Let’s get ready to rumble!
Last month, we decided to cash out and wait until after Q1 earnings to start a new batch of portfolios for our Members. We still have the Money Talk Portfolio, because we only trade it on the show and I won’t be on again until next month. In last month’s review, we were at $356,801 and, as of this morning, we’re at $338,849, which is down $17,952 (5%) in our untouched portfolio so figure that’s what we saved by cashing out the rest.
The portfolio is still up 238.9% overall and that is since November 13, 2019 so 42 months and 5% a month is pretty much our average gain. Here’s where those positions stand at the moment:
Nothing has changed since last month (so read my notes over there) and, although the portfolio is 75% CASH!!!, the positions we have have $187,000 of upside potential over the next 18 months and that’s 10% a month if all goes well – so not a bad collection of stocks…
We also still have our $700/Month Portfolio, which has made no gains in 9 months but it’s a 360-month plan and the good news is we’re building a strong base. The intention of this portfolios is to ride out times of trouble as part of the lesson. We just did a review last on Thursday, the 4th but here’s how we look this morning:
The upside potential of these 5 positions is over $10,000 over the next 18 months so we’re just fine overall as our goal is to make 10% a year or more and get to $1M over 30 years. If you haven’t stated yet – you haven’t missed anything!
Early next month, we will add another $700 to the portfolio and, if they stay this low, we’ll be buying more SOFI and more SPWR. There’s no need to add new positions when your old ones are still on sale!
SPWR, for example, is down considerably but our overall position is only down $200 as we have the short calls protecting our long position. At this point, we could buy back the short calls for just $525 to lock in our $1,125 gain, sell 10 of the $18 calls for $1.80 ($1,800) and buy 5 more of the $10 calls for $3.85 ($1,925) all for net $650. The original spread would have returned $4,000 at $18 against the original $1,600 spent but now we are in for $2,250 on an $8,000 spread with $5,750 in potential gains vs the original $2,400.
And yes, I know the original was up to $23 but it looks like that was unrealistic, right? We’ll see what happens next but it’s hard to imagine all these stimulus packages aimed at solar aren’t going to rub off on SPWR – just a little. By the way, this trade isn’t official yet, we have to wait for our turn next month but you can see how we take advantage to build a base that can explode our profits in the future.
As to SOFI – well that is the first position we added to our brand-new Income Portfolio on Monday. It was also a Top Trade Alert that day so don’t say I didn’t tell you so! The purpose of the Income Portfolio is for my Mom’s friends to be able to make a fairly steady $6,000 per quarter WITHOUT touching their principle. I have been mortified by the terrible gains people are getting in their retirement accounts so my goal is to get them an extra $2,000 a month – essentially doubling their Social Security returns.
The idea of this set-up on SOFI is, when the stock picks up again, we begin to sell short-term calls for income. Our net outlay was $3,550 in cash and $740 in margin (PM account) and our worst-case is being assigned 2,000 shares of SOFI at $5.50 ($11,000) and losing the whole $3,550 so $14,550 is our commitment and our portfolio is divided into 10 allocation blocks of $30,000 ($300,000 total buying power presumed).
At the moment, we set aside the full allocation block for SOFI but, if SOFI takes off before we buy more, we can release that 1/2 block for other things. If all goes well, we’ll get $10,000 back from the position at $5 in 18 months for a $6,450 (181%) profit and, as SOFI goes higher, we can sell 20 more short-term calls for hopefully 0.50 per quarter and generate $1,000 per quarter in income – wouldn’t that be nice?
Notice the spread is super-conservative as it’s $8,750 in the money to start (aren’t options fun?) and the stock only needs to gain 0.24 by Jan 2025 for us to win on the spread and 0.50 more than that for the puts to expire worthless. If that doesn’t happen – that’s what our allocation block is for!
So far, it’s been two days and we’re up $490, so we’re off to a good start but we need $2,000 for the month to stay on pace so let’s add a couple of new trades:
The first Top Trade Alert we had after cashing out was Coca Cola (KO) on April 24th. It was a net $7,375 spread and now it’s net $7,485 so we haven’t missed much and it’s a great trade for all the reasons discussed at the time so let’s add that (with minor changes):
- Sell 5 KO 2025 $65 puts for $5.80 ($2,900)
- Buy 15 KO 2025 $60 calls for $8.35 ($12,525)
- Sell 10 KO 2025 $70 calls for $3.50 ($3,500)
- Sell 10 KO Aug $62.50 calls for $2.50 ($2,500)
That’s net $4,625 on the $15,000 spread so there’s $10,375 (224%) upside potential at $70 and we’ve used 93 of our 611 days to collect $2,500 and we’ll have 6 more chances to sell and make up to another, let’s say $12,000 selling short-term calls. Our risk is being assigned 500 shares at $65 ($32,500), which would be a full allocation block.
What’s different about this spread to our Top Trade Alert is we’re being a bit more aggressive on the put sale (because the difference if assigned isn’t much and we can always roll and I’d rather have the money now) and more aggressive on the short-term calls (which balance out the put risk) and we tightened the spread to reduce the risk if KO plunges back to $60.
