-0.5 C
New York
Tuesday, February 20, 2024
Home Markets PhilStockWorld Top Trade Review – Second Half of 2023

PhilStockWorld Top Trade Review – Second Half of 2023

11
PhilStockWorld Top Trade Review – Second Half of 2023

Top Trades77.7% – that was our winning percentage in the first half.

Most of our misses were Sunpower (SPWR) and I still like them for the long-term but they haven’t done much in 2023. The net gain on our Top Trade Alerts in the first half of 2023 was $65,278 as of our July 13th review and we’re well over $100,000 5 months later.

As it is still 2023 and we just went over our Watch List Yesterday, we’re going to start the Top Trade Review with 4 new trade ideas from the stocks we identified in yesterday’s Morning Report:  

CRSP – We like them because, at $5Bn, they still have $1.8Bn in the bank and they only lost $239M this year so it’s like owning a very well-funded research company and giving them 3-4 years to come up with something. The FDA just approved Casgevy therapy for Sickle Cell Disease – legitimizing CRSP’s treatment process down the road.  For the LTP, we are adding: 

    • Sell 5 CRSP 2026 $50 puts at $11.50 ($5,750) 
    • Buy 15 CRSP 2026 $50 calls at $30 ($45,000) 
    • Sell 12 CRSP 2026 $80 calls at $19.50 ($23,400) 
    • Sell 5 CRSP March $70s at $5.75 ($2,875) 

That’s net $12,975 on the $45,000+ spread that’s half in the money to start. The upside potential is $32,025 (246%) and, if we sell about $3,000 per quarter in short calls – that’s another potential $21,000 (161%) while we wait.

IMAX – We always buy them when they are in a down cycle but they could go much lower (see last Fall) so we’re making a small entry for the LTP – happy to DD if they drop back around $12.  They are being hurt by a string of box office failures that have nothing to do with IMax but certainly hit their revenues.  For our LTP:

    • Sell 10 IMAX July $15 puts for $1.60 ($1,600)
    • Buy 20 IMAX July $13 calls for $3.10 ($6,200)
    • Sell 20 IMAX July $17 calls for $1.15 ($2,300) 

That’s net $2,300 on the $8,000 spread and we can make $5,700 (247%) in just 205 days at $17.

RH – They are in the midst of a transition to a lifestyle brand and getting no respect but $300 is $5.5Bn and they made $529M in 2023. They will make much less in 2024 ($165M) but it’s planned expenses as they are aiming to 10x sales this decade. Here’s a chart of WSM’s stock when RH’s current chairman, Gary Friedman was in charge:

For our LTP, we’re adding RH at:

    • Sell 5 RH 2026 $250 puts for $43.50 ($21,750)
    • Buy 15 RH 2026 $260 calls at $110 ($165,000)
    • Sell 15 RH 2026 $300 calls at $92.50 ($138,750) 

That’s net $4,500 on the $60,000 spread so $55,500 (1,233%) upside potential if RH can simply hold $300!

TGT – Is getting no respect at $142, which is $66Bn but that’s only 16.5x $4Bn in projected 2024 profits, so we’re not going to let this one get away from us. TGT sold $110Bn worth of stuff last year vs $611Bn by WMT – so there’s still room for TGT to grow. For our LTP: 

    • Sell 10 TGT 2026 $130 puts for $16.50 ($16,500)
    • Buy 20 TGT 2026 $130 calls for $31 ($62,000)
    • Sell 20 TGT 2026 $160 calls for $18.50 ($37,000) 

That’s net $8,500 on the $60,000 spread that’s $44,000 in the money to start with $51,500 (605%) of upside potential. See – we don’t have to swing for the fences to make massive returns with options.  

So there’s 4 nice trade ideas that use $28,275 in cash plus margin to generate a potential $144,725 (511%) in profits over the next two years – that’s a nice way to finish our picks for the 2nd half of 2023 – now let’s see how we did with our earlier choices (and don’t forget to use the links to check out or reasons for picking the stocks at the time):

Top Trade Alert – July 19, 2023 – Qualcomm (QCOM)

    • Sell 5 QCOM 2025 $100 puts for $8 ($4,000)
    • Buy 10 QCOM 2025 $110 calls for $29 ($29,000)
    • Sell 10 QCOM 2025 $140 calls for $15 ($15,000)

That’s net $10,000 on the $30,000 spread with $20,000 (200%) upside potential and we’re starting out $14,500 in the money – which is certainly nice. This is the proverbial “born on 3rd base” type of trade!

