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PhilStockWorld March Portfolio Review

Image result for one million dollars animated gifWhat a crazy fist quarter it has been!

We cashed out our last set of winning portfolios back in September, as I did not trust the market into Q4 but the market kept going higher so we had too much FOMO (Fear of Missing Out) and we started playing again in October – albeit with much smaller amounts.  Our Long-Term/Short-Term paired portfolios had hit $2.6M after starting at $500,000/100,000 on Jan 2nd, 2016 and it was becomming too difficut to hedge so I said at the time:

Hedging a $1.7M LTP would be very expensive and what if next time we didn't time the turn in the STP and instead blew the turn and lost money there as well as the LTP.  Then we'd be back to $2M and needing to make 30% to get back to $2.6M and what if it's hard to make money next year or what if we have another crash and the market is down 40% – it's just too much to risk vs. putting $2.6M safely on the sidelines and simply looking for new opportunities.

Well, here we are, at the bottom of that 40% sell-off and, as expected, we're having to pull a bit more cash off the sidelines as some of our new portfolios got crushed.  This is going to be an odd review because we made more than one adjustment in the past two weeks on some portfolios and I'll do my best to consolidate all the moves here.  The bottom line is we got a lot more aggressive around March expirations (20th) and yesterday (23rd), as the market hit rock bottom, we went gung-ho bullish in our LTP and Butterfly Portfolios in anticipation of a massive Congressional Bail-Out Package.  

Hopefully, that provides a catalyst to form a floor at the 40% off line and we can consolidate between here and the 20% off (the top) lines, which is where the market should be in the first place – the rest was just fluff – that's why we cashed out in September – at S&P 3,000!  

Short-Term Portfolio Review (STP) (3/19):  $282,168 is up 182% so the STP is doing it's job and, of course, it's full of potential if things stay this low – nicely offsetting the LTP losses.  To be clear (as someone asked yesterday) the STP is a model for hedging that works with any portfolio, not just the LTP.  

What happened in the last cycle was we had a couple of big market sell-offs and we cashed in the STP and then said "If it gets worse, we'll move the cash to the LTP" but then it didn't get worse and the STP just got bigger and bigger while the LTP recovered.   That's one of the ways I can feel we're at a bottom, when it's time to move cash from the STP to the LTP – like the way the market tends to reverse when StJ and I are debating whether to move the lines on the Big Chart!  

We are LOADED with CASH!!! ($457,773) and out positions have a -$175,605 net value so the trick is to work out the positions, using as little cash as possible and PRESTO! we're up another $175,000!  We generated some of that cash yesterday, by cashing in some very successful shorts and buying cheaper spreads to cover our remaining short call.  That's Phase 1.  Phase 2 is making sure we're not too bullish and Phase 3 is rolling or whatever to get that -$175,000 to turn into $0.

  • AAPL – As with all our short puts in the STP, they generally offset the cost of a hedge and, if they go bad, we just roll them over to the LTP because we REALLY do want to own 700  shares of AAPL for net $150.
  • CHL – I can't believe how bad they got.  While we do REALLY want to own them, the 5 short Sept $45 puts at $14 ($7,000) have no premium left $37.50 puts are $9 ($9,000) so we can roll to 10 of those and pick up some cash. I don't want to do all the math but this is like buying T for $15 – silly not to.  
  • FXP – That was left over from our old spread – I can't believe they are still so expense 60% out of the money.  
  • TSLA – What's left of that spread, good timing on the roll if they hold $400.  

  • SDS – Our new spread.  Keep in mind we hope to lose this – it's covering all the new LTP short puts.  
  • QQQ – Also new.  All we have to do is have the VIX calm down and we make money.  That's why we took advantage yesteray.

  • QQQ2 – Leftovers from the old spread, the first QQQ is covering it but we don't want them to get out of control so if the Nas fails to hold $175, we're damned sure going to cover again.  It's no big deal, we got offered a lot of cash for our long puts yesterday and we took them off the table (the cash was more than the spread) and now we have the naked short puts but we feel this should be the bottom for QQQ and that's $95,000 worth of short puts we can pick up if we're right!  
  • SQQQ – Added that to cover as well yesterday and that's a $100,000 spread that's currently a net credit of $17,250 though not a lot of room to roll the short calls so, again, we need to watch closely if we have another leg down.
  • SQQQ2 – That's our older set and we sold some off (more CASH!!!).  $97,500 spread at net $22,000 credit so $119,500 upside potential.  We almost make more money if the market crashes than if it recovers at this point!  Flat would be very nice though…  

  • TLT – I don't even understand bonds anymore.  Luckily, we played it right and let's keep in mind it's not because I'm a genius – the line is right there on the chart letting us know it was a high-percentage chance we'd pull back from there (not to mention common sense as that was 0% for 20 years).  Now the odds favor cashing in our 20 June $145 puts at $12 ($24,000) and then hopefully we're right about our $155 target for the short puts and short calls.  

  • UNG – Not worth changing.
  • USO – I can't believe how low this thing is.  Nor can I believe this $30,000 spread is net $5,650 despite being $20,000 in the money (less the short puts call it $10,000 in the money).  We should really just have 10,000 contracts ($3M) of these and take off until summer.  We're essentially betting oil will be more than $30 on July 4th. 

Now it's easy to see how the STP ended up 800% in the last set.  A couple of runs like this and we're swimming in cash.  Last series, the LTP never ended up needing the cash (because the markets came back so quickly) so we just ended up accumulating cash in the STP.

