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PhilStockWorld July Portfolio Review – Part 2

Image result for one million dollars animated gifImage result for one million dollars animated gif$2,142,405!  

That is DOWN $4,838 since our last review as our Short-Term Portfolio (STP) hedges continue to be hammered by this relentless rally.  Of course, the Long-Term Portfolio (LTP) gained $39,937 and, in theory, we have locked in those gains with the STP, which has $585,435 of downside protection and that should be enough to cover our $886,945 worth of longs against a 20% drop.  We also have $1,072,340 in CASH!!! in our LTP and that too makes a nice hedge.  Keep in mind we started with a combined $600,000 – which is why we're so keen to protect our $1.5M in gains.

We did a detailed review last month, so I won't be doing that today.  Our positions at the time had the potential to gain $676,193 over the next 18 months and that means $40,000 per month is just about "on track" in an up market.  While $40,000 is "only" 2% of $1.9M, it's a whopping 4.5% monthly gain on the actual positions (not the cash).  Clearly we have an abundance of caution coming into Q2 earnings but I know I sleep a lot better at night knowing our portfolio is fairly shock-proof.  

Being well-hedged has allowed us to add new positions on BCS, ENVA, ING, KBH, MU and YETI in the past month – $21,000 worth of short puts and the MU spread is a $22,500 spread that is still a net $115 credit so, as we should do, we picked up another $43,500 worth of upside potential for the month to replace the $39,937 we have realized (and locked in with our hedges).  

As long as we continue to do this in an up market – even if we end up burning the entire $183,290 balance in our STP, we'll still be about $300,000 ahead for the year – that's without doing anything smart along the way!  BALANCE, Danielson, BALANCE is the key to everything.  If you have balance, like a good surfer, you can make little adjustments and ride almost any wave.  If not – Wipeout!  

Short Puts – We have 22 of them now with about $90,000 of upside potential remaining.  On the whole we like to sell one or two a month but we felt we were too bearish and short put selling is an easy way to create a Watch List of stocks you'd like to buy if they get cheaper – and get paid while you wait.  We do pruning along the way and, of course, 7 will be expiring by January and soon we'll be adding 2024 puts to the mix – it's a constant rotation:

  • SC – These are already up 90% with just $275 left to gain over 6 months so we will clear the spot for a more productive put.
  • M – Is in a similar position except it's so far in the money it's highly unlikely we won't get the last $520 out of it, so why pay to get out early when we don't need the margin?  The same goes for HMY and AKAM – there's not enough worry about the positions to merit spending money to buy them back.  SC, on the other hand, is only $5 in the money and you never know what might go wrong in Finance.  

  • CIM – They just paid us an 0.33/share ($1,000) dividend on 6/29, which I love.  The spread is very conservative – we're just in it for the dividends.  
  • SKT – We have another $1,000 coming on this one at the end of the month.
  • TTE – This one just paid us $800.  

That's $12,000 a year in dividends from just 3 of our stocks.  Considering this was a $600,000 original investment, that's 5% back on our money right there.  THAT is how you make sure you outperform the market!  There are $240,000 worth of longs here so you get 5% back if you just do that.  We sold short puts and calls to bring our cash outlay down to $182,850 (current net) and that makes $12,000 a 6.5% annual return – very nice for coupon-clippers.  Not everything in your portfolio has to be a home run – singles are good!  Actually, we already have $112,850 in profits, mostly because we never lost faith in SKT, as it got cheaper and kept adding to it – that's why the $240,000 seems like a lot – half of it is profits on these "boring" dividend plays.