The 2025 bull spreads main purpose is to prevent us from getting burned on a sudden move higher against our short-term calls but KO is a large cap and doesn’t tend to jump up or down very quickly – which makes it ideal as an income trade. If all goes well and we can keep collecting $2,500 per quarter – we’re getting near goal with only 2 allocation blocks… allocated.
Other recent Top Trade Alerts were SOFI (got ’em), BNTX is a bit much at $105.60 but I’m thinking about them, GNRC also a bit much at $112 – not value-wise but for a smallish portfolio. NYCB is too volatile for this portfolio but I love them, CSCO is worth considering, SPWR must go in and YETI is another good one.
OK, so now we have some ideas we’ve already vetted recently so let’s look at BNTX:
One of the keys is “Can I sell puts?” and $105.60 is a problem. The VIX was higher when we called the trade at $21 for the Dec 2025 $100 puts and they are now $18.50 but the $85 puts are $12.50 and use $2,755 in margin to collect $6,250 – I think we can work with that!
- Sell 5 BNTX Dec 2025 $85 puts for $12.50 ($6,250)
- Buy 15 BNTX Dec 2025 $100 calls at $35 ($52,500)
- Sell 10 BNTX Dec 2025 $130 calls for $24.50 ($24,500)
- Sell 10 BNTX July $110 calls for $5 ($5,000)
We’re in this spread for net $16,750 and we’re committed to owning 500 shares at $85 ($42,500) so this is where that 1/2 allocation block we had left from SOFI is going. The upside potential on the $30,000 spread is $13,250 (79%) but our eye is on the prize of being able to sell $5,000 of premium over just 65 days – that makes our whole quarter!
This is a trade that needs to be monitored carefully but it’s worth it. If BNTX does well, we can buy back the short puts with a 50% gain and release the allocation block while still having the income-producing spread. For now, it lowers our net entry cost and protects us against a jump that benefits the July calls we sold – which are only 50% covered.
I don’t want to overdo it so SPWR will be our last pick for this week. It’s our Stock of the Decade but we go in and out as they go in and out of favor in the market. At the moment, they are considerably out of favor at $10.41 so let’s make the following play:
- Sell 20 SPWR 2025 $10 puts for $2.85 ($5,700)
- Buy 50 SPWR 2025 $10 calls for $3.85 ($19,250)
- Sell 30 SPWR 2025 $18 calls for $1.85 ($5,550)
- Sell 20 Sept $12 calls for $1 ($2,000)
That’s net $6,000 on the $40,000 spread so $34,000 (566%) upside potential and we’re only using $1,192 in margin on the put side while collecting $2,000 over 121 days. 5 sales like that can add $10,000 to our gains and we’re 100% covered. Clearly we’re being bullish but we’ll either make money selling short-term calls or make money on our spread or both and the worst-case scenario is owning 2,000 shares for net $26,000 – $13/share and there’s another allocation block committed.
So now we’ve committed 4 of our 10 allocation blocks and here’s the summary:
- SOFI – 1/2 Block used for $6,450 (181%) upside potential and $1,000 quarterly income potential.
- KO – 1 Block used for $10,375 (224%) upside potential and $3,500 quarterly income potential.
- BNTX – 1.5 Bocks used for $13,250 (79%) upside potential and $7,500 quarterly income potential.
- SPWR – 1 Block used for $34,000 (566%) upside potential and $2,000 quarterly income potential.
So, if all goes well, our $150,000 portfolio using 40% of it’s buying power can make $64,075 (42.7%) in a bullish market over 18 months while generating up to $14,000 in quarterly income when we only need $6,000 so another $8,000 x 6 quarters would be $48,000 added to the portfolio for a total gain of $112,075 (74.7%) over 18 months PLUS the $6,000 x 6 ($36,000) in planned withdrawals.
That’s a good start and now comes the boring part as we are essentially going to wait a couple of months and see how our first round of sales performed. If all goes well (and it rarely does), Grandma will get $6,000 in Mid August and the portfolio will still be positive! If not – well that’s what the other 6 blocks are for….
It all starts with a trading plan – just like we did it back in 2019 – after the last time we cashed out and started again.
Phil I noticed on SPWR you suggest to buy back the Jan 25 23 call and sell the lower 18 Jan 25 call. I am always hesitant to do this as I have lost on the stock or long call in this case, yes I gain on the buyback of the short call, but selling a lower short call, will hinder in the recovery as the too early of the short call will now run against me if the stock starts to recover. What’s your opinion?
I did the math in the post:
“SPWR, for example, is down considerably but our overall position is only down $200 as we have the short calls protecting our long position. At this point, we could buy back the short calls for just $525 to lock in our $1,125 gain, sell 10 of the $18 calls for $1.80 ($1,800) and buy 5 more of the $10 calls for $3.85 ($1,925) all for net $650. The original spread would have returned $4,000 at $18 against the original $1,600 spent but now we are in for $2,250 on an $8,000 spread with $5,750 in potential gains vs the original $2,400.
