2021 $195 puts, now $45 ($22,500) and we collected $13,000 selling them and $11,700 on the $210s so that's $54,300-$24,700 = $29,600 so we're just going to roll the losses to 10 of the 2021 $175 puts at $32 ($32,000) which will lower the margin requirement in exchange for $22,300 of our cash.  As noted above, we'll be able to recover that by selling short-term calls – but not now as I want to give earnings a chance.  

  • DIS – We threaded the needle on our Jan target and both the short puts and short calls will expire worthless for a $2,425 gain for the quarter.  The remaining position is net $10,900 so our ROI is 22.25% per Q – that's a keeper!  Now we have to re-target and, as I noted from my trip – DIS is packed and they have a lot of big movies coming this year and ESPN is less of a drain but the Fox deal was expensive and building the Star Wars Park and Hotel will be expensive too.  I feel good about selling 5 April $110 puts for $3.40 ($1,700) but I'm worried about selling the $115 calls for $3.20 so here's my "compromise" - let's sell 5 April $115 puts for $5.80 ($2,900) and 5 April $115 calls for $3.20 ($1,600) so we have $4,500 which gives us $9 wriggle room in either direction.  Of course we'll lose on one side but we'll just roll the loser and, hopefully, that will eventually expire worthless as well.

  • MDLZ – The short Jan $42 puts will exprie worthless and the short $44 calls will expire worthless (am I good or what?) and that's $1,260 for 2 months against a net $3,500 position so 36% ROI in 60 days is another keeper!  It was a wild ride though and, on the whole, I'm bullish.  Unfortunately, the payout for March puts are terrible, just $1.10 for the $43 puts and the $43 calls are only $1.45, so neither are worth selling at the moment and I think we should wait for earnings on 1/30 to see where they are.  

  • OIH – We got aggressively bullish on these far too early.  Waiting and seeing.

Options Opportunity Portfolio Review (OOP):  Wow!  What a turnaround from 12/26 and I would like everyone to go to that review and see how aggressive we got when we were down 40% from the 12/11 review.  Yes, we could have been wrong and it might not have been a bottom and then we'd have been F'd but we nailed the bottom and scored a jackpot.  What I said at the time was:

We lost about 40% ($40,000) since our 12/11 review – how's that for a turnaround?  The OOP is now down for the year so we'll do some triage and see which positions we still believe in.  The good news is we still have $132,050 in cash – it's the negative $38,104 value of our positions that is killing us and those are what we like to call "paper losses" but paper losses become realized losses if you aren't careful!  

There are not all that many opportunities to make big moves like that in the market and, when they do come along, you have to be Ready, Willing AND Able to take advantage of them.  Aside from the $132,000 in CASH!!! we had in our portfolio, we also raised another $68,250 by cashing in the long SQQQ calls and that gave us $200,000 to deploy and we used half of it to roll most of our positions into more aggressive ones.  

The main reason I called for the moves that day (not an expiration week) was that the VIX had gone crazy so I knew that a lot of our "losses" in the OOP were a volatility illusion but that also meant that we could take good advantage of that volatility by selling it to others.  That's where the "mechanics" come in:

  • The high volatility means our losing long calls have more premium than they deserve
  • The high volatility means our short calls and short puts have more premium than they deserve

So we sell our high vol calls (part one of the roll) and move to a position that has less premium – usually one that's deeper in the money, taking advantage of the stock's low price to establish a deep in the money call with little premium (part 2 of the roll).  Then we sell a new call with a high premium or simply don't buy back the current short call – or both.  

The same goes for the puts, if we can roll our high vol short puts to a longer-term put with even more premium – why not?  EVENTUALLY the vol calms down and that's an automatic pay-off for all those new positions.  

Now, that doesn't mean we ALWAYS do that but, as you all know, we'd been tracking the downturn very closely and I felt very strongly that we were in a panic and we had targeted 20% so we thought we'd at least get a bounce there and, had the bounce failed – THEN we would have added more covers and more hedges but, as it turned out – it all worked out as we predicted – better even as we're now up 135% since last Jan 3rd but, really, we could have sat on the sidelines and waited until Dec 26th to do the whole thing – isn't that crazy?  