Short-Term Portfolio (STP) Adjustments (3/24):

Keeping in mind that the point of the STP is to make money in a down market, we need to think about what we REALLY need to protect the LTP:

  • AAPL - $10,133 to gain and pretty much a sure thing.
  • CHL – Up 45% in a day is pretty good for a put sale and, as much as I love CHL - that's just silly to risk so we'll buy those back.  This isn't the LTP, the purpose was to offset the cost of a spread and mission accomplished (with a bit less offset than we hoped). 

  • FXP – I doubt they get back to $50.
  • JPM - We're certainly going to collect that $3,013.
  • TSLA - I expect to collect that $38,825.  

  • FAZ – We paid $2.40 for the spread and we can take the $50s off the table for $18.85 – let's do that!  If the banking sector starts to collapse, we can cover.  The key to this spread was the STUPID premium we got paid for the short calls, now it would be criminal not to take advantage of that…
  • SDS – Sort of the same as FAZ as we collected stupid money for the short $50s but we do need hedges and this was a cheap one but $35 calls are at the money and the time-frame is short so, rather than let our net $2.90 entry decay into nothing, we can cash the May $35 calls for $5.60 ($44,800) and roll them to a more realistic 80 Sept $30 ($8)/$45 ($3.50) bull call spread at $4.50 ($36,000) so we're taking $1.10 of $2.90 off the table and now we're in the covered spread for net $1.80 that's $5 deeper in the money.  

  • QQQ #1 – It was a $6.22 spread and we can take $18.28 off the table by selling the $180 puts so let's do that for $146,240 and we'll put stops on 20 $160 puts at $12.50, $14, $16 and $18, which averages $15.125 so, if we stop all 80 out, our net exit is $3.155 ($25,240) and we risk losing $24,520 against possibly gaining $100,000 that we're pulling off the table now.  Good risk/reward so we do it.
  • QQQ #2 - The above spread was protecting these short puts and now we have the short Jan $160 puts so let's not risk it and take this $26,000 profit off the table and now we can't net lose anything on the QQQs (and we've only had this play for a week).

Remember, if the market is done going down, this is still a $100,000 gain on a hedge we didn't need – just bonus money for the LTP.

  • SQQQ #1 – We netted into this spread so cheaply I'd rather have the protection than mess around and take a risk.
  • SQQQ #2 – We already took cash off the table and it is sitting in the portfolio so all we really need to do is get the current positions to expire worthless and the cash is ours!  We have one big gamble above on QQQ and we're not net ahead enough to take too many chances so we'll buy back the short April $32 calls as we're up 75% on those and that then gives us a stronger hedge that, hopefully, we won't need.  The net of the Jan $20/35 spread is only $1.75 ($11,375) so it's very cheap insurance in the money on a $97,500 spread and I'm sure we can sell more shorts along the way to pay for that. 

  • TLT – Who know what this thing is going to do?  I say we should be happy we have a net gain and get out.
  • UNG – That one I believe in.  $15,000 spread at net $2,855 means $12,145 left to gain (+ bonus on the extra 10).
  • USO – I believe in that one too.  It's a $30,000 spread at net $3,750 so $26,250 left to gain.  

The key to this portfolio is that we have $483,883 in CASH!!! and our job, going forward, is simply not to lose it.  Notice the net securities were only -$44,230 so we could have just gone to $440,000 in cash and been done with it but it's not like we don't know how to take advantage of things and we could easily squeeze another $200,000 out of this thing.   All that is from our $100,000 portfolio we played bearishly since Jan 17th, when we started it.  The timing was perfect and the gains we made here were the reason we could aggressively adjust our LTP on the way down.  

These are the situations these paired portfolios are designed to take advantage of – shame on us if we don't follow through out of fear!

Long-Term Portfolio (LTP) Review:  $100,016 is down 80% on our longs and our STP is at $391,066 (up 291%) so net $491,082 out of $600,000 is still down 18.15% on our paired portfolios.  As we often point out – you can't prevent all the damage from a sell-off but you can mitigate it to a large extent.  Of course, if we were to simply cash out – the stocks we want to buy are much more than 20% off – so we're still in good shape overall thanks to our hedges.

Not all the new short puts aren't in here yet:

  • BA – Only short put I want to change only because it's so silly now.  The 2022 $110 puts were sold for $30 so net $80 is not a big deal with BA just under $100 but the puts are $50 ($25,000) and the June 2022 $75 puts are $30 so we can sell 8 of these instead for $24,000 and that means we still collected net $14,000 in 8 or $17.50/share so our new net is $57.50 for 800 shares ($46,000) vs net $80 for $500 shares ($40,000), which is why you should ALWAYS be looking for these rolling opportunities as we've lowered our break-even by $22.50 (28%) or really $23.625 as we did use $1,000 that we had collected on the roll….
  • The rest of the short puts aren't in enough trouble to bother with.

  • SIX – Boy did we pick a bad month to enter them!   Just the reflexive roll from the 2022 $15s at $5.50 to the 2022 $10s at $8 for net $2.50 (the magic number for a $5 roll).  
  • SKT – We've chased them to BK before so be warned but I think this is just silly and we can buy 2,000 more shares for $6.05 and sell 20 2022 $5 calls for $2.40 so we're buying 2,000 more shares for net $3.65 and, if you don't want to do that, then you should be thrilled to liquidate at $6.05.  The 2022 $13 puts at $8.70 are not much of an assignment risk at net $4.30 but we can sell the $10 puts for $6.80 so let's sell 20 of those ($13,600) and put a stop on the $13 puts at $10 so, worst case, it's a 1/2 roll but, if SKT pops back up, we'll make twice as much money.  

