Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

Click here to see some testimonials from our members!

Forward-Looking Friday – Are We Hedged Enough?

$1,862,265!  

That's a gain of $95,674 since our February Review for our paired Long & Short-Term Portfolios.  Our LTP is predominantly bullish and the STP is where we keep our hedges – as they tend to need adjusting more often – as you are about to see.  Interestingly, despite the rally, the Short-Term Portfolio gained $40,000 – mostly due to our very well-timed short play on Tesla (TSLA), which we just cashed in last week.  One of the reasons we cashed it in is we now have $97,098 in cash to deploy so it's a great time to add to our hedges:

  • TZA – They reverse-split on us and this is our new position.  They should be $64 short calls (because they were $8s) but TZA only goes to $60.  It's a 3x ETF so if the Russell drops 20%, TZA should gain about 60% to $48 – so that's our actual target and, since $60 would be almost a 40% drop and we don't expect that, it means we can afford to sell more short calls if it comes up.  June $45s are $3 and that means we can double down on the $32 calls at $5.15 ($12,875) and sell 25 of the $45s for $3 ($7,500) and we have spent just net $5,375 to add $32,500 in additional protection.

  • TQQQ – Despite the dip, our Jan $100 put is showing a loss so far. Those are now $29.65 so the first thing we do is look to see if we can improve them and the Jan $120 puts are $43 and we won't pay $13 for $20 and the $110 puts are $36 so $6 for $10 is not much better.   We also won't pay $14.53 to buy back the short $70 puts, that are $20 out of the money so the best way to improve this position is to SELL 7 (1/3) of the April $80 puts for $5 to lower our basis by $3,500 and those can't go in the money unless our spread is $40,000 in the money and it's net $20,000 now – so hard to lose and we're BEING THE HOUSE! 

  • CMG – The thing will not die but we sold a lot of premium so we're winning anyway.  Our bet is reality will hit the burrito world by January and we always look to see what we can take advantage of and we can buy the short $1,100 puts back for $15,810 thanks to yesterday's pop and they were $88 last week so let's do that and we'll re-sell them on the next dip.  If CMG goes higher, now we have the flexibility to sell higher puts and roll our short puts up – that's a win/win adjustment!  

  • FXP – It's up nicely since we decided China was overdone and we didn't want FXP to go up too fast since we sold the March $40 calls and the June $35 calls so this one is right on track – no need to adjust.  It's a 2x ETF so if the Shanghai falls 20% and we pop 60% that's also $48 for a target and that would be $18 on the calls for $72,000 and the current net of the spread is only $10,200 and we bought it for about $1,000 so this one is fabulous!   

  • SCO – This is still not working.  The March calls are looking like a wipeout but the more sensible Jan/April spread where we're Being the House – NOT the Gambler is working out just fine.  We should remember not to be the Gambler, right?

  • SQQQ – Topped out at $16.32 on Monday but back to $13.49.  The short March $20 puts are expiring about where we sold them, so no harm there and now we can sell 25 of the June $19 puts for $7 ($17,500) to help pay for the spread and our target on SQQQ would be a 60% bump to let's say $25 and that would put our 200 calls $15 in the money for $300,000 and the net of this spread is $5,625 with what I believe is a manageable assignment risk.  We've only spent $25,000 so far so let's add 100 of the 2023 $10 ($7)/$25 ($4.25) bull call spreads for $2.75 ($27,500) in the $150,000 spread and that will then allow us to sell more short calls and hopefully make that money back because who doesn't like a free hedge?  

As a new trade and since we lost our TSLA short, I want to add another short on Wayfair (W), which is a ridiculously over-priced furniture store.  It was our first short trade in the LTP since this cycle began on 2/25 and we can be more aggressive in the STP, so let's play it like this:  

  • Sell 3 W April $320 calls for $27 ($8,100) 
  • Buy 5 W Jan $300 puts at $60 ($30,000) 
  • Sell 5 W Jan $260 puts at $40 ($20,000) 

That's net $1,900 on the $20,000 spread and we'll be adjusting it along the way but best to start small and see how it goes.

So now I feel better with a bit more hedging into the weekend to protect the ill-gotten gains in our LTP.   The stimulus is in and the virus is cured and it's hard to imagine what fresh catalyst (Infrastructure) there could be to take the markets another leg higer – past 35x earnings for the average stock.  Seems a lot more likely we correct 20% to 30x earnings, doesn't it?  