We’re off to a great start and already over our target.  The $100 puts are just $3.10 ($1,550) and the $110 calls are $43 ($43,000) and the $140 calls are $23 ($23,000) so net $18,450 is up $8,450 (84.5%) so far and still $11,550 (62.6%) left to gain.  

Top Trade Alert – July 21, 2023 – Pfizer (PFE)

    • Buy 1,000 shares of PFE for $37.12 ($37,120)
    • Sell 10 PFE Dec 2025 $37.50 puts for $5.25 ($5,250)
    • Sell 10 PFE Dec 2025 $37.50 calls for $5 ($5,000)

That’s net $26,870 on the $37,500 spread so we have $10,630 (39.5%) of upside if PFE is flat or up plus we have 30 months so call it 10 dividends of $410 is another $4,100 (15.2%) and, once PFE is back around $40, we can sell a few short-term calls for income as well. For EXAMPLE, the Sept $37.50 calls are $1 so selling 5 of those would bring in $500 using just 56 of our 882 days. Do that 10 times and that’s another $5,000 coming in.

The short-call selling would have helped but we won’t count it.  The stock is down to $28.61 ($28,610) and the $37.50 puts are now $10.25 ($10,250) and the $37.50 calls are $1.50 ($1,500) and that’s net $16,860 plus $820 in dividends is $17,860 for a loss of $9,190 (34.2%) at the moment.  I’d buy back the short calls and double down on the stock down here as this is a silly sell-off.  

Top Trade Alert – Aug 7, 2023 – ALL & PRU

    • Sell 10 ALL Dec 2024 $100 puts for $8 ($8,000) 
    • Buy 20 ALL Dec 2024 $100 calls for $20 ($40,000) 
    • Sell 20 ALL Dec 2024 $110 calls for $14.20 ($28,400) 

That’s net $3,600 on the $20,000 spread with $16,400 (455%) upside potential at just $110 in about 17 months. Our worst case is being assigned 2,000 shares of ALL at net $101.80, which would be 7.5% below the current price. Realistically though, if we should face danger of assignment, we would roll the puts lower before buying.  

Timing is everything here.  We had them on the Watch List for almost a year and the bounce off the July lows triggered our double Top Trade Alert. We’ve blown out our conservative target and the $100 puts are now $2.40 ($2,400) and the $100 calls are $42.60 ($85,200) and the $110 calls are $33.70 ($67,400) so net $15,400 is up $11,800 (327%) in 5 months but I’d close the $100/110 spread for $17,800 and put that money back to work and let the puts expire down the road.

PRU had similar success:

    • Sell 10 PRU Dec 2025 $85 puts for $10 ($10,000)
    • Buy 20 PRU Dec 2025 $85 calls for $19.50 ($39,000) 
    • Sell 20 PRU Dec 2025 $100 calls for $12 ($24,000)  

That’s net $5,000 on the $30,000 spread with $25,000 (500%) upside potential and here we’re promising to buy 2,000 shares of PRU for net $102.50 if it all goes bad. More likely, we will spend a bit more money to widen the position as we get confident $100 will hold.

Here we’re not as far over goal and it’s a longer-term spread. We’re at $6.50 ($6,500) on the short puts (which are great for a new trade as that’s way too much) and $22.75 ($45,500) on the $85 calls and $16 ($32,000) on the $100 calls for net $7,000 and that’s only up $2,000 (40%) so far with $23,000 (328%) left to gain so this is great for a new trade!  

Top Trade Alert – Aug 22 2023 – IBM (IBM)

    • Sell 10 IBM 2025 $135 puts at $10 ($10,000)
    • Buy 20 IBM 2025 $140 calls at $16.50 ($33,000)
    • Sell 15 IBM 2025 $160 calls at $8 ($12,000)
    • Sell 7 IBM Nov $145 calls at $4.60 ($3,220)

That’s net $7,780 on the $40,000 spread so we have $32,220 (414%) of upside potential at $160 and, along the way, we’ve used 87 out of 514 days so far so at least 5 more sales of $3,000 can drop another $15,000 into our pockets while we wait.

IBM was $152.89 on Nov $17 so the short $145s cost $7.89 to buy back (we would have rolled them, of course) but that’s OK as the 2025 $135 puts are down to $4.30 ($4,300) and the $140 calls are $29.50 ($59,000) and we only sold 15 $160 calls, now $15.72 ($23,580) so net $23,230 (including the buy-back) is still up $15,450 (198%) in 4 months is not bad and only a year to collect the next $24,550 (158%) if IBM holds $160 so good for a new trade and I’d sell 7 of the April $165s for $6.50 ($4,550) as that’s a 29.4% return on the $15,450 in just 113 days – who turns that down?  