  • AMZN – We took advantage of the high VIX.  Hopefully it doesn't return. 
  • AVGO - Let's roll the 5 short 2022 $250 puts at $95 to 10 short 2022 $180 puts at $50 and let's roll our 10 long 2022 $280 calls at $13.10 ($13,100) to 10 long 2022 $200 calls at $35 ($35,000) and I'm fine with the short call target – this is just a bump in the road!   We bought the bull spread for $14,250 and we're salvaging $13,100 from the long puts – not much of a loss, is it? 

  • BRK/B – Brand new.
  • CSCO – Not in trouble. 
  • DFS – Big trouble!   The 2022 $60 calls are down to $3 ($6,000) so let's roll them to 30 of the 2022 $25 ($8.50)/$40 ($4) bull call spreads at $4.50 ($13,500), so we're spending $1.50 per contract to drop more than 50% in strike + $4,500 on 10 more spreads and we're in a $45,000 spread – I can live with that!  On the short put side, we can roll the 10 2022 $70 puts at $45 ($45,000) to 20 2022 $50 puts at $30 ($60,000).  Now we've taken a net $7,500 CREDIT to drop to 30 2022 $25/40 and 20 short $50 puts and it was net $28,800 before (not counting gains on previous short calls) so now net $21,300 on the $45,000 spread.  We were promising to buy $70,000 worth of DFS and now we're promising to buy $100,000 worth – not a huge additional commitment and, when we were buying them for $80 – if I had said how much would you like to buy for $50 – I bet the answer would have been "lots!" 

It's very easy to lose perspective when things are selling off like this but won't MORE people use credit cards when they run tight on money?  Yes, there may be more defaults but, unless the GOP Congress drastically changes the bankruptcy laws – they can't be discharged so the overall collection rate remains high.  Does DFS make more money when 1M customers buy $20 items and they collect 1.5% from the merchants ($300,000) or do they make more money when 1M customers don't pay their $200 balance and pay 1.5% interest for the month ($3M)?  

  • FCX – Not in trouble. 
  • GILD – In the money. Great for a new trade at these ridiculous premiums.  

GILD is a good example of how silly your portfolio balance can get.  The 15 $55/65 bull call spreads with the $62.50 puts are $10 in the money on a $15,000 spread yet the broker says the spread is worth $100.  If I really thought we could get those prices I would double down out of spite!  

  • GM – Yuch!  The 30 2022 $30 calls are $1.25 ($3,750) and they can be rolled to 50 of the 2022 $18 ($4.85)/$25 ($2.40) bull call spreads at $2.45 ($12,250) and we can roll the 10 short 2022 $35 puts at $17.20 ($17,200) to 30 2022 $18 puts at $5.50 ($16,500) so we were going to buy $35,000 of GM at $35 and now we're going to buy $54,000 worth at $18 – these are not big stretches of our commitments. 

  • IMAX – Not sure they'll recover by Sept or I'd be more aggressive.  The 50 Sept $14 calls at $2.70 can be rolled down to the $10 calls at $4.50 for $1.80 ($8,000) and the 50 short June $20 puts at $9.70 ($48,500) can be rolled to 50 short Sept $15 puts at $7 ($35,000) as we don't have to make it all back on one roll – we have our whole lives to sell IMAX puts….  So we're spending net $21,500 to improve the position and it was net $11,500 to start (not counting short call profits) so in for $33,000 on 50 means $16.60 is our break-even.  That's not out of the question.

  • JO -  Actually doing well in this crappy market – deep in the money and, in fact, it's showing net $9,000 on the $10,000 spread so let's cash that in and leave the short puts.  
  • LABU – If there was ever a time for Biotech to step up and save us, now would be it.  We'll just do the mechanical roll and move the 20 2022 $20 calls at $7.50 ($15,000) to 20 2022 $10 calls at $11.50 ($23,000) and I'm fine with the $35 target.  

  • LB – Back on sale!  Let's see, they just sold 1/2 of Victoria's Secret and collected $550M and didn't have a chance to spend it when the market crashed and now the whole company is valued at $2.4Bn at $8.75.  Sounds good to me!  They made $644M last year and 80% of it is during Q4, which isn't now.  Let's roll the 50 2022 $17.50 calls at $2.85 ($14,250) to 50 of the 2022 $7.50 calls at $4.60 ($23,000) and let's roll the 20 2022 $20 puts at $13.60 ($27,200) to 40 of the 2022 $10 puts at $5.50 ($22,000).  

  • M – Boy they are just giving these retailers away  We can roll the 20 short 2022 $25 puts at $10.55 ($21,100) to 40 2022 $8 puts at $4.50 ($18,000) and we'll roll the 40 2022 $10 calls at $1.25 ($5,000) to 60 2022 $5 calls at $2.50 ($15,000).
  • MIDD – How can people not need ovens?  Well I guess the logic is the restaurants are closed so no need for new ovens but then MIDD doesn't have to make ovens and, as a manufacturer, that's called a VARIABLE cost.    Now you can buy them for $2.4Bn at $43.85 and they made $350M last year and do you know what they'll make next year?  $350M!  This year, probably not but we don't buy them for this year, do we?   Big loss so far but we can roll the 10 Dec $110 puts at $65 ($65,000) to 20 Dec $75 puts at $33 ($66,000) and the Dec $100 calls aren't worth rolling but we'll buy back the Dec $120 short calls and grab 20 of the Dec $30 ($18)/$50 ($8) bull call spreads at $10 ($20,000) so we've spent net $19,000 more and we were in for a net $2,200 credit so now we're in the $40,000 spread for net $16,800 but at more than 50% below where we started.  