Hopefully, there won't be much to change but, like the LTP/STP, we do have to put some of our quick gains to work protecting what we've got as the gains can be lost as easily as they were found…

  • HMNY – Still not BK – that's encouraging!  I didn't want to do it last time since we were worried about our other positions but, since it's only $600 to buy another 40,000 shares and drop our basis to 0.07 - why not?
  • JO – Lots of room to run on these.  Last March JO was $48 – that would be $20,000 vs our $3,350 current position so I can live with the risk/reward on this one and I do think this is a strong bottom – it's just the time-frame that worries me but we can give it a month.  
  • SCO – On 12/26, we had a $14,325 loss on the short Jan $20 calls at $19,575 and we rolled them to 20 of the 2020 $30 calls at $17,600 and now they are down to $8,000 – huge turnaround and we should collect that $8,000 over the rest of the year.  
  • LB – Our new puts are on track.  Earnings probably first week of March.  

  • PLAY – Fairly new position, still good for a new trade with a net $38.65 entry. 
  • AAPL – We had the $195 puts and added the rest, puts are $4,000 better and the rest is up $5,000 so nice recovery there already.  
  • ALK – We doubled down (and rolled) and they popped over 10% since! 

BBBY – On track.

BHC – Nice pop already and looking good for our goals.  

C – Great pop on earnings, very on track.

CDE – Still laying around but we cashed ABX and now this is the one we'll work on.  

CHK – I can't quit them with all the LNG exports and I just read an article supporting my premise that infrastructure is now constraining additional increases in drilling so demand should outpace supply for /NG and that should be good for CHK too.  

  • FCX – Good for a new trade.
  • FNSR – On track.

Options Opportunity Portfolio Review (OOP) - Part 2:

  • FTR – We just doubled down on the stock so just waiting for earnings on 2/26.
  • GE – Comeback kids!   Was -$2,000 on the 26th, now +$7,900 so another $10,000 turnaround!  
  • GNC – We doubled down on our -$6,650 position and now + $2,600 – another +$10,000!  
  • GOLD – Silly me, we didn't cash ABX, it changed to GOLD…  Still hurting but not so bad but, with CDE there too – we're just watching and waiting and hoping Gold (/YG) gets back to $1,400.  Still, this is an earnings report I'll be looking forward to as I think people are way underestimating this company. 

  • HBI – Finally turning back up.  Hopefully we break through now that we've pressed our position (we also took a very conservative target). 

  • HRB – Every year we buy them in the winter and then, around tax season, people remember them and start buying.  Good for a new trade.  
  • LB – Good for a new trade.
  • MJ – Home run here.  We were flattish overall last month and we moved to a way more aggressive position and that has taken off for a quick $11,500 gain but it's a $40,000+ (1/2 covered) spread now net $27,000(ish) so 50% more to gain and I feel very confident – though we will sell short-term calls if we get a good pop for income.  This ETF can go 5x over the next few years very easily but will also be a rough ride.  

  • MU – Still good for a new trade.
  • NAK – I knew we should have doubled down last time but that would have been $5,000 (now $7,000).  Still, we're playing them because IF they ever get approved to mine – this could be a 10-bagger but it's a very speculative bet and we're in deep enough.  Trump put a coal lobbyist in charge of the EPA – that should help…

  • NLY – Very range-bound but that's to be expected when you distribute 90% of your profits.  We're in this for the dividends, not the stock gains.  We just got 0.30/share (3%) on 12/28.
  • OIH – We doubled down on the $15 calls and we were down $9,000 and now down $1,700 so I'd say that's a nice improvement.
  • SPWR – On track. 