Top Trade Alert – Aug 25 2023 – Overstock (OSTK) – Now BYON!

  • Sell 20 OSTK 2025 $20 puts for $4.40 ($8,800) 
  • Buy 50 OSTK 2025 $20 calls for $10 ($50,000) 
  • Sell 40 OSTK 2025 $35 calls for $5 ($20,000) 
  • Sell 10 OSTK Oct $25 calls for $2.10 ($2,100) 

That’s net $19,100 on the $75,000+ spread and we’ve only used 56 out of 511 days we have to sell so let’s say we have a path to selling 8 more short-term calls for $2,000 – that would be $16,000 of income while we wait on our $75,000.  If OSTK goes lower, we still sell short-term calls, possibly more than 10 at a time and we use that money to roll the $20 calls to the $15 calls (now $12.30), which would cost $11,500 – less than we plan to collect selling longs. 

It’s only back to where we came in but we were pretty conservative and we sold the short Oct calls, which expired worthless and now the $20 puts are $3.60 ($7,200) and the $20 calls are $13.70 ($68,500) and the $35 calls are $7.20 ($28,800) so net $32,500 is up $13,400 (70.1%) so far but it’s a $75,000+ spread so still $42,500 (130%) left to gain in a year is still worth playing!

Top Trade Alert – Sept 7 2023 – BYD and Barbie (MAT)

    • Sell 10 BYD 2025 $65 puts for $8.50 ($8,500) 
    • Buy 20 BYD 2025 $60 calls for $16.50 ($33,000) 
    • Sell 20 BYD 2025 $80 calls for $8 ($16,000) 

That’s net $8,500 on the $40,000 spread giving us $31,500 (370%) upside potential at $80 but, as our Members know, with such a wide spread we plan to also sell short calls for income when the stock pops.  At the moment, the Jan $70 calls are $2.40 and the $60 calls are $8 so, if the Jan $70 calls get over $6, we’d be happy to sell 5 for $3,000 – using 134 of our 498 days we have to see and we’d be on a good path for getting back our $8,500 and turning it into a free spread (with the put obligation) 

It kept falling but now back above our entry. That’s the problem with being a Fundamental investor – I can only tell you when something is too cheap – that does not mean it won’t get cheaper…  In any case, we’re looking good now and the $65 puts are $6.60 ($6,600) and the $60 calls are $9.70 ($19,400) and the $80 calls are $1.85 ($3,700) as the premium drained out of them but it’s still net $9,200, which is up just $700 (8.2%) so far and there’s still $30,800 (334%) left to gain for 2024 if BYD can get to $80.

    • Sell 10 MAT 2025 $20 puts for $2 ($2,000)
    • Buy 20 MAT 2025 $18 calls for $6.50 ($13,000)
    • Sell 15 MAT 2025 $25 calls for $2.95 ($4,425)
    • Sell 5 MAT Jan $22 calls for $1.90 ($950)

That’s net $5,625 on the $14,000 spread that’s mostly in the money. We have no upside risk with the short calls and we can always sell more but we’ve taken in $950 using 134 of our 498 days so 3 more sales will drive our basis down nicely – even if we just sell 5 units.

We bought these at the top and we’ll have to see if Q4 earnings got a bump from the movie. At the moment, the $20 puts are $2.75 ($2,750) and the $18 calls are $3.80 ($7,600) and the $25 calls are $1.10 ($1,650) and the short $22s are just 0.05 ($5) for net $3,195, which is down $2,430 (43.2%) and I’d wait for earnings to see what happens.  

Top Trade Alert – Sept 14 2023 – CSCO and AKAM

    • Sell 10 CSCO 2026 $50 puts for $4.10 ($4,100)
    • Buy 25 CSCO 2026 $55 calls for $9.50 ($23,750) 
    • Sell 20 CSCO 2025 $70 calls for $3.85 ($7,700)
    • Sell 10 CSCO Jan $55 calls for $3.50 ($3,500) 

That’s net $8,450 on the $37,500 spread so we have $29,050 (343%) upside potential if CSCO gains 25% to $70 over the next two years. We sold $3,500 using one of the 9 quarters we have to sell and 8 more sales like that can drop another $28,000 in our pockets while we wait.  The risk is owning 1,000 shares of CSCO at $50 plus whatever we lose on the spread – net $58.45 would be the worst and that’s not so bad, is it?  