  • BABA – Last month we bought back the short calls, expecting $200 to be the bottom.  I'm not brave enough to sell more puts but I do want to roll the 20 2023 $230 calls at $32 ($64,000) to 20 2023 $200 calls at $45 for net $13 ($26,000) to buy us net $24,000 of additional upside and put us in the money (increasing our Delta from 0.53 to 0.65).  
  • BIG – The short July calls will go worthless for a lovely $2,350 profit for the quarter on our net $4,250 spread.  It was only a 1/3 sale so no reason not to sell 5 Oct $70 calls for $2.20 ($1,100) while we wait for earnings at the end of August.  
  • BRK.B – If I wasn't writing this review, I'd be writing about how RIDICULOUS it is that Berkshire is up from $215 in 2019 to $278 today (30%) but in 2019 the company made $81Bn and in 2020 they made $42Bn and this year they project $25Bn.  So making half as much money and charging 50% more is a strong proxy for what's wrong with the entire market at the moment.  They were woefully underpriced in 2019 but now the P/E at $638Bn is 25.5 – still better than the S&P but, come on people, can't you see how insane these markets have become?    Needless to say we're miles over our target at net $47,150 on the $50,000 spread – there's just no point in buying it back early.  

  • CHL – Damaged goods.  We're being massively ripped off because the options are untradeable.  Hopefully that clears up by next year.
  • CSCO – Right on track.
  • FB – $1Tn Baby!   They actually make $37Bn so not too overpriced but I think we hit peak Facebook usage last year so these guys need to figure out some new revenue streams or they'll be disappointing the extrapolators.  We have to buy back the July $325 calls we sold for $3,400 for $4,525 so a little loss there but that means our net $2,710 CREDIT spread is well on track to make the full $22,710.  Of course $350 is ridiculous so we're going to sell 3 FB Sept $365 calls for $10.50 ($3,150) and hopefully we do better on these.  

  • FNF – Cheaper than our entry so still good for a new trade at net $3,650 on the $12,000 spread.  That's $8,350 (228%) upside potential by December!
  • GILD #1 – On track.
  • GILD #2 – On track

  • GOLD – We bought back the short calls and got more aggressive.  
  • GS – Another one that's ridiculously in the money.  The bull call spread is $38,200 so silly to wait for $1,800 more, let's kill those and leave the short puts.  
  • IBM – Right on track.  
  • IMAX – Over targets with 18 months to go, despite the pullback on renewed lockdown fears.  We're getting $20,000 out of a potential $25,000 on the bull call spread so only 25% to make over 18 months isn't worth any risk at all so let's kill the whole trade.  

  • INTC – Over targets already.
  • LYG – Aggresively long and we'll see how earnings look.  I'm assuming a lot of their worst-case Covid policies didn't have to pay out. 
  • MMM – Well in the money, expires in Jan.  They make the masks – how obvious was this play?  
  • MO – Fairly new trade and about where we came in.   Net $115 CREDIT on the $30,000 spread.  I can only tell you how you can make $30,115 – that is the extent of my powers…

  • MU – New trade, same(ish) net $3,325 on the $22,500 spread is how you can make $19,175 (570%) betting on a chip stock, during a global chip shortage.  

  • NRG – We were aggressively long and got out pop so NOW that our long calls are up 72%, we can cover by selling 20 2023 $42 calls for $5.15 ($10,300) and that drops us to net $4,000 on the $34,000 spread and THAT is how you leg into a trade by paying attention to the trading channel!   Keep in mind though, this is not a chart thing – it was a VALUE call we made in May, when the short put we had sold in NRG reminded us it was a good time to leg into the bull spread (because it had a big loss and we said "WTF?" and did more research and decided our fellow traders were idiots).  

  • PAA – We have a $1,500 dividend coming at the end of the month.  Otherwise, right on target.
  • PBR – On track.
  • PFE – Another very obvious Covid pick.  Over our target already.  

PHM – Pretty new and went nowhere so far so good for a new trade at net $12,200 on the $30,000 spread that's mostly in the money to start.  

QSR – Right on track.

REYN – At goal already.and expires in Dec.  It's only net $2,925 out of $10,000 at $30 so let's buy 30 more of the bull spreads and sell 15 more puts!  Because who doesn't want to make 200% in 5 months?  

  • RIO – This is what's fun about options, the stock went down but we still made money on the spread!  Not at all worried. 
  • SPWR – My baby!  Took a big hit yesterday but not much to do as we took the previous winner off the table last month and this is the replacement trade.  
  • T – What an opportunity to get into this stock at $28.28!   I almost feel like converting it to a stock play to get the 7% dividends.  

