TIB - An Investors Journal #610 - Banks, UK Utility, Europe Airline, Payment Services, US Pharmaceuticals, US Utilities
After the big sell off in the previous week, I chose to stay quiet in the markets. I am actively looking to preserve capital. Was good to see a market recovery of sorts.
Portfolio News
In a week where S&P 500 rose 6.6% to bounce off the bear market lows, my pension portfolio rose only 1.45%. The big drags were De Grey Mining (DEG.AX), other Australian resource stocks, Japan, and shipping stocks
Big movers of the week were Providence Resources (PVR.L) (+25%), Fiverr International (FVRR) (+18.6%), Aurora Cannabis (ACB.TO) (+17.5%), Jyske Bank (JYSK.CO) (+15.9%), Stem Inc (STEM) (+15.1%), Adyen (ADYEN.AS) (+13.9%), Nordic American Tankers (NAT) (+13.2%), Tilray Brands (TLRY) (+12.8%), Cronos Group (CRON) (+12.7%), Starr Peak Mining (STE.V) (+12.3%), Canopy Growth Corp (WEED.TO) (+11.7%), Robinhood Markets (HOOD) (11.3%), Dutch Bros (BROS) (+10.6%), Sankyo Kasei Corp(8138.T) (+10.4%), ChargePoint Holdings (CHPT) (+10.2%)
Hard to pin down why cannabis stocks moved up across the board. Congress did move the SAFE Banking Act out of the China Competition Act with a view to combining it with other social justice acts. This may improve the chances of the Act getting through the Senate. The Act is key to providing access to US cannabis producers to the financial systems. I have my doubts in the week Roe Vs Wade got overturned by the conservatives.
https://www.ganjapreneur.com/safe-banking-act-removed-from-china-competition-bill/
The headlines were a mix of relief and recession fear - there is more down to come seems clear. Wait until earnings season in a few weeks.
Providence Resources (PVR.L): Irish Oil. Providence completed a bookbuild to finance the next stage of development of its oil fields - this has been a drag in my portfolios for years.
Robinhood Markets (HOOD): Financial Markets. Two items of news driving price - Senate committee hearings talking about the Gameshop (GME) debacle and the possibility of a takeover by crypto exchange, FTX
https://www.msn.com/en-us/money/companies/crypto-exchange-ftx-is-reportedly-looking-into-buying-robinhood/ar-AAYVSxq
Crypto drifts
Bitcoin price stabilised with a peak to trough range of only 8.5% with price ending the week pretty well unchanged
Biggest holding in my portfolios is HIVE which surged 73% as I was writing this - pump or value is yet unknown.
Big pump also in Polygon (MATIC) with trough to peak move of 93% - even more against BTC
Bought
ABN AMRO Bank N.V. (ABN.AS): Dutch Bank. Replaced stock force sold at 6.4% premium to forced sale price - this gets my goat. Trigger a loss when they make the sale and get a buy back price higher for a trade that could have been done differently (see TIB 608 for the rant). Wrote covered call at 1.6% premium with 8.4% price coverage.
Centrica plc (CNA.L): UK Utility. Topped up holding after forced sale at 1.3% premium to forced sale price. Wrote covered call at 1.6% premium with 6% price coverage.
Air France-KLM SA (AF.PA): Europe Airline. Price was hammered when Air France announced a deeply discounted subscription offer which was not open to shareholders in many jurisdictions, including Australia. I averaged down entry price in the small managed portfolio to claw back some capital selling covered calls. Wrote covered call for 3% premium with 5.8% price coverage.
ChargePoint Holdings (CHPT): Electric Vehicles. AAPlus added to their holdings. Rather than replace stock assigned last week, I set up a 13/11 credit spread offering an ROI of 24% and 10.32% price coverage.
Citigroup Inc (C): US Bank. US Banking stocks have slid on the recession fears despite the rising interest rates. I added a 45/43 credit spread to my under water stock holding at 21% ROI with 6.6% price coverage.
Adyen N.V (ADYEN.AS): Payment Services. Adyen has been hammered in the recession fear. My stock holding is well under water but the charts shows price bouncing off the 52 week lows - I set up a 1150/1050 credit spread below those lows. This offers a modest 19% ROI 8.7% price coverage. Price has since marched ahead strongly.
Chart shows the sorry story of the investment with stock bought and a few call spreads. The new trade is below the lows - that claws some back if price keeps where it is.
Europe Banks Added new credit spreads on Commerzbank (CBK.DE), Credit Agricole (ACA.PA), ABN Amro Bank (ABN.AS).
Sold
Pfizer (PFE): US Pharmaceuticals. Short position covered by broker for 9.4% profit on the short itself. Trade came about with a 52.5 calendar put spread set up in March. The sold puts recovered only 58% of the bought premium reducing overall profit to 7.4%. Next time, I will run a longer calendar to get more time to recover the bought put premium.
Quick look at the chart shows price in a consolidation zone just below $55. Of note is the cycle highs and lows are progressively lower. There is certainly scope to put in another calendar put to test another leg lower - the longer terms trade has not yet been tested.
Shorts
Utilities Select Sector SPDR Fund (XLU): US Utilities. With price opening at $64.58 (Jun 21), the short position I have held since September 2021, has finally swung into profit. My sense is this could drop a bit further. I rolled down and out the 70 strike short put to a 64 strike so that I do not get exercised at $70. As things transpired during the week, that opening price was the lowest of the week.
The chart shows the sold put below the reversal. As I am short the stock with a breakeven around $65, it looks like I could well be selling more covering puts in the coming months. The trade idea of the short is rising yields put utility stocks under pressure as they are essentially yield plays. Rising costs do too. I have added in S&P500 on the chart (blue line). Utility stocks do provide a bit of a hedge in down markets - they do not fall as much.
Income Trades
Next cycle of income trades begins - In managed portfolios 53 covered calls written (Europe 12 UK 4 US 27) and 64 in pension portfolio (Europe 15 US 46 UK 3). Fewer credit spreads again this month with only 9 new trades (Europe 6 US 3). Only 3 new sold puts (all US) two of which will be hedged this week.
Sold Puts and Credit Spreads
Updated report for new sold put exposure = a lot healthier than the week before with modest exercise risk
Resources
Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas
Images: I own the rights to use and edit the Buy Sell image. News headlines come from Google Search. All other images are created using my various trading and charting platforms. They are all my own work
Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers. Crypto tickers come from TradingView
Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices
Investing: Interactive Brokers provides comprehensive global markets coverage with very competitive commissions. Open an account to earn up to USD 1,000 in IBKR stock. https://mclnks.com/ibkr
Crypto Trading: Binance offers a wide range of coins to trade, tight spreads and low fees if you use BNB to pay https://mymark.mx/Binance
Kucoin offers a wider range of altcoins than many of the other exchanges. I do like to diversify my holdings in case an exchange gets knocked over. Grab 15% discount on your trades whn you open an account on this link https://mclnks.com/kucoin15
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June 20-24, 2022
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