Have a great weekend,

- Phil

 


Do you know someone who would benefit from this information? We can send your friend a strictly confidential, one-time email telling them about this information. Your privacy and your friend's privacy is your business... no spam! Click here and tell a friend!



Comments (reverse order)


    You must be logged in to make a comment.
    You can sign up for a membership or log in

    Sign up today for an exclusive discount along with our 30-day GUARANTEE — Love us or leave, with your money back! Click here to become a part of our growing community and learn how to stop gambling with your investments. We will teach you to BE THE HOUSE — Not the Gambler!

    Click here to see some testimonials from our members!


  1. Good Morning.


  2. I know it is more difficult to find new plays, as many stocks are at their highs and you do not wish to jump on to a running train.
    AKAM I did run out of plays in my portfolio and showed a 28k profit in Feb. 2021. The stock has dropped from it’s high in Feb 21 120 to now 96.95. With not paying div. one can set up 2 different plays. 
    P.S. March 2020 stock was down to 80.00!!!
    With less cash outlay I go for the poor man’s trade: buy  Jan 2023 80 call for 26.40 and sell Jan 23 85 put for 10.40. Here your cash out lay is 16.00 and you can start by selling even numbers short term calls Apr 21 100 call for 2.30. Looking  at the option strike at 80 call today I would get 19.40, so I look at a loss of 7.00 if 2023 was today. Taking the opportunity of selling just three short term calls during the two year period, I would cancel my theoretical loss not even taking the Jan. 23 put sale in to consideration. 
    So here I have a good two year run of selling calls against my long leap call.
    Obviously if one wishes to reduce the cash lay out you set up a Leap BCS of Jan 23 80/110 for a cost of 14.35, with a spread of 30. Reducing my cost further by selling the Jan 23 85 put for 10.40. Here I would only buy 2x Jan 23 BCS against 1x the short put so it would be 28.70 against 10.40. ( ratio 2:1) So the net cost would be 18.30. Remember you should only sell in this case half the amount of short term calls in relation to your BCS.
    Just looking at the different cash outlay the BCS is only 2$ more, however you have limited you capital gain at 110.00, whereas the PMT is not limited to the up side. 

    Please note prices have slightly changed after opening


  3. Good morning!!

    Allocation blocks.

    Phil. You replied to a recent question I had and indicated that each new trade should not be more than 1 quarter of an allocation block

    As some trade entries are for a debt and some a credit, how do I determine how much to allocate to each trade if for example… my allocation block is 20k, and 1 quarter of that is 5k?





  4. An other armchair WPC Yield 6.14% buy the stock at about 68.00 and sell the Nov. 21 70/65 strangle for 7.90. Monthly combined return 1.9%.


  5. POLITICO Playbook: Last night is why Joe Biden won the presidency


  6. Any one awake on this site? T up by 1.12 !!!!!


  7. yodi-saw that on T. No news?


  8. asleep I mean 46 comments yesterday, in the olden days we had 250 per day!!!!


  9. Maybe investor fatigue in this insane market.


  10. AKAM filled 25.15 for the long and 10.20 for the put. I put a GTC on the Apr21 100 as the price is toooo low.


  11. I do not like selling short options when the price of the stock shows negative. 

    For example GOOG. yesterday up some 70 $ sold the 2150 for 43.50 have a look where it is today just to prove my point.


  12. pirateinvestor still have to work in my garden of portfolios. 


  13. Understand. Always a need for due diligence.


  14. Good morning!

    Nasdaq be so cray-cray…

    AKAM/Yodi – Good way to play and they are not to crazy-expensive at $96, which is $15.7Bn and they should be good for $900M going forward.

    I know I'd love to own them for $75 so there's no reason not to sell 5 of the AKAM 2023 $85 puts in the LTP for $10 to remind us to keep an eye on them.

    See what we're doing?  We had no short puts in the LTP and now we're building up to maybe 12 of them at about $5,000 each so there's $60,000 in our pocket in exchange for promising to buy things like AKAM at 20% or more below the current prices.

    Allocation blocks/Youngy – Rule of thumb is if you have a $500,000 portfolio, you should have $1M in buying power and we divide by 20 to get $50,000 allocation blocks.  The allocation, however, accounts for how much STOCK you will end up owning while the CASH you spend should be under $25,000 in that case.  