  • SQQQ - Let's buy back 1/2 (25) of the 2020 $25 calls for $1.80 ($4,500) as it makes us much more flexible and gives us better coverage.  Also, it would be silly not to roll the 50 2020 $15 calls at $3.20 to 50 of the 2020 $12 calls at $4 as we're picking up $3 in position for 0.80 ($4,000).
  • TZA – Amazingly, we're still up on these.  Let's buy back the 50 short April calls as they are just 0.70 ($3,500) and it makes us much more bearish and we'll roll our 2020 $15 calls at $1.70 ($8,500) to the 2020 $8 calls at $4 ($20,000) so we're spending net $15,000 but buying $25,000 in position and now I'll sleep well over the holiday weekend.  

  • WBA – We closed the first one with a profit and now this one is off to a great start.
  • WPM – Wisely, we covered as we popped to $20 – very rangebound on this one. 

 

Short-Term Portfolio Review (STP): Yeah, since I'm not going to be here, let's look as the STP.  I think it's current but I also think something we added is still missing.

So SCO is what it is and the short puts are what they are and UGA is a dud.  We'll have to fix CELG if we haven't already, we should have rolled MJ long ago, MSFT will come back eventually so we'll roll them along, TSLA is done at full price as is XRT…

  • SQQQ we can flip more bullish (better hedge) by just buying back the short March calls.  Though they are not likely to go in the money, if we did have a sell-off, we would not be able to cash in some of the 2020 $15 longs like we like to do with so many short calls so $5,500 is a fair price to lean a bit more bearish.
  • TZA – In this case, we're up 81% on the April $15 calls so buying those back makes us very bearish and we can roll the 200 2020 $15 calls @ $2.15 to the $12 calls at $2.75 for 0.60 and then we're 0.50 in the money for 0.60 ($12,000) with a much wider spread.  

 

Long-Term Portfolio Review (LTP) – Part 1:  $952,639 is up an amazing 12.2% ($61,200) since Monday's snap-shot as all those Jan short puts and calls we sold expire worthless (or at least with no premium) and the aggressive adjustments we made in the last review kick in on this rally.  More importantly, we're up over $100,000 since our 12/14 review where I said:

$847,390 is DOWN $86,175 since our last review but the STP is at $378,093 and that's UP $68,253 so the paired portfolios are working PERFECTLY as the hedges are not meant to eliminate all your losses – just mitigate them.

How does loss mitigation work?  Well, we're essentially flat since 11/16 and the S&P is down about 5% and AAPL is down 10%, etc so the same cash we had on 11/16 buys 10% more stock – that's what the hedging is for – it puts CASH!!! in our hands when things go on sale.  They also keep us from having to panic out of positions as they go lower and, in fact, we often get to add to them – as often the best use of cash is improving strikes on the spreads we already have – especially when we're early in our scales, as we are with almost all of our first-year positions.

"They (hedges) also keep us from having to panic out of positions as they go lower" may be the most important thing I've ever said.  Hedges are the difference between just recovering and coming out ahead when there's a correction and a rebound.  BECAUSE we had our hedges and BECAUSE we had a ton of money (and margin) sitting in the STP, we were able to ride out the correction, which knocked the LTP down 20%, without breaking a sweat.  

We made 2 (two) adjustments in the December review – though we did make more aggressive adjustments later in the month, when the market hit the -20% line.  It didn't make sense for us to adjust on Dec 14th because we were not confident the market would bounce back but, on Dec 26th, we were confident calling a bottom – mainly because the STP made another $100,000 on our hedges so, even if we were wrong – we had plenty of room to adjust.

As I said on 12/14:

All in all the portfolio is in good shape with lots of positions I'd like to buy more of if the market doesn't collapse.  The high VIX is also hurting us as we sell a lot more premium than we buy but one thing we know is all premiums go to zero on expiration day so simply waiting will make us about $200,000 in this portfolio.  We have a ton of short calls to deal with next month, so don't make any plans for expiration week (14-18).

And here we are, on Jan 18th with everything going exactly as planned.  That's LUCK, not SKILL – the skill was in being prepared to take advantage of the downturn so that – IF we got lucky – we would do a lot more than just recover.  