While it's really fun when your net $2,200 credit spread ends up paying $22,200 because the stock went straight up (or staying flat would have done it), that doesn't always happen but we have $50,000 allocation blocks in the LTP so plenty of cash on the sidelines to improve the position.

  • MJ - Let's roll the 30 2022 $15 calls at $1.35 ($4,050) to 50 2022 $5 ($5.20)/$10 ($2.60) bull call spreads at $2.60 ($13,000) and buy back the 30 short 2022 $30 calls at 0.30 (no more) and we'll wait a bit to deal with the short puts.
  • MO - The March $47.50 puts expired $13.22 in the money ($6,610).  We can roll the 10 2022 $40 puts at $14.30 ($14,300) to 20 of the $32.50 puts for $9.30 ($18,600) to consolidate the puts and we can roll the 30 2022 $40 calls at $3.85 ($11,550) to the $25 calls at $9.50 ($28,500).  

  • PAA – Still dropping like a rock.  Fortunately, the 2022 $5 calls are $2 so we can buy 4,000 more for $5.25 and sell 40 of the $5 calls for $2 and we're in for net $3.25 ($13,000) which is $9.37 on 8,000 and the 30 short 2022 $15 puts have a $12,750 loss so we'll just roll those to 40 of the 2022 $8 puts at $4.60 ($18,400) and we'll be thrilled to get back to $9 one day.  

  • SPWR – Doesn't need fixing.
  • TD - We can roll the 10 short July $55 puts at $21.55 ($21,550) to 20 Oct $40 puts at $10.50 ($21,000) and our 25 Oct $45 calls at $1.55 ($3,875) can be rolled to 25 Oct $30 calls at $7.50 ($18,750).
  • TOL – Catastrophic dive!  The 10 short 2022 $35 puts at $21.50 ($21,500) can be rolled to 20 $20 puts at $9 ($18,000) and the 15 2022 $33s at $1.60 ($5,280) can be rolled to 40 2022 $13 ($4.50)/$25 ($2.60) bull call spreads at $1.90 ($7,600).  These builders didn't go BK in 2008 and it was their crisis! 

  • TXT - The 10 Dec 2021 $40 puts at $19.50 ($19,500) can be rolled to 20 of the $25 puts at $8.40 ($16,800) and the 25 Dec 2021 $30 calls at $4.15 ($10,375) can be rolled down to 25 $17.50 calls at $8.80 ($22,000).

  • VALE - Let's roll the 40 2022 $10 calls at $1.10 ($4,400) to 40 2022 $5 calls at $3 ($12,000) and let's roll the 20 2022 $12 puts at $6 ($12,000) to 40 of the 2022 $80 puts at $3 ($12,000).
  • VIAC - The 20 2022 $27.50 puts at $17.75 ($26,625) can be rolled to 30 of the 2022 $17 puts at $9 ($27,000) and the 50 2022 $25 calls at $1.60 ($8,000) can be rolled to 50 of the 2022 $5 ($7)/$15 ($3) bull call spreads at $2 ($10,000) and you can do that as a new trade with just 10 of the short puts for net $1,000!  

  • WBA – In good shape.
  • XOM - Let's roll the 10 2022 $50 puts at $22.65 ($22,650) to 20 more of the 2022 $27.50 puts at $7.20 ($14,400) to clean things up and we'll roll our 20 2022 $50 calls at $2.60 ($5,200) to 30 of the 2022 $30 calls at $8 ($24,000)

Now we need to add a some hedges to cover this stuff!  

Still, good chance to adjust our positions back near yesterday's lows.  

These are not full reviews, just the things I want to adjust:

Butterfly Portfolio Update (3/5):

  • AAPL – Let's buy back the April $320 calls at $5.50 just to clear the slot to sell something else if they bounce back or something lower if they don't.  
  • DIS – Not worried about the short puts but let's buy back those short 2022 $160s at $3.85 and hope for a bounce but, if no bounce, we can sell the $110s ($17.50) and use that money to roll our long $130s ($11) to the 90s ($30).
  • X – 2022 $10 calls are $2 and the $5 calls are $4 so that's a good roll and we're not worried about the puts.  

Butterfly Portfolio Review: $50,751 is down 50% and we are going to add $100,000 to this portfolio so we can make some aggressive moves.  It is not our intention to have a bullish Butterfly Portfolio but you have to play the hand you are dealt and these are some ridiculously low prices we're able to take advantage of.

  • AAPL – Keep in mind we took profits off the table.  Now we need to fix the losses.  While $260 is a realistic price for 2022, we still have to decide if we'd be better off with a roll.  AAPL has June 2022's and the $200 puts are $43 so we could roll our loss ($98,900) to 25 of those ($107,500) and roll our 2022 $240s ($123,975) to the June 2022 $200s at $62.50 ($187,500) and roll the short 2022 $310 calls ($57,750) to the June 2022 $260 calls at $37 ($111,000).  So, all in all, we added 5 more puts but lowered the strike by $60 (30%) and we still have a $60 spread (was $70) but now it's $40 lower in strike with 6 more months to go.  The whole move was net $1,675 so still a $180,000 spread, now a net $37,175 credit.  

  • DIS – We got crushed on the long calls but they are still viable if DIS recovers.  I don't want to spend too much money but since we can sell 50 June 2022 $120 calls for $10 (50,000) and that pays for us to roll 30 2022 $130 calls at $6.50 ($32,500) to 50 June 2022 $85 calls at $21.50 ($107,500), I suppose we can count on some sales to make up the other $25,000 and now we're in a $175,000 spread that's at the money.  We can also roll the 10 June 2021 $130 puts at $50 ($50,000) to 20 2022 (Jan) $90 puts at $24 ($48,000).