Disappointing so far but 2 years to go and, fortunately, we sold the Jan $55s, which are now 0.03 ($3). The $50 puts are $5.60 ($5,600) and the $55 calls are $4.85 ($12,125) and the $70 calls $1.20 ($2,400) for net $4,122 and that’s a $4,328 (51.2%) loss and I’d buy back the short $70s and wait for the bounce to sell more short 2025 calls as well as short April calls – hopefully the $55s for $2.50+.  

    • Sell 10 AKAM 2026 $95 puts for $9 ($9,000) 
    • Buy 20 AKAM 2026 $90 calls at $32 ($62,000) 
    • Sell 20 AKAM 2025 $110 calls at $20.50 ($41,000) 
    • Sell 5 AKAM Jan $105 calls at $7 ($3,500) 

Again we are spending net $8,500 but this time it’s on a $40,000 spread that’s $28,000 in the money to start!  The upside potential at $110 is $31,500 (370%) and we have 8 more quarters to sell $3,500 in premium for a potential bonus of $28,000 while we wait – I’m feeling more secure already!  

This one went well and we are over target already with the short $95 puts down to $5 ($5,000) and the $90 calls are $41.50 ($83,000) and the $110 calls are $20.50 ($41,000) and the Jan $105 calls are $15.50 ($7,750) so net $29,250 is up $20,750 (244%) in just 3 months and almost 100% to go – better than that if we roll the short calls and we’ll roll the short $110s too when the time is right so this can be played new as well. 

Notice how it only takes one winner to more than make up for a couple of losers. By constantly giving ourselves excellent Risk/Reward ratios – we make it very, very likely that we’ll win in the long run.  Also notice how we use time-frames to our advantage as well as, of course, the only thing you can ALWAYS count on in the market and that is that ALL Premium Expires Worthless! 

PhilStockWorld Top Trade Alert – Sept 28 2023 – BBY, CAKE, GLW, KO, NLY, T, VALE & WHR

We finally got a nice sell-off so we jumped all over our Watch List (as we are trained to do) and picked a whole bunch of trade ideas – including our eventual Trade of the Year (VALE) and the runner-up (GLW) – two months before the picks were officially made.  This trade alert has dozens of great trade ideas.

    • Sell 10 BBY 2026 $65 puts for $11 ($11,000)
    • Buy 20 BBY 2026 $65 calls for $14.50 ($29,000)
    • Sell 15 BBY 2026 $85 calls for $7.25 ($10,870)

That’s net $7,130 on the $40,000 spread with $32,870+ (461%) upside potential and the Jan $70 calls are $4.25 so selling 7 of those would bring in $2,975 for a 41% monthly return – but not yet.

Again, you can see how we watch stocks and pull the trigger when they drop (after making sure we think the drop is overdone, of course). Fundamental OBSERVATION will beat charting EXTRAPOLATION every time!  The $65 puts are now $8 ($8,000) and the $65 calls are $18.75 ($37,500) and the $85 calls are now $10.50 ($15,750) for net $13,750 so far and that’s up $6,620 (92.8%) in 3 months and there’s another $26,250 (190%) left to gain in this spread that is well on-track.

    • Sell 10 CAKE July $30 puts for $3.60 ($3,600)

We sell short puts to remind ourselves to watch a stock closely but we missed the rapid rise of CAKE and didn’t add more. Still, the short $30s are down to $1.20 ($1,200) and we’re up $2,400 (66.6%).

    • Sell 10 GLW 2026 $30 puts for $4 ($4,000)
    • Buy 25 GLW 2026 $25 calls for $7.50 ($18,750)
    • Sell 20 GLW 2026 $37 calls for $2.50 ($5,000)

That’s net $9,750 on the $30,000+ spread that’s $12,500 in the money to start so very fair with an upside potential of $20,250+ (207%) and the Jan $30 calls are $1.90 so 10 short would be $1,900, which is 19.5% per quarter while we wait. Should be fun.

The $30 puts are down to $3.80 ($3,800) and the $25 calls are $8.50 ($21,250) and the $37 calls are 1.80 ($3,600) so net $13,850 is already up $4,100 (42%) but still a long way to go and we’re well on track.  