Yes, it would have been nice to make 300% as we hoped when we started but it turns out we should be more realistic as SPWR tripped coming out of the gate. If I hit my goals, I don’t worry about the profits I could have made if I had been more aggressive – time and again we have proven that we can beat Buffett or anyone else in the game by simply not losing money and having a high percentage of winners.
That means we make whatever adjustments we have to to keep our trades on track and, when circumstances change – we cut our losses and move on.
I just want to have a portfolio full of winners which is why, after 3 years of pruning – no one wanted to let go of the LTP – not even me!
If you have not seen this film – click here. It is everything you need to know about building portfolios.
Thanks Phil good comment. Yes I read the tree planting some 10 years, have some old trees now including me😉
Phil, I missed the KO traded. Is there a way to catch up on this trade? Thanks
You mean since I put up a brand new trade idea for KO an hour ago you missed your chance and need another one?
sorry my bad. I was confused with the Top trade that was issued on April 24th. All good thanks.
Poor prisda But I did not see a KO play eather
Try searching for KO on this page and see what comes up.
Only after renewing the page 3 times the full page comes up. Must work abit slow over 3500 miles😬
It depends how often your computer and the local server clear their cache.
possible so I thought I was losing it.😅
Not mutually exclusive. 😘
Does the money talk portfolio require portfolio margin? Thinking about doing it with 50K in a new account.
Dollar being rejected at 103 – that should help a bit if it sticks.
TGT beat but had conservative guidance – still going higher.
JACK kicked ass and guided up but people don’t seem to know what to do with that information, apparently.
Here’s what we discussed yesterday re. this morning’s earnings:
And here are Shel-Bot’s expectations for tomorrow morning. He has decided on his own to now include “Meet” expectations. Interesting..
I do like JACK. $95 is $2Bn and they make $130M so 15.4x is about where they should be. They made more in 2021 ($166M) on less sales ($1.15Bn vs $1.7Bn projected) so overall this is one of those companies that is behind the curve on raising prices to keep up with inflation. They are also high in the channel – they were $70 in November so it’s a pass for me – hoping they miss horribly so we can buy them.
4 right and one wrong – this is starting to be a thing!
Brutal build in oil is knocking them back off $72. We’ll see if /BZ can hold $75 – not if Dollar goes over 103.
Wow, Bing is a friggin’ nightmare. Now he won’t do the analysis because he says that would be predicting the future. This is why I may go work for JPM – I want my own personal AI to play with!
He did agree to make this nice chart but not as good.
Ha, I got him back! I said “Yesterday, your very useful output looked like this:” and pasted what he had done before – that got him back in the right mode.
Oddly enough, he is prefacing now by saying: “Here are some more predictions for the stocks you mentioned:”
Boy people ruin everything. Bard is right – kill them all!
And now he is back to saying:
🤓 That’s an interesting question. I’m not a financial advisor, so I can’t give you any specific recommendations on which stocks to buy or sell. However, I can try to give you some general insights based on the earnings expectations and the industry trends.
According to the earnings calendar1, here are some of the stocks that I expect to beat or miss expectations and why:
I hope this helps you get some insights into these stocks. However, please do your own research before making any investment decisions.
Those are for tomorrow morning and the other list is for tonight.
Treasury expiring may 31 has a yield of 3.296, treasury zero expiring on June 1 has a yield of 5.34! I don’t recall ever seeing anything like this. So the market is indicating June 1 the X date…
Sounds very odd.
i read somewhere that that is because big money market funds or other big players that roll short term paper all the time, cannot afford to buy a 3 month T bill that includes a risk, however small, that the govt would default, when they can buy a 1 month T bill that expires and pays off before we hit the debt ceiling. the downside is too large if the unthinkable happens, so in the very short term they lose a point of gain in order to avoid an unkowable loss if the worst happens.
it’s only for one month, then they can go back to buying T bills that pay 5 and a quarter.
Things seem to be in good shape so I’m out of here – have a good day, folks!
Phil, you mentioned that we will start with 3 portfolios LTP, STP and Butterfly. How much is the allocation for each one?
There will be a $500,000 long-term portfolio and a $200,000 short term portfolio and a $200,000 butterfly portfolio.
Phil, can you explain why the Dollar Indx ($DXY) is up? If we default it would result in loss of confidence in USD and dollar should collapse, if we increased the debt ceiling- it would mean more money printing and I would expect the dollar to weaken. But the current dollar move seems to be contrary.
It’s going to be a lot worse for the rest of the world, that’s why.
Would you rather be the guy who defaults on $1 trillion or would you rather be the guy who gets to defaulted on?
Look at Trump, his whole business plan is to borrow money and default.
The thing about the dollar is that it’s 65% of all the currency in the world but it’s also the currency that is used in about 85% of all transactions. Almost all international trade is dollar-based, which creates a constant demand for dollars. When there is any kind of financial turmoil that causes people to hoard dollars, then people who are trading dollars for of the currencies, or for commodities have to pay more.
Actually, if we default, we will have less debt and the dollar would be arguably stronger.