  • UBS – Still good for a new trade. 
  • VIAC – Another stock I love.  Funny how stocks I love end up in our LTP, isn't it?  We're pretty aggressive here and there's no point in buying back the Jan $60 calls as, if the stock pops 50%, we'll be happy enough.  
  • VLO – Wow, lots of energy stocks.  I guess that was good into summer but the pullback has been hard and fast.  The short July calls are paying us $2,250 and we only spent net $2,750 on the spread so no reason to kill it.  Let's sell 10 Sept $70 calls for $2.95 ($2,950) and see how that goes.  

  • W – Finally starting to pay off.  I have no idea why it took traders so long to agree with me…  

  • WBA – Another one of my babies!   Right on track.
  • WPM – On track
  • WU – On track and still net $4,000(ish) on a $20,000 spread so 400% upside potential I'd call good for a new trade.  

 

 

IN PROGRESS

 

 


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  1. Thinking about moving to Schwab since they acquired the TOS platform.  I see that they have integrated TOS into the Street Edge platform.  How does this new integrated platform work?  Do you guys recommend them for new accounts?  Thanks.


  2. Good Morning.


  3. Good morning!  

    So we only have Earnings, Butterfly and Future is Now Portfolios to go – I'm very proud of myself!  

    Still, that will be the bulk of my day as my girls are flying in this afternoon and tomorrow will be a half day for me as we're off to Key West.  

    TOS/Seer – I'm on the old platform until they take it away.

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    How inflation could prompt the largest Social Security cost-of-living adjustment in decades

    The junk bond market is on fire this year as yields hit a record low.

    Game on? Netflix hires first videogame executive, signaling a new approach

    South African Army 'Activates' All Reserve Members Amid Worsening Social Unrest 

    Environmentalists "Feel Burned" By Biden's Infrastructure Bill, Want Another $2.1 Trillion In Climate Spending

    US Consumers So Far Completely Undeterred By Delta Variant


  4. FB/Phil – The LTP also has 3 short Aug $330 Calls (you rolled the 2 short June $310 calls to 3 short Aug $330 calls in June) here. 

    https://www.philstockworld.com/2021/06/18/philstockworld-june-portfolio-review-2/#comment-8083175 


  5. the non-breaking space should not be in the comment link I posted, so it should read:

    https://www.philstockworld.com/2021/06/18/philstockworld-june-portfolio-review-2/#comment-8083175


  6. FB/LTP, Rn – Thanks, forgot that.  Well if you did that one, of course don't do the trade above.  We will keep the previous adjustment as the official trade.


  7. TOS/Phil – Where will you go when they take it away?  I'm guessing new accounts can't get on the old platform.  Thanks.


  8. TOS/Seer – I doubt they want new people on the old platform.  They keep trying to get us to switch and enough people keep freaking out that they put it off a few times.


  9. Seer/Schwab,

    I used them primarily for a base for private equity transactions for two years and closed the account because of persistent booking errors. Their customer service folks were very responsive but the communication between the accounting folks and brokers and customer service dept was comical and very time consuming. Their trade executions weren't as good as Fidelity and signing in was a bit cumbersome. Just my experience.



  10. Kremlin papers appear to show Putin’s plot to put Trump in White House


  11. Phil / GOLD – on the Naked Calls, at what price of GOLD are you looking to cover these, also what option strike  would you be looking at selling?

     

    Thanks


  12. 8800/Schwab – I'm at Fidelity now and have been underwhelmed.  They also don't allow you to sell cash secured puts in an IRA.  Perhaps I'll try IB.  Thanks.


  13. GOLD/Batman – Well, if the channel holds, we should get to $24/25 at some point and then I'd look to sell $25 calls to lock it in (and partly cash out).  

    IB/Seer – Seems to be the best alternative.