  • MDLZ – Not much damage but may as well take advantage since we got off cheap on the other adjustments.  Let's buy back the June $55 calls at 0.45 ($450) and buy back the short 2022 $62.50 calls at $1.75 ($3,500) and roll 20 2022 $55 calls at $3 ($6,000) to 30 of the 2022 $45 calls at $7.50 ($22,500) and we'll wait on selling more short calls.  We can also roll the 10 short 2022 $50 puts at $12 ($12,000) to 15 short 2022 $42.50 puts at $7.50 ($11,250).

  • MJ – Might be bottoming!  The 60 2022 $20 calls at $1 ($6,000) can be rolled to the 2022 $10 calls at $3 ($18,000) and we'll buy back the 30 short Jan $21 calls at 0.35 ($1,050) to clear the slot.  

  • WHR – Amazing drop on these guys.  I guess no one will ever buy a washer again and, fortunately, we were waiting to sell puts.  Hard to say if now is the time but I can't turn down selling 5 2022 $50 puts for $12.50 ($6,250) and we'll buy back the short Jan $150 calls at $1.50 ($1,500) and we'll roll the 10 Jan $120 calls at $3 ($3,000) to 15 2022 $70 ($17.50)/$100 ($9.50) bull call spreads at $8 ($12,000).  That's net $4,250 to turn a $30,000 way out of the money spread into a $45,000 spread that's at the money.

  • X – Just keeps going lower.  The $8 puts are $4 but I don't think it's worth paying $7.50 to buy back the $12 puts (net $4.50) so we'll just leave it.

Dividend Portfolio Review:  Well, so much for leaving this one alone and seeing how it goes!  We are down to $7,771 (down 92.2%) which is because we have stocks and there are no hedges in this portfolio, specifically – which is not to say you shouldn't have hedges, just that we keep ours in the STP and there's no sense in having 5 STPs for 5 portfolios.  

This is a great example of why I strongly prefer options – stocks tie up too much money and require too much money to fix when you do have a market disruption and, from my perspective, we had one in 1987, 2000, 2008 and 2020 so pretty much every 10 years since I've been trading – seems kind of idiotic not to expect it, right?  

Clearly we have to add $100,000 here in order to make adjustments but, for the most part, I want to stick with the premise that, over 6-8 years, we will reduce our basis(s) to $0 and it really doesn't matter what the stock does between here and there – this is a great test of that theory!  

  • PFE - We can roll the 5 short 2022 $35 puts at $9.40 to 10 short 2022 $28 puts at $5 and it drops our basis from $31.20 to about $26 so we're committing $26,000 vs $15,600 – that's not so terrible because then we'd sell puts and calls for maybe $6 and we've back to net $20,000 if assigned.  We can live with $20 a share so the roll makes sense.  

  • TD – Same concept.  The 5 short July $57.50 puts at $19.60 can be rolled to 10 of the Oct $42.50 puts at $10 about even.  

  • CHL – It's really not damaged enough for us to bother adjusting.  If the portfolio were healthier, I'd love to DD but we have bigger fish to fry. 

  • ET – What a catastrophe.  I really can't see how this is that bad for them so here we have to DD at $5.15 ($5,150) and then we can buy back the short 2022 $12 calls at $1 ($1,000) and sell 20 2022 $5 calls for $2 ($4,000) and, although I'm not worried about the 10 short $10 puts at  $6.10 ($6,100), I do like selling 15 of the $8 puts for $5 ($7,500) so consider that the roll.  That's net $750 spent to turn the net $6,800 position that would be called away at $10 ($10,000) for a $3,200 profit into a net $7,550 position that would be called away at $5 ($10,000) with an $1,800 profit.   Of course, we need to be over $8 really because of the puts but we'll roll them along as long as ET is solvent.  If they keep paying the dividends, we'll be thrilled to have 2,000 shares instead of 1,000 shares.  They just paid 0.305 on 2/6 too so that's $305 we just collected and it will be $610 in May!  

  • F – Bailout!!!!  It's only been 10 years, why shouldn't they get another bailout?  This is one where we should TD so 2,000 more shares at $4.40 ($8,800) and we'll sell 20 2022 $3 calls for $2.20 ($4,400) to cover those but the put target is fine so we leave those.  So we're spending net $4,400 on top of the $5,760 we started with puts us in 3,000 shares of F at net $10,160 so $3.86 and F just paid 0.15 ($150) on 1/29 and next time we get $450 if they don't cut it.  7 x $450 is $3,150 + called away at $15,000 at $5 (ignoring bonus money if we hit $7) is net $7,990 in profits over $5 to pay for the 1,000 shares we get assigned back if we're below $7 – certainly we can live with that, right?  