Another way we prepared was by adding 9 short-term bearish positions in September that were designed to make us another $100,000 in a market downturn.  That was a success and also helped us ride things out but notice we took our precautions AT THE TOP – we didn't need to wait for a correction to begin to tell us the positions we held – even the ones we loved – were overbought. 

Now we have way too many positions so I'm looking for any excuse to cash some out…

  • HMNY - There's no reason not to spend $2,160 to triple down on these.  That will make our cost basis 0.466 on 240,000 shares and it's probably going to end up at zero but we might get lucky so it's like a lottery ticket now. 
  • WBA – Short puts will go worthless and I'm including them here because, by the time we get to Part 4 of the review – I may forget I skipped them.

As to the rest of the short puts:  All being kept except:

  • FNSR – Up 74% with a year to go so let's take it and run.
  • ARR – On track 
  • ETM – On track
  • NRZ – On track.
  • SKT – On track

  • AAPL – We're super-aggressive on Apple now and it is a huge position but paying off quickly as we rolled the $160s at $18.50 to the $120s at $37.50 and now the $160s are only $22.50 and the $120s are $45.50 – so much more gain than we would have had simply because we logically bought $40 in position for $19.  That's why I say those are MECHANICAL rolls – if you intend to stay in the position – then why on Earth wouldn't you buy $10 in position for $5 every time it's available?  We buy options as a proxy for the stock but we're happy to improve our position because all that does is bring us closer to actual ownership and raises our delta closer to the 100% we'd have if we owned the stock.  Not having 100% delta SAVED us money while the stock was falling but it's only paper savings if we don't convert to a more relational contract position.  I'm still confident enough to leave these open for now an, anyway – we just spent a lot of money improving our SQQQ hedges in the STP.  
  • ALB – Not so bad, considering the drop.  Let's buy back the short 2021 $120 calls and roll our 5 short 2020 $100 puts at $25 ($12,500) to 10 short 2021 $75 puts at $12.50 ($12,500) so we're only taking a profitable short call off the table and spending no additional money to lower our shorts while committing to own the stock if it's still down at $75.  I costs us $14,000 to roll the 20 2021 $80 calls at $14 to 20 2021 $65 calls at $21 but that puts us $22,000 in the money - so that makes sense.    

  • ALK – I'm hearing good things about them from travelers.  The short Jan calls will expire worthless and our position is on track. 
  • AMGN – We were pretty close on our Jan target so we'll close those out and also close out the 10 short 2020 $200 calls at $19.70 since that loss is canceled by the short Jans.  Now we can just sell 10 of the June $200s for $13.35 ($13,350) as we can always roll them along but it's good protection in case we fail at the triple top.  The CELG deal make me worried AMGN could get bought and those 2020 short calls would burn us if they did.

  • BBBY – We got way more aggressive on them in Sept and we're finally back to where we were then.  At least it's good for a new trade!  
  • BHC – The old VRX and we already cashed in the profitable longs we had and this is our leftovers. Just have to watch and see how these play out for now.
  • C – Nice reaction after earnings and we're back on track.  We should have taken better advantage of the dip but it will be a nice score regardless.  
  • CAKE – The short Jan $55 calls will go worthless and the rest is on track but we'll revisit after earnings.
  • CDE – Under-performing miner but I have faith.
  • CELG – Well these worked out great!  Our Dec spread is potentially $40,000 and now net $25,555 and the offer was at $100 so no reason to cash in early there.  Our Nov spread is potentially $22,500 and now net $13,133 so again, not going to walk away from $9,000.  Just have to hope the deal doesn't blow up and we've got $24,000 coming to us…
  • CHK – I guess it's on track? 