  14. /Here is the link to this week's webinar 07/14/2021

    https://youtu.be/rINY9b85Ppg


  15. Phil /GOLD – thanks….  I was looking at 22.5 but will maybe push a bit higher 


  16. Phil / SPWR – If you were toped a new position on this today…. with the big drop. what would you set up?


  17. Phil / SPWR – looking at 50X Jan '13 $20 ( 8.3) / $30 (5)   with a 25 Putter at 7


  18. Future is Now Portfolio Review:  $201,345 is down $10,347 since our last review.  JETS took a hit, F turned down, IGT is starting off with a loss and SPWR took a huge hit and WTRH is still not helping.  The Future better come quick!  Fortunately, we're playing with house money as we're up over 100% since Dec 2019, so call it 18 months so we're playing the summer not to lose more than anything.  The net $35,145 in positions we have here were calculated to have $96,468 in upside potential in last month's detailed review.  As we lost $10K, that means we now have $106,000 of upside potential plus our new IGT position will hopefully pay $14,000 against the current net $2,000 – so there's another $10,000 potential so $116,000 if we're right about the future – let's hope this is a bump in the road.

    • NAK – All about their EPA battle.  Let's hope one of those Trump judges gets the case!  
    • JETS – On track with people back in the skies, despite the pullback on renewed virus fears.   We were expecting to give it another 18 months to recover so no worries.

    • CIEN – Blew past our target.  
    • COWN – Still has that new trade smell.  Hoping the channel holds.  They report on the 28th.

    • F – Wow, what do these guys have to do to please investors?  At $14 their market cap is $57Bn and they are tracking $4.7Bn in profit this year so call it 12x but this year got off to a slow start and they should make $7Bn next year, which would drive the P/E down to 8!  No respect, I tell ya….
    • FF – That's 3 Fs in 2 positions, 12 points in Scrabble!   FF fell fell pretty hard but not because they did anything bad but because they paid out $2.50 per share as a special dividend (5/21) and we get that on our options.  So we're not actually down as much as we thought as Power Options (portfolio tracker) is treating us like we have the new FFs but we have the old ones.  When longer-term options come out we're going to roll and clean up the position but this is a fantastic long-term hold.   Basically, they were making so much money – they didn't know what to do with it!  

    • IGT – Brand new and already cheaper than we bought it for! 
    • SPWR – We took a hit but we're only back where we started. 

    • WTRH – Relentless selling but I think they will be one of the major delivery players and, if so, they will start getting valuations like their peers.  Zachs doesn't like them and that's been deadly this month.  Still, it's Stocks of the Future – not Stocks of the Moment – so we'll wait a bit.

    $116,000 of upside potential gives us room to play with stocks like WTRH.  We're obligated to own 2,000 shares at $3.50 ($7,000) and it was a net $1,500 credit so $5,500/2,000 is $2.75/share so we'll take that loss if we don't want to keep going or we DD at $1 for $2,000 and then we are averaging $1.875 on 4,000 shares ($7,500) and, since that still sounds like a good idea – no reason to do anything now but wait(r) for earnings in Early August.

    Meanwhile, our $166,200 (82.5%) CASH!!! position is all the hedge we need to see ourselves comfortably into the Future.  


  19. Phil / SPWR – I have not position in this … I'm looking at the following position would like your thoughts.

    Long 50X Jan '23 $20 Call ( 8.3) 

    Short 50X Jan '23 $30 Call (5.0)

    Short 20X Jan '23 $25 Put ( 8)


  20. Notice a LOT of our positions are pulling back.  Fortunately we're self-hedging with short calls but that only takes you so far.  It's a trend we have to be wary of as not everything is going up and up and up anymore – the rally is narrowing – especially for small caps.

    SPWR/Batman – There's always room for more SPWR.  We just did add the LTP position last month as the old one had run its course.  My targets are, of course, no different:

    SPWR Long Call 2023 20-JAN 20.00 CALL [SPWR @ $23.16 $-0.78] 75 6/18/2021 (554) $75,000 $10.00 $-1.75 $10.00     $8.25 $-0.35 $-13,125 -17.5% $61,875
    SPWR Short Call 2023 20-JAN 35.00 CALL [SPWR @ $23.16 $-0.78] -75 6/18/2021 (554) $-37,500 $5.00 $-1.03     $3.98 $-0.33 $7,688 20.5% $-29,813
    SPWR Short Put 2023 20-JAN 25.00 PUT [SPWR @ $23.16 $-0.78] -30 6/18/2021 (554) $-21,750 $7.25 $0.90     $8.15 $0.45 $-2,700 -12.4% $-24,450

