SPY/Winston – Well, if you have $1M in SPY you want a $100,000 hedge against a $200,000 drop (20%). Your SDS Sept $23/30 spread at $1.10 is at the money and SDS is a 2x hedge so a 20% drop in SPY would be a 40% gain in SDS to $32 – so good logic there. To get $100,000 ($200,000 would be way over-hedged) you need 150ish of the spreads for $16,500 and that would pay $105,000 back and likely around $50,000 on a 10% drop. I guess you could go for 200 at $22,000 but the question is – do you feel your SPY will gain 10% and that the chance of gaining 10% on SPY is as good or better than losing 10% or else – why be in the trade at all?
SSD is the ultra-long SPY and it's at $85 and you can buy the Sept $80 ($10)/85 ($7) bull call spread for $3 so $300,000 pays back $500,000 ($200,000 profit) if the S&P simply stays flat and you can pull the plug with a $150,000 loss and buy 100 of the SDS hedges for $11,000 and they would pay $70,000 if the S&P does drop on you and now you've only tied up $311,000 and you have $689,000 to play with with essentially the same upside.
Since you are not likely to lose more than $80,000 on a 20% drop in SPY, you'd still have $920,000 left to invest when stocks are 20% cheaper than they are now and you can start by selling some puts in things you REALLY want to buy if the market does drop like BA 2022 $250 puts, which are still $16 so, if you are willing to commit to $125,000 of BA, then you can collect $8,000 for 5 short puts.
AAPL is a bit high but, like BA, you can sell the 2022 $250 puts for $16.65.
Do that with 10 stocks and there's another $80,000 in your pocket and you'll be up $280,000 if SPY goes higher with far, far less risk than keeping all that money in SPY.
SKT is $13.35 and you can sell the 2022 $13 calls for $1.80 and the 2022 $13 puts for $3.10 so that's net $8.45/10.725 if assigned so either you own 2x the shares at $10.725 (and then sell more puts and calls to lower the basis) or you get called away at $13 with a $4.55 profit (53.8%) and they pay a $1.43 dividend while you wait, which is 17% of $8.45 and would increase the overall profit by $2.51 (you missed the first payment) so $7.06 profit potential is 83.5% at $13!
Let's add 2,000 to the LTP!
| Year End 31st Dec | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | 2020E | 2021E | CAGR / Avg |
|---|---|---|---|---|---|---|---|---|---|
|
$m
|
419 | 439 | 466 | 488 | 495 | 478 | 433 | 426 | 2.71% |
|
$m
|
119 | 144 | 151 | 125 | 109 | 106 | -2.26% | ||
|
$m
|
74.0 | 223 | 204 | 68.0 | 43.7 | 87.9 | 59.4 | 53.4 | 3.49% |
|
$
|
0.769 | 2.32 | 2.12 | 0.707 | 0.455 | 0.932 | 3.93% | ||
|
$
|
0.854 | 1.05 | 2.06 | 1.02 | 0.988 | 0.870 | 0.660 | 0.597 | 0.363% |
|
%
|
-25.2 | +23.2 | +95.7 | -50.7 | -2.73 | -12.0 | -24.1 | -9.55 | |
|
x
|
15.4 | 20.3 | 22.4 | ||||||
|
|
|||||||||
Current market cap is $1.2Bn – I like them down here.
I'm very surprised that we haven't played SKT as a Top Trade in this cycle so it's going to be today. Last time they were a Top Trade was August of last year at $14 when we rolled and added to our original entry of $15.37.
Breakdowns/Yodi – Stockopedia.
xxx