  • CHL – I picked one of the only stocks in China that was green for the year!  Net $7,050 out of $7,500 potential though means we should close the bull call spread for $7,255 and leave the short puts to expire worthless.  
  • CMG – Yikes, they blasted higher but we already cashed out a huge winner so they deserve to get some back.  Our 2012 $480/540 spread is potentially $140,000 and now showing $58,000 and I'm not worried about the 10 short 2020 $580s but they are even so let's just close them.  We'll have to roll the 20 short Jan $485 calls at $32 ($64,000).  We sold them for $19.75 though so not a huge loss ($24,500) so we're just going to roll those to 12 of the March $550 calls at $15 ($18,000) and we'll see how earnings go.  If they go lower, we have room to sell puts and if they go higher, we could still sell puts and roll the longs higher and we're double-covered with $82,000 in potential gains at "just" $540. 

  • CZR – Brand new and doing well.

Long-Term Portfolio Review (LTP) – Part 2:

  • DAL – Good for a new entry.
  • DIS - 25 2021 $120 calls at $8.50 can be rolled down to 25 2021 $110 calls at $13.50 for net $5 ($12,500).  
  • F – A bit behind but I have faith so good for a new trade (just one set of puts if new).
  • FCAU – Should put their troubles behind them and on track anyway. 
  • FTR – Waiting on earnings.  We're already obligated to DD essentially from our short puts. 
  • GCI – Buyout offer at $12 and we played for $12.50.  The 30 short Jan $10 calls are $1.20 so we have to close those and there's really no sense in selling more so we'll just wait and hopefully collect our entire $12,500 but only $10,000 at $12 but still much higher than our current net.
  • GE – Finally showing signs of life.  Not ready to buy back the short $15 calls but I am happy.

  • GILD – Our short Jan calls will go worthless and, otherwise, we're on track.  Again, with the CELG thing – let's wait a bit before re-covering.
  • GOLD – The old ABX. Not too much damage – good for a new trade.
  • GPRO – Wating and seeing on earnings.
  • GS – Still has that new trade smell.
  • HBI – Our aggressive adjustment is paying off (so far).

  • HRB – At our goal but net $6,500 out of $14,000 means i'ts great for a new trade, even up $3,600 from our original entry.  
  • IBM – Our 2019 Stock of the Year {insert fanfare here}!  After narrowly missing as our 2017 pick, the stars lined up in 2019 and we're on track and up about $12,000 already.
  • IMAX – Not only is DIS giving them mega-content this year but Aquaman had blowout numbers too.  We got very aggressive on the October dip and we only just passed it going the other way.   Great for a new trade.  

  • IP – I love shifting from exciting to boring.  IP is very boring but had an exciting sell-off that we couldn't resist.  Already almost at the top of our very conservative targets but way too early to cash in.

  • KHC – More boredom!  Same story as IP – can't resist a blue-chip going on sale for no good reason.  Our original short puts are still hurting so let's roll the 10 2020 $57.50 puts at $12 ($12,000) to 15 of the 2021 $50 puts at $8.40 ($12,600).

  • M – Now this would be my Stock of the Year at $25 – how silly!  We are already aggressive and not too much damage.  The short Jan $35s will expire worthless, so thanks for the $3,000 and the rest of the position is good as a new trade.
  • MJ – Well, that was easy money.  I think this ETF will be up 3x or more in 2021 as there are several companies in their basket that could become 10-baggers.  We're right on track so far. 

  • MO – Also going into the MJ biz so we like them and this spread likes us – right on track.  
  • MT – Suffering from tariffs and now a slowing economy but, as I keep saying, these are self-inflicted wounds and we should recover – I just hope 2021 is enough time.  
  • MU – Another huge bargain and we're up a bit anyway. 
  • NLY – We're in it for the dividends 
  • NYCB – Another dividend-payer and I'm not worried (good for a new trade).
  • OPK – Had some SEC issues that seem to be resolving so good for a new trade.

  • PZZA – We took the new spread to cover the short 2020 $50s so down is what we expected.  I want to see earnings before trying to improve what's really just leftovers from our original, hugely profitable trade.  See where we got out?  11/20!  You have to KNOW when your stock is unrealistically high as much as you need to know when it's low.

  • QCOM – Seem to be suing everybody but we're on track so we'll see how earnings look.
  • SKX – On track
  • SPWR – We got very aggressive and now we wait.  
  • T – We always buy T below $30 – it's in our first videos from 10 years ago…  On track.

