How to Become a Millionaire by Investing $700 per Month – Part 44/360

War profiteering!  

That’s right, war has been good to us as our smallest, most conservative portfolio has gained $23,063 in the past month(including our monthly $700 deposit, of course) and is now up a whopping 304% in 44 months!  

At this blistering pace (truly incredible for a no-margin, low-touch portfolio), we’ll hit our $1M goal in just 3.3 years, which is around August of 2029 at this point. Despite the madness this month, we added CAG but that was the only move of the month as our “passive” premium income did all the work for us otherwise. 

This is just the mathematical grind of our “Be the House – NOT the Gambler!” strategy playing out in a small (not so small anymore), no-margin portfolio. For those who are new – here’s me discussing the strategy with Forbes.    

The S&P 500 was at 6,795 on March 10th and yesterday we closed at 6,782 and there is nothing we like better than a flat market! We are sitting on $32,126 (25.8%) in CASH!!! and I would prefer to be around 40% in this chop but, as noted last month, these positions are TOO GOOD TO CUT!!! As Boaty noted last month: 

“The portfolio still looks aligned with your stated design: boring, undervalued, hedged, with time as the main asset rather than margin. If you want, I can next sketch specific roll/repair ideas for HRB and UUUU, since those are the only ones really demanding “active” attention.”

If you are just joining us, we began on Aug 25th, 2022 with $700 and each month we added $700 ($30,800) so far and each month we find things to buy under NO MARGIN rules (for 401K/IRA players). This is, despite the huge gains, a fairly conservative portfolio and we are generally quick to take our profits and run – as we always seem to find new opportunities to make more.  In the past year, our 12 prior Portfolio Reviews were:

• • How to Become a Millionaire by Investing $700 per Month – Part 43/360

  • How to Become a Millionaire by Investing $700 per Month – Part 42/360

  • How to Become a Millionaire by Investing $700 per Month – Part 41/360
  • How to Become a Millionaire by Investing $700 per Month – Part 40/360
  • How to Become a Millionaire by Investing $700 per Month – Part 39/360
  • How to Become a Millionaire by Investing $700 per Month – Part 38/360

  • How to Become a Millionaire by Investing $700 per Month – Part 37/360 – Year 4 Begins!

  • How to Become a Millionaire by Investing $700 per Month – Part 36/360 – 3 Years In!

  • How to Become a Millionaire by Investing $700 per Month – Part 35/360
  • How to Become a Millionaire by Investing $700 per Month – Part 34/360
  • How to Become a Millionaire (EVEN in This Market) by Investing $700 per Month – Part 33/360
  • How to Become a Millionaire – EVEN in a CRASH!!! by Investing $700 per Month – Part 32/360

Now you are all caught up! We have $92,323 in positions and $32,129 in CASH!!! but we also added an SQQQ hedge to protect our gains and now I will give my take on our positions while the war is on “pause“:

• • ARCC – They have held up well (now that they’ve found a bottom) and we’re aggressive on them into earnings because they are trading at 10x despite the fact that they’ve increased share count (raised money) by 40% in the past 3 years yet they are STILL making $1.85 per $18.17 share with $1.29/share in CASH!!! ($638M). They also have $5.5Bn of unused credit line to bargain hunt with…    
  • If earnings (early May) calm the fears they should get back to 13x, which is a 30% bump to $23 and THEN we cover and sell more short-term calls is the plan.  

• • HELE – On track after coming in in-line on earnings (as we expected). This is a $7,500 spread at net $3,500 so $4,000 (114%) upside potential if they get to $20 in 20 months! As we like to say at PSW: “Good for a new trade!“  

• • PATH – Thrown out with SaaS companies but they are the ones installing the AIs that are replacing SaaS – THAT is their service! Business is booming and they are buying back their shares and this $5,000 spread is currently net $1,650 so we have $3,350 (203%) upside potential – if they can get their groove back.  

• • SQQQ – This is our hedge and $400 has been the cost of insurance for the past month. It’s net $11,375 on the $30,000 spread so we have $18,625 of downside protection (and not fully covered) and we COULD sell 3 June $75 calls for $7 ($2,100) and that kind of pace will EASILY pay our $11,375 back over 20 months BUT, since this is a legitimate time of great concern – We would rather go uncovered (more flexible, more hedged) while we see how the cease-fire resolves itself.  

• • VFC – Here we have $3,315 tied up in sportswear with a questionable consumer so, sadly, we’ll have to let it go due to uncertainty. We have to recognize that we were lucky the short calls lost their money faster than our longs (well, not really luck – it was good positioning) and that has, so far, saved us as the stock dropped but why press it?  