    If your allocation blocks are $20,000, you should have a $200,000 portfolio with $400,000 in buying power so AKAM, for example, you couldn't have more than two shorts of max and we don't start off using a whole block so 1 short put at $1,000 would cause you to own 100 shares of AKAM for $8,500 (net $7,500) and then you would have to sell calls and more puts so committed to about $15,000 in the second round – it's right on the edge of what you can afford (so we stick to stocks under $50 for one thing).  

    Now we have to determine if it's worth it?  You have 20 chances to make money on $200,000 but this is just a short put sale so you are only tying up $7,500 of buying power or 1/3 of an allocation block, which means you can do 3 of these in one block.  Collecting $15,000 over 2 years against $20,000 in cash is perfectly fine – so it does fit in the portfolio but keep in mind you need to REALLY want to own AKAM for the long-term at net $75 but, if so, then be happy to collect $1,000.  Do that 12 times and it's $12,000 tying up 4 allocation blocks out of 20 and that's a 3% annual return on your $200,000 cash just for watching some stocks that you'll turn into plays if they get cheaper.  

    WPC/Yodi – I'm still not convinced on Commercial Real Estate.

    T/Yodi, Pirate – Very nice.  Don't need news when they are this cheap.

    Comments/Yodi – People are certainly less chatty.  I know I'm fatigued.


  15. Hey all! I just rejoined this site after about 6-7 years – just need some new ideas! And, always loved your posts Phil. Agree, fewer comments then years ago! But happy to be back! 


  16. Example IBM  hold Mar 12 125 caller sneaked up on me, drained the last penny of premium out of the sucker and rolled to 130 for a credit. Obviously you can do it like Phil does sell two month out for 125 and hope it will go down again.


  17. Phil chatty possible just all of them fall asleep over the portfolios you deliver!!!!


  18. AKAM turning around showing already a small profit on the leaps but still to early to sell the short caller!


  19. T does have news! Trading higher after co guided higher 120-150M HBO Max/HBO subscribers by 2025 reaffirmed guidance FY 21 sales growth guidance.


  20. Phil and company – appreciate any thoughts on IPOE as it's set to become SoFI in March. Thinking there is a long term FinTech play here but it may not grow into current valuations for 2-3 years. Anything here?


  21. looks like no volume today so far


  22. T/pirate: also saw reports of an ad-supported tier for HBO Max, which may have helped.


  23. Welcome back Rick2006!  We have been rockin' the casbah here!

    https://youtu.be/bJ9r8LMU9bQ



  24. Phil. Thanks for the explanation. Very helpful.

     

    Have a good weekend. 


  25. BA is a BEAST!  Started buying Jan22 and Jan23 200/250 BCS mid-last year…..cha ching….


  26. GLD….lotto play. Mar 165c for 36c.  Lift off now baby!


  27. Anyone still in the X play from back in January?  Selling the front month 18Ps and 20Cs every month is bankrolling things. Stock is probably gone now on this final round.  That was a seesaw for ~23%.


  28. Hi Phil,

    Any thoughts on WMT, DLTR, TJX, DIS, HD given that 1.9T bill passed?

    Thanks,



  29. Phil: I have a question of a Ford position I am in:

    +5 Jan '23 $10 Calls (bought 2.62, now 5.20), -5 Jan '23 $15 calls (sold 1.32, now 3.07; with -2 June $10 calls (sold 1.14, now 3.70)

    The short June $10s are underwater about $2.55. I probably should have done something sooner, or not. There's about $0.30 left in premium. I am thinking about rolling out to 4x Sep $13s but that doubles my risk. i could also roll out to the Jan '22 $15s for about even.

    Any suggestions?


  30. deveo I am in F for quite some time. My two cents only roll when there is no premium left. Why would you pay now .30 premium ???


  31. P.S. F does pay no div so why worry about a short call 3 month out?


  32. Yodi / F – I guess I was wondering if picking up more premium was worth the added risk.


  33. Welcome back Rick.  Good news is you get more individual attention.  

    We've had quite a few additions to the LTP in the past two weeks so I suggest you read back through the previous posts.

    Thanks Yodi – am I getting boring?  Well we are playing the market boring because I want to avoid the excitement of having fully-invested portfolios cut in half in a correction.  

    T/Pirate – That is good news. 