  • TGT – Earnings not until March but last earnings went well.
  • THC – This is our third round with these guys – love 'em! 

  • UCTT – Earnings are late Feb and I don't want to do anything until we see them but we are pretty aggressive in this spread now.  We haven't rolled the short puts because 2020 is the longest month for contracts.
  • WBA – Jackpot on the short puts.  We only bought the long spread to protect the short puts, which were left over from a bullish play we cashed already.  I don't see any reason not to turn it into a proper play though so let's buy back 20 (1/2) of the short 2021 $85 calls for $5.50 ($11,000) and see how earnings go.  If they are good – we win big and, if they are not, we sell puts and roll the long calls lower and sell more calls to cover.  

  • WHR – Another tariff victim but doing well for us regardless.
  • WPM – This is like our 3rd time playing them so all gravy now.  Once again on track and the short Jan $17 calls are in the money so we'll buy them back and wait for earnings (around 2/15) before selling more.  The big spike came when they settled a tax issue in Canada.

Wow, done exactly on schedule!   Nothing to cut though – our positions are too good!  

 

Options Opportunity Portfolio Review (OOP) – Part 1:  Wow!  What a turnaround from 12/26 and I would like everyone to go to that review and see how aggressive we got when we were down 40% from the 12/11 review.  Yes, we could have been wrong and it might not have been a bottom and then we'd have been F'd but we nailed the bottom and scored a jackpot.  What I said at the time was:

We lost about 40% ($40,000) since our 12/11 review – how's that for a turnaround?  The OOP is now down for the year so we'll do some triage and see which positions we still believe in.  The good news is we still have $132,050 in cash – it's the negative $38,104 value of our positions that is killing us and those are what we like to call "paper losses" but paper losses become realized losses if you aren't careful!  

There are not all that many opportunities to make big moves like that in the market and, when they do come along, you have to be Ready, Willing AND Able to take advantage of them.  Aside from the $132,000 in CASH!!! we had in our portfolio, we also raised another $68,250 by cashing in the long SQQQ calls and that gave us $200,000 to deploy and we used half of it to roll most of our positions into more aggressive ones.  

The main reason I called for the moves that day (not an expiration week) was that the VIX had gone crazy so I knew that a lot of our "losses" in the OOP were a volatility illusion but that also meant that we could take good advantage of that volatility by selling it to others.  That's where the "mechanics" come in:

  • The high volatility means our losing long calls have more premium than they deserve
  • The high volatility means our short calls and short puts have more premium than they deserve

So we sell our high vol calls (part one of the roll) and move to a position that has less premium – usually one that's deeper in the money, taking advantage of the stock's low price to establish a deep in the money call with little premium (part 2 of the roll).  Then we sell a new call with a high premium or simply don't buy back the current short call – or both.  

The same goes for the puts, if we can roll our high vol short puts to a longer-term put with even more premium – why not?  EVENTUALLY the vol calms down and that's an automatic pay-off for all those new positions.  

Now, that doesn't mean we ALWAYS do that but, as you all know, we'd been tracking the downturn very closely and I felt very strongly that we were in a panic and we had targeted 20% so we thought we'd at least get a bounce there and, had the bounce failed – THEN we would have added more covers and more hedges but, as it turned out – it all worked out as we predicted – better even as we're now up 135% since last Jan 3rd but, really, we could have sat on the sidelines and waited until Dec 26th to do the whole thing – isn't that crazy?  

Hopefully, there won't be much to change but, like the LTP/STP, we do have to put some of our quick gains to work protecting what we've got as the gains can be lost as easily as they were found…

  • HMNY – Still not BK – that's encouraging!  I didn't want to do it last time since we were worried about our other positions but, since it's only $600 to buy another 40,000 shares and drop our basis to 0.07 - why not?
  • JO – Lots of room to run on these.  Last March JO was $48 – that would be $20,000 vs our $3,350 current position so I can live with the risk/reward on this one and I do think this is a strong bottom – it's just the time-frame that worries me but we can give it a month.  
  • SCO – On 12/26, we had a $14,325 loss on the short Jan $20 calls at $19,575 and we rolled them to 20 of the 2020 $30 calls at $17,600 and now they are down to $8,000 – huge turnaround and we should collect that $8,000 over the rest of the year.  
  • LB – Our new puts are on track.  Earnings probably first week of March.  