  • M – OK, we clearly paid too much for these!  Rather than pay money to buy more shares at $6.40, let's just say we WOULD double down at $4(ish) by selling 20 more $8 puts for $4.20 ($8,200) and I still believe in the $13 target of our original puts but we can buy back the short $15 calls for $1 ($2,000) and we paid net $15,900 for 2000 shares so net $7.95 but now we're netting $6,200 for changes so $9,700 is net $4.85 and we can sell the $5 calls for $3.50 ($7,000) and that drops our net by $2.50 to $2.35 with a $5,300 profit over $5 to pay for the potential of being assigned 2,000 shares at $5 and $2,000 shares at $13 is $26,000 – $5,300 + $10,000 (assigned at $5) = $30,700/4,000 = $7.675 if we are assigned at $5 or lower.  If we are above $5, we only get assigned 2,000 at the same $20,700/2,000 = $10.35 but, either way, it's way cheaper than the $15 we started with after 2 years.  This is why I say in 6-8 years, unless the company goes BK, you pretty much end up with free stock so who cares what happens along the way?  M just paid us 0.378 on the 12th so $756 x 7 = $5,292 that will be knocked off the price if the dividend continues.  That's right, we weren't even counting on dividends to get to $7.675 per share (would knock off $1.35ish).  

As long as you go into these positions with 1/4 entries (scaling in) that you will be THRILLED to DD on when they drop 20% of more and HAPPY to DD again when they drop another 20% or more – you will enjoy this kind of trading but if you are impatient and deploy your capital too quickly – you will not have a good time! 

  • MO – Not down enough to bother with.  

See, good point.  We're not interested in doubling down MO, even though it's just 500 shares because it's only down at our net entry ($34.50 or $37.50 if assigned another 500 at $40) so it's not enough of a bargain for us to want to deploy more capital – not when we can buy M for 1/2 our entry price instead!  

  • NLY – Our net entry was $4.44 and, if assigned at $10, will be $7.22 so $5.65 is nice but not thrilling.  Fortunately, we only sold 10 2022 $10 puts and those are now $6.25 and yes, I would love to buy 2,000 more at net $3.75 so of course we can sell 10 more 2022 $10 puts for $6,250 and now we have spent net $5,130 for our 2,000 shares ($2.565/share) so even if we do get assigned 2,000 more at $10, that's net $6.28/share and they are $5.60 now so we're back to the point where it's not worth doing more than that at the moment.  NLY should be paying us 0.25 this month so $500 coming 8 times is $4,000 more of a discount (another $2 per share off) if they don't cut it.  

You can see why I have trouble panicking in a sell-off.  This is just our first 2-year cycle and we're only 6 months in on this one and already we're down to $2.65 a share if we get called away at $10 but, even if we don't, it's $6.28 on our first 4,000 shares and then we sell more puts and more calls and drop another $2 off the net into 2024.  After a while, you're at net $0 – especially if they don't cut the dividend.

  • SIG – Damn, they were doing so well too!  Fortunately, we came in at $16.95, not $30 but now $8.20 it would be a shame not to DD so here we will buy 1,000 more shares at $8.20 ($8,200) and we will buy back the short 2022 $13 calls for $2.40 ($2,400) and I'm not worried about the $13 puts nor do I want to sell $10 calls so let's leave it as that for now.  So we're spending $10,600 and we netted in 1,000 for $5.65 ($5,650) so now $16,250/2,000 is $8.125 – that's because we're not selling more puts and we aren't re-covering yet but that's also the current price and being assigned 1,000 more at $10 won't change that much but it does double our $370 quarterly dividend to $740 x 7 is $5,180 if all goes well – 1/3 of what we laid out for 2,000 shares in our first 2 years – right on track!  (and we will still collect at least $4,000 more when we decide to sell calls!) 

  • SKT – See, this is why we save our money!  Fortunately, we made a conservative entry but not conservative enough, it seems.  We were in for net $11,000 ($11/share) and I'm happy to TD so let's roll the 10 short 2022 $15 puts at $9 ($9,000) to 30 $8 puts at $3.70 ($11,100) and buy back the short 2022 $15 calls at 0.40 ($400) to clear the slot and add 2,000 more shares $7 ($14,000) so net $12,300 spent plus $11,000 is $23,300 for 3,000 shares is net $7.76/share and the $8 calls are $1.70 which would drop our net to $6 but let's wait and see if things pick up.   They paid us $335 on 1/30 and if they pay us $1,005 x 7 that's $7,035 off (1/3) and I almost hope we get to own 3,000 more at $8 on this one!  That would put us in 6,000 shares (collecting $2,010/qtr) for net $23,300 + $24,000 – $7,035 = $40,265/6,000 = $6.71/share WITHOUT selling more calls – but we will eventually.  

  • T – Damn, another one we should buy more of but let's just sell 10 more 2022 $30 puts for $7.50 ($7,500) while we can and that drops our net cash outlay on 1,000 shares to $22,050 ($22.05/share) and if we get assigned 2,000 more at $30, that's still net $27.35/share on 3,000 shares that would be paying us $1.50 (5.5%) per quarter if they don't cut the dividend.  

While this portfolio requires more cash when the market drops 40%, it's very likely money well spent when you can get into a position of collecting 20% annual dividends from AT&T!   That's why we're not upset to move more cash off the sidelines and into this portfolio! 

Earnings Portfolio Update (3/5):

  • HBI – Let's roll our 7 2022 $15 puts at $4.60 ($3,220) to 10 short 2022 $13 puts at $3.40 ($3,400) and let's add 20 2022 $10 ($3.50)/15 ($1.45) bull call spreads at $2.05 ($4,100).  
  • WYNN – What a catastrophe for them!   May as well roll the 3 2022 $120 calls at $13.50 ($4,050) to 5 2022 $100 calls at $21 ($10,500) with the intention of turning  it into a sales vehicle down the road.  We can sell 3 April $110s for $5 ($1,500) for example, using just 43 of the 687 days we have to sell so I have confidence we'll make our $6,000 back very easily – but too early to sell now.

