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Friday, March 29, 2024

Toppy Tuesday – $2Tn Stimulus Talks Buys Us a Trip back to the Highs

Here we are again!

After incredible gains yesterday, we're back to the highs on the Dow, Nasdaq and S&P 500 and we're waiting for the Russell to come back to 1,700 (now 1,636) but even the NYSE has joined the party at 13,324 and things could not be greater in America, could they?  

Well, the economy may be on life support but what a lot of life support we're getting with Trump now bidding $2Tn and Biden saying that's nowhere near enough so, whoever gets elected – there's going to be lots of money flowing into the economy – just don't ask where it came from…

Apple (AAPL) led the markets higher yesterday, jumping 6.35% in a single day ahead of today's iPhone 12 event.  While Apple may be introducing a 5G phone, the US is certainly not ready (the rest of the World is) as Trump's ban of Huawei set us back quite a bit and he either saved us from Chinese spying or put America about a year behind the rest of the World in technology – which one do you think Putin was hoping for?  

Despite the run-up in the Nasdaq, our Short-Term Portfolio is holding up well at $484,069 – up a very healthy 384% for the year and that's strange for a hedging portfolio in an up year but that's because we caught a couple of nice down moves perfectly AND we made some very profitable short-term plays.  We're down about $30,000 since last Wednesday but our Long-Term Portfolio has jumped from $1,005,650 to $1,065,450 (up 113%) so we're going to take the +$30,000 we made in the LTP and spend it on more hedges in the STP to lock in those gains – just in case.

Short-Term Portfolio (STP) Review:

  • CANE – We figured sugar would do well with people being shut inside and nothing to do but bake.  We can exit at $1.20.

  • INTC – Just a short put to raise cash.  Very confident.
  • WBA – My favorite bargain stock.  In contention for Stock of the Year 2021.

  • SDS – We spent net $5.09 on the spread and the 2022 $10 calls are down to $4.93 so we salvage our investment (see "Stupid Option Tricks – The Salvage Play") in a position that's iffy and move to a position that has a higher chance of paying off.  That's going to be the UPRO though, so in this spread, we're just cashing out the 2022 $10 calls for $98,500 and leaving the naked, short Jan $22 calls with a stop at 0.50.

  • UPRO – This is a new hedge using the S&P 500 3x Ultra-Long and we're going to short it as it should drop spectactularly if the S&P drops and will decay nicely even if it doesn't.  UPRO is at $65 so we'll take 100 of the 2022 $70 puts for $20 ($200,000) and sell 100 of the 2022 $50 puts for $12 ($120,000) and we'll also sell 50 of the Jan $50 puts for $3.75 ($18,750) so our net cost on this $200,000 spread that's $50,000 in the money is $61,250 and we intend to make more short call sales to pay for the rest.  

  • TQQQ – Another ultra-long we are shorting and we can roll our 40 March $130 puts at $23.70 ($94,800) to 40 June $200 ($71)/160 ($45) bear put spreads at net $26 ($104,000).  So we're spending $10,000 more but we're moving to a $160,000 spread that's 100% in the money – it pays off UNLESS the Nasdaq is higher in June and, of course, if that happens, our longs should be doing well.

  • CMG – The short Jan calls are 50% premium and earnings are on the 21st and I can't see how this fast food restaruant is going to justify trading at 145x earnings so let's be happy and buy back the 2 short puts and see what the number actually are.   The remaining spread is a net $37,750 credit and could easily make $50,000 if CMG disappoints.  

  • SQQQ – Interesting that our June $15s have held there value better than the June $39s.  That's the advantage of selling more premium than you buy!  The short Jan $35s are so dead there's no reason to buy them back but, with the Nasdaq back at a record high, let's buy back half (100) of the short June $30 calls for $4.45 ($44,500) to increase the power of our hedge substantially.  We're also going to take advantage of the now very cheap 2022 $15 calls at $9 to roll our June $15s to so we add 7 more months of protection (and 7 more months to sell premium!) for $24,000.

  • TSLA – The madness continues!  Back near the top but, fortunately, we cut back our short calls so we'll be happy to roll (again) if we get in trouble (again) but, for now, they are still 1/3 premium and the short puts are 100% premium.

  • UNG Back on track but hurricane season is over so let's just take the win and be done with it.

So we've got a solid $500,000 of downside protection – enough to cover our $1M LTP and now we'll see how earnings season goes.  I always feel better after improving our hedges – don't you?

 

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