    • Sell 10 KO 2026 $55 puts for $4.25 ($4,250)
    • Buy 20 KO 2026 $50 calls for $10.50 ($21,000)
    • Sell 10 KO 2026 $60 calls for $5 ($5,000)
    • Sell 7 KO Jan $55 calls for $2.75 ($1,925)

That’s net $9,825 on the $20,000+ spread so 100% upside potential and we made 20% in our first quarter’s sale. We’re not even fully covered and can certainly roll the short $55s to 5 or less 2026 $60s and then we’d still have 5 open positions to keep selling.

As money comes in, we can spend $2.50 or less to roll the 2026 long calls down $5 or the 2026 short calls up $5 so we’ll widen the spread over time but, for now, it’s a nice conservative entry with great flexibility.

We got a good bottom on this one!  The $55 puts are $3.65 ($3,650), the $55 calls are $4 ($2,800), the $50 calls are $11.75 ($23,500) and the $60 calls are $5.80 ($5,800) for net $11,250 and that’s up $1,425 (14.5%) and still looking good for a double from here.  

    • Sell 10 NLY 2026 $20 puts for $5.60 ($5,600)
    • Buy 1,000 NLY at $18.68 ($18,680)
    • Sell 10 NLY 2026 $15 calls for $5.20 ($5,200)

That’s net $7,880 and we get called away at $15,000 for a $7,120 (90%) gain if we don’t roll. Meanwhile, the dividend is $2,600 (33%) per quarter while we wait! If we get assigned another 1,000 at $20, we’d have 2,000 for $27,880 and that’s $13.94, which is 25% off the current price as our worst case.

We get a $650 dividend today! The last one was Sept 28th and I’m not going to count that one as we only put out the alert that day. The stock is now $20,530 and the $20 puts are $4.75 ($4,750) and the $15 calls are $5.65 ($5,650) for net $10,130 and that’s up $2,250 (28.5%) in 3 months which is way more than the dividend despite how conservatively we played it.  

    • Buy 1,000 shares of T for $15 ($15,000)
    • Sell 20 T 2026 $15 puts for $2.25 ($4,500)
    • Sell 10 T 2026 $15 calls for $1.85 ($1,850)

That’s net $8,700 and we pick up $6,300 (72%) at $15+ and, if assigned 2,000 more at $15, that’s $38,700, which is $12.90/share and that’s fine too. Meanwhile, the dividend is $1.10 ($1,100) per year, which is a 12.6% bonus.

We picked them often enough so it’s a broken clock sort of thing but that’s how you play a major blue chip over time – just keep buying it and eventually you get it right! The shares are $16,580 and the puts are $1.55 ($2,300) and the calls are $2.70 ($2,700) and the dividend was $278 on Oct 6th so net $11,858 is up $3,158 (36.2%) in 3 months – who says dividend stocks are boring?  

    • Sell 30 VALE 2026 $15 puts for $3.75 ($11,250)
    • Buy 50 VALE 2026 $10 calls for $4.20 ($21,000)
    • Sell 40 VALE 2026 $17 calls for $1.40 ($5,600)

That’s net $4,150 on the $35,000 spread so we have $31,850+ (767%) upside potential (because we’re very aggressive on the short puts but do we really mind owning $45,000 worth of VALE when we can sell puts and calls for $6.60 ($19,800) per year?) and the Jan $14s are 0.70 so 15 short would be $1,050 which is 25% per quarter in income on a spread that’s $16,150 in the money to start!

Turned out to be our Stock of the Year for 2024 and our entry was almost perfect.  The $15 puts are down to $2.45 ($7,350), the $10 calls are $6.30 ($31,500) and the $17 calls are $2.10 ($8,400) for net $15,750, which is already up $11,600 (279%) in 3 months but there’s more than 100% left to gain so still a great trade!  

    • Sell 5 WHR 2026 $120 puts for $17.50 ($8,750)
    • Buy 15 WHR 2026 $120 calls for $27.50 ($41,250)
    • Sell 10 WHR 2026 $150 calls for $14.50 ($14,500)

That’s net $18,000 in the $45,000 spread that’s $22,500 in the money and not fully covered. There’s $27,000+ (150%) upside potential and, currently, we could sell 7 Jan $140s for $5.50 ($3,850) for a 21% quarterly return while we wait – but not yet.

Barely getting back to where we came in but that’s a chance to get in for you! The $120 puts are $20.70 ($10,350), the $120 calls are $19.50 ($29,250) and the $150 calls are $10.50 ($10,500) and that’s net $8,400, which is down $9,600 (53.3%) but that means there’s $35,400+ left to gain from here – great for a new trade.  