  • CLF – Let's DD on the 2022 $5 calls at $1.65.
  • HRB – Lets buy back the short July $24 calls and DD on the long July $20 calls.  I doubt the IRS will forego collecting taxes due to the virus.
  • IMAX – Let's roll the 5 short June $23 puts at $8.45 to 10 Sept $18 puts at $4.
  • M – Let's buy back the Jan $15 calls at 0.85 and let's roll the 15 2022 $13 calls at $2 ($3,000) to 25 2022 $10 calls at $3.20 ($8,000).
  • SQQQ – Let's sell 15 June $25 calls for $3 ($4,500) to lock in some of the gains on the spread.  If SQQQ pops over $25, we'll just DD on the $15/30 spread (net $4) and roll the short calls (and the short puts would go worthless too).  

Earnings Portfolio Review:  $67,814 is down 32.2% and that's much better now that the VIX has calmed down but still sucks, of course.  I'm going to make adjustments under the assumption that we're WILLING to put another $100,000 in – otherwise I would not be so aggressive.

  • WYNN – Holy crap!  Do we think WYNN will remain viable down the road?  $53 a share is $5.7Bn in market cap and they do make $500M a year in a good year but this will not be a good year and that's on $6Bn in revenues so $500M a month in expenses and here we are talking NO ($0) revenues coming in.  Do they still have to pay back their loans?  Yes.  Do they still have to pay Cirque du Soliel?  Don't know.  The buildings are assets but only if someone actually wants them but I'd guess, for the year, they'll take a $2Bn loss so let's say they only make $300M a year going forward (if we avoid more viruses) and 15x is $4.5Bn – a bit lower than here.  That makes those calls pretty useless, we're lucky to get $9.50 back so let's sell those and let's buy 10 of the 2022 $30 ($32)/$50 ($22) bull call spreads at $10 ($10,000) and sell 5 2022 $30 puts for $10 ($5,000) so net $5,000 on the $20,000 spread seems great for a new trade with a 300% upside potential at $50.

  • ACB – We liked it because it was such a cheap spread.  Do we want to turn it expensive?  Well the 2022 0.50 calls are 0.40 and, if we're not willing to buy those then we should be folding.  We can get 0.20 for our $2s so let's do that roll for 0.20 and add 20 more longs at 0.40 ($800) to bring us to 50 and let's buy back the short $3s no more than 0.10 – just to clean things up.  The puts are a reasonable target so let's leave those.  
  • CLF – These I love and I'm fine with the $7 target so let's buy back the short calls and roll our $5 calls at $1 to the $3 calls at $1.75 and add 10 more to make 50 long and see what happens
  • HBI – Don't you wish you had bought Levis during the great depression.  Think about it, people have to go to the hospital and your mother always told you to wear clean underwear for just such an occasion!  Still, we have other things to pay for and this isn't far out of the money so we'll leave it.    

  • HRB – They delayed tax season and that blew our premise!  We can roll the 5 short 2022 $22 puts at $11 ($5,500) to 10 short 2022 $15 puts at $5 ($5,000) but let's not spend money on longs for now.  
  • IMAX – I just wish they had longer-term options.  $18 is still a fair target so let's leave the short puts but we can roll the 30 Sept $15 calls at $3 ($9,000) to 30 Sept $10 calls at $4.30 ($12,900) to widen the spread by $15,000.  If we get a chance to roll the $10 calls to the $5 calls for less than $2 – we should do that too!

  • IRBT – This should be a good bottom as $40 is just over $1Bn and they make just under $100M so 10x earnings on strong growth is great.  Maybe no growth this year but so what?  The short calls are ridiculous but we can roll the 10 2022 $40s at $12 ($12,000) to 20 of the $30s at $17.50 ($35,000) and sell 10 of the $65 calls for $7 ($7,000) and 5 more of the $40 puts for $15 ($7,500) so that's net $8,500 spent to turn a $25,000 spread that was at the money into a $70,000 spread that's $20,000 in the money.

  • M - Just going to roll our 25 2022 $10 calls at $1.65 ($4,125) to 25 $5 calls at $3.20 ($8,000).
  • SQQQ – I wish I could say take a profit but too crazy!  Spread #1 is newer and it's a $150,000 spread at a net $6,250 credit so this is fantastic as a hedge for anyone.  It's not very bearish as the short callers are at the money but we thought this was a bottom so we wanted to sell a lot of premium.  If you want to be more bearish – just sell less short calls!  Spread #2 is messy but let's say it's a $100,000 hedge.  As the Jan $20/$35 bull call spread is just $3(ish), I want to add back 30 for the weekend but let's do it this way, we have 30 short Jan $30 calls so let's roll those up to the $35s and buy 30 more Jan $20s for $12.40 and let's sell 30 June $35s for $7 and roll our June $25s up to there as well.  

We'll see if we need to add cash but I think we can get away without it as long as things don't get worse.  

 

Future is Now Portfolio Review:  We don't need to add money to this one as we didn't spend much.  $89,235 is down 10% but not so terrible and we'll certainly look to add some stuff next week.

  • BYND – They came down hard and fast, now below the IPO price and fortunately we only committed to 5 short puts so now we are free to roll our 5 short 2022 $60 puts at $23.50 ($11,750) to 10 2021 (202 ONE) $50 puts at $12.50 ($12,500) and we can buy 10 2022 $40 ($30)/65 ($21) bull call spreads at $9 ($9,000).  That puts us in the $25,000 spread for net $1,000 as we sold the original puts for $7,250 and this is why we are happy to sell those short puts in the LTP – THIS is the downside – the stock finally gets near our target price (net $45.50) and, rather than panic – we roll into a LOVELY bull call spread where we make $24,000 (2,400%) if BYND can get back to 60% of it's IPO price in the next two years.