    IPOE/PMan – Not my kind of thing.  Basically a SPAC waiting to be something.  Anyone like this is raising money to buy at the top of the market (so you get less shares for your money) and then they are going to squander that cash buying another company at the top of the market.  Banksters make these things up so they can sucker retail investors into taking all their BS investments off their hands.  

    Volume/Tommy – We've been relatively busy in March:

    Date Open High Low Close* Adj Close** Volume
    Mar 12, 2021 392.07 393.62 391.20 392.68 392.68 41,529,778
    Mar 11, 2021 392.23 395.65 391.74 393.53 393.53 86,027,400
    Mar 10, 2021 389.69 391.40 388.17 389.58 389.58 109,660,800
    Mar 09, 2021 385.85 389.91 385.31 387.17 387.17 113,457,800
    Mar 08, 2021 384.66 387.68 381.42 381.72 381.72 122,957,100
    Mar 05, 2021 380.46 384.76 372.64 383.63 383.63 151,959,800
    Mar 04, 2021 381.22 384.00 371.88 376.70 376.70 182,856,500
    Mar 03, 2021 385.79 386.83 381.31 381.42 381.42 119,482,700
    Mar 02, 2021 389.82 390.07 386.00 386.54 386.54 79,389,200
    Mar 01, 2021 385.59 390.92 380.57 389.58 389.58 104,945,700
    Feb 26, 2021 384.35 385.58 378.23 380.36 380.36 152,534,900
    Feb 25, 2021 390.41 391.88 380.78 382.33 382.33 146,670,500
    Feb 24, 2021 386.33 392.23 385.27 391.77 391.77 72,433,900
    Feb 23, 2021 384.66 388.95 380.20 387.50 387.50 107,284,100
    Feb 22, 2021 387.06 389.62 386.74 387.03 387.03 67,414,200
    Feb 19, 2021 392.07 392.38 389.55 390.03 390.03 83,241,000
    Feb 18, 2021 389.59 391.52 387.74 390.72 390.72 59,712,800
    Feb 17, 2021 390.42 392.66 389.33 392.39 392.39 52,290,600
    Feb 16, 2021 393.96 394.17 391.53 392.30 392.30 50,972,400
    Feb 12, 2021 389.85 392.90 389.77 392.64 392.64 50,505,700

    You're welcome, Youngy.

    BA/Pharm – Yes, I'm pissed we didn't accumulate more for the LTP.  GLD was a Trade of the Year runner-up, no surprise there.  

    Top Trades for Wed, 30 Dec 2020 12:23 – GILD

    Top Trades for Mon, 01 Mar 2021 11:44 – GILD

    Never ashamed to pick things over and over again until people listen…

    X/Pharm – That one's gone now too.  Out of the Bargain Basement.

    Top Trades for Tue, 26 Nov 2019 10:48 – X and Low P/E Stocks I Like

     

    X is back at $13.80 and you can buy the stock but it only pays an 0.20 dividend and they are not going to make any money so I'd set it up as a call-selling play like this:

    • Buy 40 X 2022 $10 calls for $6 ($24,000)
    • Sell 30 X 2022 $17 calls for $3.20 ($9,600) 
    • Sell 20 X 2022 $12 puts for $3.30 ($6,600) 
    • Sell 20 X March $14 calls for $1.60 ($3,200) 

    That's net $4,600 on the $28,000 spread that's $16,000 in the money at the moment and, of course, I'm assuming we'll be able to roll the 10 extra short calls out of trouble over time and, if not, worst case is we buy 10 more long calls ($6,000) to cover them so no real issue there, right?  I certainly don't think the puts are aggressive and we collected $3,200 selling 115

    It's very, VERY hard for me to justify paying more than 20x for stocks when there are PLENTY of stocks trading well below that like:  MT, TEVA, FCAU, DELL, VIA, AAL, VALE, F, SFBTY, ING, SAN, MFUG, LNC, PUK, BCS, MU, FCX, PRU, SNP, LEN, KHC, UBS, CBS, GS, COF, MET, MFC, LYG…  PLENTY of perfectly good mid to large-cap stocks trading at reasonable prices (some on the Watch List, some on deck and still being considered). 

    If there were NOTHING to buy cheaply, THEN I would consider paying 20x for a retailer or restaurant but ONLY if there are no alternatives – and there still are.  Enough to last the next 2-year cycle before I throw in the towel and pay these insane prices….