PhilStockWorld Top Trade Alert – Oct 24, 2023 – SQQQ and BCS

Given the overall uncertainty in the markets, I’d like to place a hedge in the portfolio BUT, given the overall uncertainty – I’d like not to have a big loss if the market keeps going up. Two weeks ago, we came up with a clever hedging solution for our Members for our Short-Term Portfolio and, for the Money Talk Portfolio, I’m going to do something very similar to what we did on the 13th:

    • Buy 100 SQQQ 2025 $20 calls for $6.70 ($67,000)
    • Sell 40 SQQQ 2025 $30 calls for $5.00 ($20,000)
    • Sell 60 SQQQ Jan $35 calls for $4.50 ($27,000)

What we have is a net $20,000 investment in a potentially $130,000 spread. SQQQ is a 3x inverse ETF on the Nasdaq so, for it to gain 75% to $35, the Nasdaq would have to drop 25%. Hopefully that does not happen but, if it does, we make $110,000 to offset our losses.  

Down and down the SQQQ went since October.  Still we had the right strategy and the $20 calls are now $2.20 ($22,000) and the $30 calls are $1.35 ($5,400) and the $35 calls are 0.02 ($120) and that’s net $16,480 for a loss of $3,520 (17.6%) was our cost of insurance against all of the above gains – well worth it!  

Now we salvage the $22,000 and roll the 2025 $20 calls to 200 of the 2026 $10 ($5.50)/20 ($3.60) bull call spreads at $1.10 ($22,000) and that’s now a $200,000 spread that’s $64,440 in the money covering the short calls and we buy back half for $2.50 ($5,000) if SQQQ goes up.  

=============================================

Since we have free insurance and plenty of CASH!!!, let’s add a bank to our portfolio and Barclays (BCS) just disappointed on earnings by announcing they are taking charge-offs in Q4 – so that disappointment stands ahead. Fortunately, BCS is on our Watch List so we’re well-aware of the issues and $6.50 is a good $2.50 (38%) below fair value so this is a great time to learn a Stupid Options Trick and buy the stock for half price so we can collect that 0.38 annual dividend.

      • Buy 5,000 shares of BCS for $6.50 ($32,500) 
      • Sell 50 BCS 2026 $5 calls for $2.25 ($11,250) 
      • Sell 50 BCS 2026 $7 puts for $1.60 ($8,000) 

That’s net $13,250 for 5,000 shares ($2.65/share) and we will collect about 0.10 ($500) per quarter in dividends for 9 quarters ($4,500) and, if called away at $5, another $25,000 less whatever amount we are below $7 but, even if we’re just at $5, it’s net $19,500 back for a profit of $6,250 (47%).  That’s what happens if we drop $1.50 to $5. 

If we rise 0.50 to $7, then we end up with $16,250 in profits (260%) in two years. Our worst-case scenario is being assigned another 5,000 shares at $7 ($35,000) and, if we lose the initial $13,250 entirely, we’ll have 10,000 shares at net $48,250 ($4.825/share), which is STILL a 25% discount to the current price – that’s our WORST case!  Aren’t options fun?  

Looks like the best-case scenario is kicking in and the shares are now $39,750 and the $5 calls are $3.35 ($16,750) and the $7 puts are 0.95 ($4,750) and that’s net $18,250, which is already up $5,000 (37.7%) already.  

Top Trade Alert – Oct 30, 2023 – Ford (F)

  • Sell 20 F 2026 $12 puts for $3.50 ($7,000)
  • Buy 75 F 2026 $10 calls for $1.75 ($13,125)
  • Sell 75 F 2026 $15 calls for 0.65 ($4,875)

That’s net $1,250 on the $37,500 spread so $36,250 upside potential at $15 but even $13 pays $7,500 – which would be just fine.

Talk about easy money! We hit that one right on the nose with another broken clock trade (we bet on the strike being settled for timing). The aggressive put sale paid off as they are down to $2.10 ($4,200) already and the $10 calls are $3.40 ($25,500) and the $15 calls are $1.35 ($10,125) so net $11,175 is up $9,925 (794%) in two months and there’s still $26,075 (233%) left to gain that looks much less risky now!