That's our process!  This is why we made such ridiculous gains in the last round of portfolios.  We sell puts for good prices at small commitments and then we take advantage when the market sells off (it often does) or, if not, we just collect the short put money and sell more puts with the occasional bargain play.  It's the "bargain" plays that get us in trouble – not the early stage short puts.  The problem is everyone is too impatient and wants to deploy all their capital right away and that's a terrible thing to do.  Let's try to remember that the next time everyone wants to chase the rallies!  

NOTHING has changed about BYND and people will still eat fake meat after the virus is over (and probably while it's around too).  You have to consider whether there's a rational reason to throw out your investing premise just because of whatever current crisis we're in.  If not – that's when you take advantage of that.  That's all Buffett does – he keeps calm when the market dips and buys more of what's worth buying while other people are panicking out.

  • TOT – Just added them yesterday, still has that new trade smell.  

  • SPWR – Another good example of investor idiocy.  While it's bad for SPWR to some extent that oil is now free – it doesn't change the 20-year picture for them and it's not even likely to change the projects that are in their pipeline to any large extent.  I'm not going to pay $1.45 to buy out the $12 calls though – that's outrageous and I don't know that I want to spend $12,000 to DD on the $5s, though that is tempting but the $10s are $1.75 so I do like the idea of buying 40 of the 2022 $5 ($3.25)/10 ($1.75) bull call spreads for $1.50 ($6,000) as that's a $20,000 spread and I think 8 is a great target so we can sell 10 more of the $8 puts for $4.50 ($4,500) to help pay for it.    That is FANTASTIC for a new trade at net $1,500 on the $20,000 spread, by the way.  

Hemp Boca Portfolio Review:  This is one we never touched as they don't do the radio show anymore (too much back and forth to Thailand).  It's down to $40,980 (-58.3%) so we can look as the adjustments we make would be good for new positions:

  • TAP - So, question 1 is "Do we still believe in the target?" for 2022 I think yes, so there's no need to roll the puts (net $43.50) and they are now $17 ($8,500) but the thing is the $35 puts are $8 so I would rather sell 10 of those ($8,000) as it's an easy goal (though $10,000 more shares commitment).  It's not about needing to roll but recognizing that $8 is a silly fear-driven price – so why not take advantage?  Question #2 is already answered, I do still like them so that means it would be silly not to take advantage of a cheap roll of the Jan $50 calls at $3 ($6,000) to 20 2022 $30 ($13)/$42.50 ($6.20) bull call spreads at $6.80 ($13,600) and we may as well buy back the short calls at $1.18 ($2,350) so now we've spent net $5,750 to adjust on top of net $5,200 we started with so $10,950 total spent on what is now a $15,000 spread but our target is now $42.50 – very doable.  If they pop, we can pay down some of that $10,950 by selling short-term calls (5 April $45s at $1.80 is $900 for 29 days out of 673 we have to sell).  

  • M – See, you have to save the DD money…  The problem with relying on your commercial real estate as an asset is what happens if commercial real estate crashes?  Still, can't turn down $6.66 so let's roll our 15 2022 $13 calls at $1.15 ($1,725) to 30 $5 calls at $3.30 ($9,900).  The short 2022 $20 calls are pointless so we'll buy those back and wait for a bounce to sell covers (famous last words!).  5 short $15 puts at $10 can be rolled to 10 short $8 puts at $4.50.

  • MJ – Damn, we were doing good for a while.  Actually MJ sales are booming so I still like them.  Let's cash out the 20 2022 $15/22 bull call spreads at 0.80 ($1,600) and buy 40 2022 $5 ($5.50)/10 ($2.80) bull call spreads for $2.70 ($5,400) and we'll roll the 10 short 2022 $20 puts at $11 ($11,000) to 20 short 2021 $15 puts at $6 ($12,000).  I was going to say the 2022 $13 puts at $5.50 but the premium will burn much faster on the $15s and the target isn't unrealistic so we have the possibility of selling another $12,000 next year too this way.  If not, we can do an even(ish) roll to the 2022 $13 puts anyway.  

  • THC – Why is a hospital stock down so much?  THC is prone to violent swings but a great stock to own when they are low.  We aren't that badly off but we can always improve so let's roll our 10 Jan $13 calls at $5.50 ($5,500) to 20 of the 2022 $10 ($7.50)/$25 ($2.50) bull call spreads at $5 ($10,000) and let's roll the 5 short 2021 $18 puts at $8.20 to 10 short 2022 $18 puts at $9 ($18,000) and we'll buy back the 10 short Jan $20 calls at $2.50 ($2,500) for net $6,800 in our pocket and we moved from a $7,000 $13/20 spread to a $30,00 $10/25 spread.  Will be great if it works!  

Money Talk Portfolio Review:  $67,628 is down 32.4% and fortunately we hadn't invested too heavily, even with the recent additions.  We can't change anything but I'll make some quick notes:

  • VLO – Just added attempting to call a bottom and I still think net $28 is fine.  
  • FCX – Copper is a disaster but I like them to recover.  Wish we could roll but we can't.  
  • GOLD – Still mostly in the money – I'm very confident since they are flooding the world with money.   Of course, at this stage, no one is buying gold with it but give them time…
  • IBM – Holding up pretty well considering.  Another one I'd love to roll. 
  • IMAX – Big comeback today but only at the money so far.  
  • SKT – I'm fine with that entry.
  • SPWR – What an opportunity to get into these guys!  

 


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