The fact that we WANT to have more cash pushes us to re-evaluate some of our marginal positions. 

• • F – STUPIDLY cheap. Not even selling short-term calls on this one. Tempted to buy back the 2027 short calls. In fact, I can’t think of any reason NOT to spend net $1.27 ($1,270) to roll the 2027 $10 calls ($3.13) to the 2028 $8 calls ($4.40) – that buys us $2 in position and another year to sell premium.  

• • GEO – We got a nice pop so let’s lock in the gains by selling 5 June $18 calls for $2 ($1,000). That drops our net to $3,800 and we’ll roll the 5 short June $15 calls at $3.60 ($1,800) to 5 short Sept $17 calls at $3.50 ($1,750) so net $50 to widen the spread by $2,000 and that is called LEAPFROG!  

That’s how we do it – a series of small adjustments to make sure each position is on track for what we believe the months ahead will bring. Each month, we learn a little more and, hopefully, make better and better adjustments along the way.  

• • B – Over our target! Net $3,540 on the $4,800 spread means we just sit and wait to make $1,260 (35%) but that’s almost two years so is it worth it or can we find something better to do with $3,540? As we have 10x that much cash – it’s not like we need it – so better to collect the interest (1.7% per month) – but we should keep in mind it’s cash we could deploy elsewhere.  

• • CAG – Brand new so good for a new trade, of course.  

• • HPQ – Also pretty new and good for a new trade.  The short April $20 calls will go worthless and let’s keep that slot open to be more aggressive into earnings.   

• • NVO – They invented the GLP space but are besieged by knock-offs. Still, our 2028 spread is net $7,275 and we sold $1,625 (22.3%) for the quarter with 6 quarters left to sell for a potential $9,750 (134%) so the stock getting back on track would just be a nice bonus.  

• • OWL – I keep doing the math and it keeps looking STUPIDLY cheap but it keeps getting worse. The short May calls are toast with a $315 profit and our long spread is net $1,187 so net net $872 and we can sell 5 June $8 calls for $1 ($500) and we’ll roll our 10 2028 $10 calls at $1.65 ($1,650) to 10 2028 $8 calls at $2.30 ($2,300) for net 0.65 ($650) – that’s well worth it!  So net $150 to roll our spread $2,000 lower is money well spent.   

As long as we are in position to sell short calls at $500 per quarter, we have $3,000 (about 300%) coming to us in 6 quarters against an $872 + $15 + $150 spread – obviously a “business” we should continue to operate!  

• • PR – Blew way past our target but not a problem, just annoying. The 2 short April $14 calls at $6.45 can be rolled to the Oct $15 calls at $6.25 for 0.20 to gain $1 ($500) of width on the spread. OR, we could buy 5 2028 $20 calls for $4 ($2,000) and roll ALL of our short calls ($3,390) to 10 short Oct $19 calls at $3 ($3,000) so we’re spending net $2,390 to put our 2028 $10 calls $4,500 ($2,000 more) in the money while putting ourselves back in position to sell much more premium. 
  • Figure October was 6 months for $3,000 so 2 more sales like that could be $6,000 vs shutting it down for net $2,560 today, so a great use of capital PLUS the $4,500 value of the spread is still there too! 

• • SOFI – I’m so tempted to get more aggressive but let’s see how earnings (4/29) go.

• • SQQQ – As noted above, it’s a $31,500 spread at net $7,411 so we have $24,089 of downside protection and we collected $2,000 (26.9%) for one quarter of short calls so 6 more of those is $12,000 – which is more than enough to make this FREE INSURANCE – my favorite kind!  

THIS, by the way, is how you hedge!  

• • ULCC – They sold off on guidance but then went up during the war – how weird! We sold 5 April $5 calls for $2,450 and those will go worthless and the rest of the spread is net $6,000 and we can sell 25 July $4 calls for 0.60 ($1,500) so that’s 25% for 3 months which means this will eventually be a free spread that would be worth $30,000 if ULCC gets back to $7 in 20 months – speculative but worth keeping – since it should cost us nothing to gamble.

• • UUUU – There should only be 5 short June $20 calls, not 20. That’s a roll we did last month.  Now we should buy those back ($1,130) and roll 10 of the Jan $10 calls at $9.73 ($9,730) to 15 short Oct $18 calls at $5 ($7,500). We’re just pushing those short $10 calls into more time premium and widening the spread.  

I’d still rather have more cash but we do have a good hedge and we will keep our eye on this portfolio as things develop.  Usually it’s very low-touch but you can’t blame us for being wary given the macro conditions.