PhilStockWorld Top Trade Alert – Nov 2 2023 – Altria (MO)

 I have to agree, $40 is silly so let’s take the opportunity to add them to the Income Portfolio, as they are paying out $3.92 per $40.44 share – close to 10% – and we can make it over 10%:

    • Buy 500 MO at $40.44 ($20,220)
    • Sell 5 MO 2026 $42.50 puts at $8.25 ($4,125)
    • Sell 5 MO 2026 $35 calls at $6.25 ($3,125)

That’s net $12,970 and, if we are called away at $35, that’s $17,500 for a $4,530 (34.9%) profit and they are paying 0.98 ($490) x 9 payouts = $4,410 (34%) so an overall 68.9% return at $42.50+ and worst case is we get assigned 500 more at $35 ($17,500) and we’re in 1,000 for net $30,470 ($30.47), which is still 24.6% off the current price – that’s our WORST case!

****************************************

For the LTP, we can do much, much better with:

    • Sell 10 MO 2026 $42.50 puts at $8.25 ($8,250)
    • Buy 50 MO 2026 $40 calls at $3.40 ($17,000)
    • Sell 40 MO 2026 $47.50 calls for $1.10 ($4,400)

That’s net $4,350 on the $37,500+ spread and the plan is, of course, to sell 10 Jan $45 calls, now $1, for $2+, which is where they were a week ago. If we can generate $2,000 per quarter selling calls, that’s $18,000 (413%) back before we even count profits from the longs.

Thank goodness we got a good entry as they fell back to where we started. I’ve lost confidence in MO but, for the record, on trade #1 – we’re at $20,900 on the stock and the puts are $7.20 ($3,600) and the calls are $6.30 ($3,150) and we just collected a $490 dividend on Dec 20th so net $14,640 is up $1,670 (12.8%), despite the downturn. That’s simply because we sold premium and ALL Premium Expires Worthless!  

Trade #2 is the same $7.20 ($7,200) for the short puts and the $40 calls are $3.10 ($15,500) and the $47.50 calls are 0.85 ($3,400) and that’s net $4,900 which is surprisingly still a gain of $550 (12.6%) – even without the dividends to save us.  

PhilStockWorld Top Trade Alert – Nov 27 2023 – TD Bank (TD)

Now, we’re not saying it’s going to happen that soon but, eventually, the Dollar will weaken and it’s a good hedge if we are playing the Fed to stay tight and they get loose instead – that will weaken the Dollar, strengthen CAD and TD is off to the races – see how easy it is? A nice play to make on TD for our Butterfly Portfolio is: 

    • Sell 5 TD 2026 $60 puts for $6 ($3,000) 
    • Buy 15 TD 2026 $60 calls for $8 ($12,000) 
    • Sell 10 TD 2026 $70 calls for4 $4 ($4,000) 
    • Sell 5 TD April $60 calls for $3.75 ($1,875) 

That’s net $3,125 on the $15,000 spread so we have $11,875 (380%) upside potential at $70 but notice we sold $1,875 in premium using our first 144 days out of the 781 we have to sell.  So, if TD is down or flat, we’ll have 4 more sales like that and make about $7,500, which would turn our spread into a net credit. If TD is up then we roll the short calls to higher strikes and we’ll have our $15,000 in 2 years.  Aren’t options fun?  

Working out well already with the $60 puts at $4.80 ($2,400) and the $60 calls at $9 ($13,500), the $70 calls still $4 ($4,000) and the short April $60s are $5.80 ($2,900) so net $4,200 is up $1,075 but that’s up 34.4% in a month – nothing to cry about! 

PhilStockWorld Top Trade Alert – Nov 27 2023 – Vale S.A. (VALE) + 6

    • Sell 10 GLW 2026 $32 puts for $5.75 ($5,750) 
    • Buy 25 GLW 2026 $25 calls for $6 ($15,000)
    • Sell 20 GLW 2026 $37 calls for $2.75 ($5,500) 

That’s net $3,750 on the $30,000 spread with $26,250 (700%) of upside potential. The short calls are aggressive so we risk assignment of 1,000 shares at net ($32,000 + $3,750 =) $35,750 or $35.75/share but it’s another one we don’t mind doubling down on and, of course, we can always roll the short puts – the 2026 $25s are $2.60 so a 2x roll to there means we’re in 2,000 shares at net roughly the current price – that’s very acceptable as a risk vs the very large potential reward.  

Never be ashamed to pick things twice! If it was a good time to buy it and it is still a good time to buy it – then why not pick it again? In this case, these were our Trade of the Year finalists – so all worth mentioning.  It was just a month ago – so don’t expect much…

The puts are now $4.40 ($4,400) and the $25s are $7.50 ($18,750) and the $37s are $1.90 ($3,800) so an excellent net $10,550 already is up $6,800 in 30 days – pretty good! That’s largely because the VIX collapsed so our strategy of buying in the money calls and selling 100% premium calls and aggressive puts really paid off.  Still good for a new trade too with about 200% left to go. 