    Nothing wrong with yours – it's just a bit more conservative.  Currently, the $20s are $8.30 and the $10s are $15.80 so you know I want to roll there if we get to $5 and that would be $37,500 more and I'd buy back the short calls (if they go down 50%) and do a 2x roll on the short puts to 2024 something lowers and then, next year, when SPWR pops to $35 and we have a $250,000 position that we spent net $53,250 on (maybe less if we sell more short calls) because we had the conviction (and sideline CASH!!!) to follow it lower.  

    If we aren't lucky enough to get a bigger sell-off and it just goes up and up – then we only get $112,500 back on our original $15,750 investment.  That would be a shame…

    • The International Trade Commission says it will investigate a patent infringement complaint that seeks to block imports of solar panels made in Asia by Canadian Solar (NASDAQ:CSIQ), Hanwha Q Cells and Boviet Solar.
    • Photovoltaic biosensor manufacturer Advanced Silicon Group Technologies claims the companies are using its patented inventions for PV cells with nanostructures and nanowires.
    • Canadian Solar says Advanced Silicon Group does not make nanostructured solar modules and has not licensed the technology for use in other solar modules but instead for use in the medical industry.
    • Canadian Solar shares settled -5.8% in today's trading, but solar companies across the board fell hard: SPWR -14.6%MAXN -9.6%RUN -8.5%JKS -8.2%NOVA -7.6%SEDG -7.5%ENPH -7.2%SOL -5.8%DQ -4.7%FSLR -2.9%.
    • The top solar ETF (NYSEARCA:TAN) tumbled 5.3% today and has now dropped 20% YTD.
    • Helped by talk of potential legislation that would offer tax credits for each stage of the solar manufacturing supply chain, solar stocks had entered July at two-month highs but have since turned lower.

  21. SEDG / ENPH – are really not affected by this, as they really don't buy many panels and profits don't dome form this


  22. Phil / SPWR – Thanks. I bought a bit at 8.4 and am waiting to cover a bit… will take the 35 target …. my target is 30 to 35 on this…


  23. Earnings Portfolio Review:  $297,401 is down $10,197 from our last review.  The upside potential last month was $72,935 so now it's $83,132 as the max payoffs don't change just because we lost a little ground.  The question is, is anything unrecoverable or off-track.  We sold calls on two positions last month but no major adjustments and no new positions.  We are almost all cash at $268,071 (90%) – so there's plenty of money to deploy if Earnings Season gives us some new discounts.

    • SBUX – So far so good and we'll see how earnings go.  Here's where it's TA vs FA as the up channel looks good but, back in April, I called shenanigans on the Fundamentals and we got a good price for the short calls but here we are again at $120.  This is $141Bn up here and their best year was 2018 at $4.5Bn so call it 31x but last year was under $1Bn, this year maybe $3.5Bn and MAYBE next year they are back to where they were but labor costs are rising, commodity costs are rising and all it takes is one hiccup and this thing is back to $100.   Anything below $120 is a winner for us.

    • HBI – Not worried enough to buy them back.
    • WBA – You know I love them, letting it ride.
    • GILD – On track.  

    • INTC – We sold calls but it didn't help much.  They are at the money and I think they hold $55 into Jan.
    • PETS – It's a funny up and down stock but we have 18 months.  

    • SQQQ – Those Jan $320 calls are unreachable so no sense in paying $4,250 to buy them back.  It's a 3x ETF so a 20% drop in the Nas would pop us 60% to $14 and then we'd have $90,000 (at least) and currently net $19,750 so about $70,000 of downside protection from this spread.  
    • VIAC – Love them.  We'll see how earnings go.  
    • X – Took a hard fade on us but still on track for $30 in 18 months.

    All looks good, we lost $2,850 on our hedge for the month, which is not bad and our positions are down a bit so we do need more longs or we're over-hedged.