  • PLAY – Fairly new position, still good for a new trade with a net $38.65 entry. 
  • AAPL – We had the $195 puts and added the rest, puts are $4,000 better and the rest is up $5,000 so nice recovery there already.  
  • ALK – We doubled down (and rolled) and they popped over 10% since! 

BBBY – On track.

BHC – Nice pop already and looking good for our goals.  

C – Great pop on earnings, very on track.

CDE – Still laying around but we cashed ABX and now this is the one we'll work on.  

CHK – I can't quit them with all the LNG exports and I just read an article supporting my premise that infrastructure is now constraining additional increases in drilling so demand should outpace supply for /NG and that should be good for CHK too.  

  • FCX – Good for a new trade.
  • FNSR – On track.

Options Opportunity Portfolio Review (OOP) – Part 2:

  • FTR – We just doubled down on the stock so just waiting for earnings on 2/26.
  • GE – Comeback kids!   Was -$2,000 on the 26th, now +$7,900 so another $10,000 turnaround!  
  • GNC – We doubled down on our -$6,650 position and now + $2,600 – another +$10,000!  
  • GOLD – Silly me, we didn't cash ABX, it changed to GOLD…  Still hurting but not so bad but, with CDE there too – we're just watching and waiting and hoping Gold (/YG) gets back to $1,400.  Still, this is an earnings report I'll be looking forward to as I think people are way underestimating this company. 

  • HBI – Finally turning back up.  Hopefully we break through now that we've pressed our position (we also took a very conservative target). 

  • HRB – Every year we buy them in the winter and then, around tax season, people remember them and start buying.  Good for a new trade.  
  • LB – Good for a new trade.
  • MJ – Home run here.  We were flattish overall last month and we moved to a way more aggressive position and that has taken off for a quick $11,500 gain but it's a $40,000+ (1/2 covered) spread now net $27,000(ish) so 50% more to gain and I feel very confident – though we will sell short-term calls if we get a good pop for income.  This ETF can go 5x over the next few years very easily but will also be a rough ride.  

  • MU – Still good for a new trade.
  • NAK – I knew we should have doubled down last time but that would have been $5,000 (now $7,000).  Still, we're playing them because IF they ever get approved to mine – this could be a 10-bagger but it's a very speculative bet and we're in deep enough.  Trump put a coal lobbyist in charge of the EPA – that should help…

  • NLY – Very range-bound but that's to be expected when you distribute 90% of your profits.  We're in this for the dividends, not the stock gains.  We just got 0.30/share (3%) on 12/28.
  • OIH – We doubled down on the $15 calls and we were down $9,000 and now down $1,700 so I'd say that's a nice improvement.
  • SPWR – On track. 

  • SQQQ - Let's buy back 1/2 (25) of the 2020 $25 calls for $1.80 ($4,500) as it makes us much more flexible and gives us better coverage.  Also, it would be silly not to roll the 50 2020 $15 calls at $3.20 to 50 of the 2020 $12 calls at $4 as we're picking up $3 in position for 0.80 ($4,000).
  • TZA – Amazingly, we're still up on these.  Let's buy back the 50 short April calls as they are just 0.70 ($3,500) and it makes us much more bearish and we'll roll our 2020 $15 calls at $1.70 ($8,500) to the 2020 $8 calls at $4 ($20,000) so we're spending net $15,000 but buying $25,000 in position and now I'll sleep well over the holiday weekend.  

  • WBA – We closed the first one with a profit and now this one is off to a great start.
  • WPM – Wisely, we covered as we popped to $20 – very rangebound on this one. 

 

 


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