    • Sell 20 LEVI 2026 $15 puts at $2.50 ($5,000) 
    • Buy 40 LEVI 2026 $10 calls at $6.50 ($26,000) 
    • Sell 35 LEVI 2026 $15 calls at $3.50 ($12,250) 

That’s net $8,750 on the $20,000 that is STARTING OUT 100% IN THE MONEY with $11,250 (128%) upside potential.  All LEVI has to do is not go lower and we make 64% a year back on our $11,250 – that’s fun!  We’ve left ourselves room to make money selling short-term calls as well – once we’re back over $18 we can start doing that.  

Top Trade Alerts are all about trade ideas that are highly likely to succeed – usually because something we’ve been watching has hit our value point AND has an upcoming catalyst that we see before the rest of the market does – that’s the key to our success. Around that we construct high Risk/Reward option spreads with conservative (usually) strike targets and the results you can see for yourself, right?   

The $15 puts are down to $1.85 ($3,700) and the $10 calls are $7.70 ($30,800) and the $15 calls are $4.60 ($16,100) so that’s net $11,000 is up a quick $2,250 (25.7%) but still $9,000 (81.8%) upside potential for a trade that is well over 100% in the money already.  

A great example of making huge money taking a very, very small risk.  

    • Sell 15 VALE 2026 $17 puts for $4 ($6,000) 
    • Buy 25 VALE 2026 $10 calls for $5.35 ($13,375) 
    • Sell 20 VALE 2026 $15 calls for $2.55 ($6,375) 

That’s net $1,000 on the $12,500 spread so we have $11,500 (1,150%) upside potential if VALE can make it up 0.07 to $15 in the next two years – that’s pretty conservative, right?  Of course we need $17 for the puts to expire worthless and the risk is owning 1,500 shares of VALE at $17 plus losing the $1,000 is net $17.66, which is 18.3% OVER the current price but we’re happy to double down on VALE if we’re wrong and we’ve left ourselves an opening to sell short calls along the way.  

The aggressive $17 puts are now $3.50 ($5,250) and the $10 calls are $6.30 ($15,750) and the $15 calls are $3 ($6,000) for a nice net $4,500, which is already up $3,500 (350%) and our Trade of the Year goal is to be up 300% so it’s a new record at 30-days!  Still a lot of room to grow too…

As to the other trades, as I said in the Alert: “See this morning’s post (PhilStockWorld 2024 Trade of the Year (Members Only)) for trade ideas on BBY, CROX, GLW, LEVI, MP and PARA but VALE is the winner of the group after a very intense selection process that began with our Watch List Review back in late September.” I’m not going to do the rest here as we’ve already done all of them above somewhere.  

Top Trade Alert – Dec 18, 2023 – Cleveland Cliffs (CLF)

    • Sell 15 CLF 2026 $17 puts for $3 ($4,500)
    • Buy 20 CLF 2026 $15 calls for $7 ($14,000)
    • Sell 20 CLF 2026 $20 calls for $4.60 ($9,200) 

That’s net $300 on the $10,000 spread so there’s $9,700 (3,230%) of upside potential if X is over $20 in 2 years. If they do get bought, the options will trigger early and that will make us very happy! If they don’t get bought, our break-even is $17.03 – 9% below the current price.

This one was simple logic where I said: “$14.1Bn is a 60% premium to Friday’s close which what an 80% gain since rumors about a buyout of X began in August so good luck to Japan justifying that purchase! This should also be good for CLF because they WON’T be buying X and most people think they were biting off more than they could chew with their original offer.” – that’s what a catalyst is.

As expected, they popped back up and the puts are down to $2.30 ($3,450) and the $15 calls are $8.55 ($17,100) and the $20 calls are $5.85 ($11,700) so net $1,950 is up $1,650 (550%) but there’s still $8,350 (506%) left to gain so great for a new trade as it’s already over our goal.  

And that (plus our 4 new Trade Ideas we started with) is that for 2023! We had 24 winners and 5 losers for a 82.7% winning percentage and, added to the first half’s 14 and 4 (77.7%), we’re at 38 wins and 9 losses – +80.8% for the year.  

Combine that kind of winning percentage with our very strong Risk/Reward strategy and it’s led to +$97,693 in winners less $29,068 in losses is a net gain of $68,625 for our 2nd half Top Trade Ideas (so far).

Looking forward to many more exciting trades and a very profitable 2024 with you!