    On the smaller cap side, by the way, there's also:  X, M, CLF, MYL, ECA, ADS, TECK, BHF, STLD, SVC, XEC, NRZ, GPS, LB, NWL, HUN, GT, UTHR, AUO, TWO, AGNC, PK, MTG, BSM, SLM and HFC.  

    PLENTY to keep us busy.  

    That was really good advice!

    Retailers/Harip – Well if they hadn't already fully recovered and then some, I'd say sure but you'd be chasing all of them now.  As I've been saying about the overall market – we baked this stimulus in 6 months ago – now what?  

    F/Daveo – The whole point of selling 2 June $10s is that you can roll them to 2x (4) of the Sept $15s, now $1.42 but if F goes over $15, you need to either buy the stock or calls to cover before you roll again.

    Unlike Yodi, I'd take the very huge premium offered in September while it's available as you've then sold 2x $1.40 in premium ($2.80) vs 0.30 that you have left to burn.



  34. GME 800C next week are $6….. hummmm….


  35. Thanks Phil! Did some reading of old posts. Will finish up over the weekend! 

    Saw WBA. What's the thought on CVS? I'm in the $60 2023 CVS calls. Been in them for a couple months (since $11.30). Could sell and swap for WBA or convert into a call spread. 

    lol on the 800 GME calls! thats completely insane 


  36. TDA won't let you sell them. :(


  37. GME- There were 28k+ contracts traded at that strike today!?!?!?  Its now has the highest open interest of any GME Mar strike.  Seriously wtf…


  38. I may need to pick up a couple 3/19 GME $150 puts just because (with some play money). 

    any thoughts on BABA pulling back today on the Ant news? I've always liked that company. Maybe slowly step into a long?


  39. I have to defend my .30 cents on F. I my case I hold 300 stock and sold as well 3 x the Jun. 10 call. If I roll now I pay some one .30 cents extra. Obviously I can not sell additional Sep. 21 15 calls as they would be naked. At any time the price of the Jun 10 caller goes up, the Sep.21 15 caller will go up in proportion. So I do not see any reason rolling before the time the premium of the Jun 10 caller is reduced near zero. In case of Deveo he holds 5 long leap calls, by selling now 4 short calls will bring the balance some what out of proportion, being at least 1 call naked, as said by Phil one needs extra stock or long calls to cover, if the Sept 21 15 caller will be ITM.


  40. P.S. Deveo has a BCS to cover in case of only a poor Man's long 5 off only he would be covered by selling up to 5 short calls.


  41. Now that WBA has taken off I'm liking CVS a little more but WBA was clearly the better value until this last 30% run.  I am not at all a fan of naked calls.  The 2023 $60s are $18 and you can cash those out and pick up the 2023 $65 ($14.50)/$80 ($7.75) bull call spreads for $6.75 so then just playing with your profits and still might get $15 more back at just $80 – why risk more?

    GME/Pharm – TD is wise.

    BABA/Rick – We're long-term long on them.  

    BABA Long Call 2023 20-JAN 250.00 CALL [BABA @ $231.69 $-9.12] 15 2/3/2021 (679) $106,500 $71.00 $-24.00 $71.00     $47.00 $-4.50 $-36,000 -33.8% $70,500
    BABA Short Call 2023 20-JAN 300.00 CALL [BABA @ $231.69 $-9.12] -15 2/3/2021 (679) $-78,000 $52.00 $-21.03     $30.98 $-3.13 $31,538 40.4% $-46,463
    BABA Short Put 2023 20-JAN 200.00 PUT [BABA @ $231.69 $-9.12] -5 2/3/2021 (679) $-15,500 $31.00 $3.20     $34.20 $2.40 $-1,600 -10.3% $-17,100

    A bit lower and we'll roll the $250s to the $200s !

    Have a great weekend folks,

    - Phil


  42. Here the lonely ranger again, glade we had some more members showing up Friday on site. Especially for any new comers, not having their 10,000 hours of trading, only with questions we all can learn. So always ask questions.

    New armchair trade REYN paying a div. just over 3% with a P.E. of 17 and having a trading range during the year from 21 to 36, so still some room to go up. 

    Buy stock @ 29.95 and sell the Dec 21 30/25 strangle for 4.55. Combined monthly return 1.9%

    Here I am not looking for leap BCS or PMT as they have not really leap options. Further always to remember BCS or PMT are more interesting with stocks having small or no div payments. You will find premiums are always higher. 

    Have a nice week end