TIB: Today I Bought (and Sold) - An Investors Journal #582 - Banks, Uranium, Airlines, Utilities, Retail, Nasdaq, US Telecom, Solar + more

Rising interest rates and oil prices took a slice of covered calls to assignment locking in profits and releasing cash. Some of the cash was applied to a few naked puts that went to assignment too. Otherwise it was a quiet trading week staying away from trouble

This report covers all trades across the portfolios during the week but only pension portfolio expiries. I will do the others in the follow up report.

Portfolio News

In a week where S&P 500 dropped 5.75%, my pension portfolio dropped only 3.48%. Biggest drags were US stocks (especially solar) and Japan. Hedging trades in gold and silver did their work with de Grey Mining (DEG.AX) the biggest plus stock up 8.5% (holding is large)

The market has become very nervous about inflation and the chance the Federal Reserve over-reacts. Growing covid cases is not helping the nerves.

Over the years we have seen that the Federal Reserve does not make the same mistake twice, all other things being equal. The difference this time is they have a massive balance sheet which they are quite keen to trim - my guess is this is where the mistake will lie.

Big movers of the week were 88 Energy (88E.AX) (+44.8%), Yooma Wellness (YOOM.CN) (+30%), ProShares UltraPro Short QQQ (SQQQ) (+24.7%), Honey Badger Silver (TUF.V) (+21.4%), Starr Peak Mining (STE.V) (+13.6%) Direxion Daily MSCI Real Estate Bear 3X Shares (DRV) (+11.7%), Cue Energy (CUE.AX) (+11.6%).

The hedge trades and rising oil did their work

Crypto busts

Bitcoin price drifted sideways for a few days and then fell over when US markets fell over finishing the week 16% lower than the open. The peak to trough drop was bigger than a normal week move but the overall is not really out of normal range.

All coins followed with most making much bigger falls - example Cardano (ADA) was falling all week dropping 43%

Biggest peak to trough move in my portfolios goes to Galaxy (GALA) down 50%

Bought

ING Groep (INGA.AS): Dutch Bank. Used a down day to replace stock likely to be assigned on covered call at 5.5% premium to assigned price. Wrote a February covered call for 1% premium with 6% price coverage.

Cameco Corporation (CCJ): Uranium. With price opening at $21.82 and trading lower, I rolled out a January 2022 strike 22 call option to February strike 23 to save some premium. This contract was part of 22/27/18 call spread risk reversal on which the sold put has already expired. Normally, I would just let this run to expiry as the trade was fully funded by the sold put. The sold call will expire worthless which will leave me with a February expiry strike 23 call option with a net premium of $0.86 - hard to see price moving enough to cover that. I will set up a short straddle to reduce the net premium.

[Means: Short Straddle: Sell both a call and a put out-the-money - i.e., above and below the current price]

Price traded another 5.8% lower in Friday trade to close at $20.16. I clawed back $0.57 of the net premium by selling a February strike 19 put option for 3% of strike premium and 6% price coverage (less now after the price drop from the open).

ABN AMRO Bank N.V. (ABN.AS): Dutch Bank. Used a down day to replace stock likely to be assigned on covered call at 9.4% premium to assigned price. Wrote a February covered call for 1.7% premium with 5.5% price coverage.

Air France KLM (AF.PA): Europe Airline. Doubled my position to average down in one portfolio. Position size is still small - next trade I will double down again.

Centrica plc (CNA.L): Europe Utility. Used a down day to replace stock likely to be assigned on covered call at 1.3% premium to assigned price. Price did finish the day 0.4% higher than my entry

Next few trades are naked puts assigned on expiry

iShares Russell 2000 ETF (IWM): US Small Cap Index. Assigned on naked put at 2.5% premium to $196.99 closing price. This trade is at breakeven but will need protection as trade size is larger than I normally do.

SPDR S&P Regional Banking ETF (KRE): US Regional Banks. Assigned on naked put at 4% premium to $71.61 closing price. I put this naked put in place as I was expecting Huntington Bancshares to go to assignment on a covered call - it did not.

Loop Industries, Inc (LOOP): Specialty Chemicals. Assigned on naked put at 15% premium to $8.66 closing price.

Maxeon Solar Technologies, Ltd (MAXN): Solar Power. Assigned on naked put at 16.7% premium to $10.71 closing price.

Invesco Solar ETF (TAN): Solar Power. 25% Assigned on naked put at 25% premium to $63.74 closing price. This is part of a January 2023 90/125/80 call spread risk reversal from which the net premium is fully funded and breakeven on this leg will be $78.53

A look at the chart shows the dramatic falloff just when things were starting to head in the right direction. The timing for the turnaround is when Democrats failed to agree the Infrastructure Bill in Congress - solar clearly was dependent on the handouts. I will remain invested for the long haul and will find ways to protect this new long position. I am hoping the other sold put (60) holds - it did in Monday trade.

https://www.nbcnews.com/politics/congress/democratic-infighting-leaves-party-leaders-wrangling-support-infrastructure-bill-n1280560

Sold

The Home Depot, Inc (HD): US Retail. Sold part of holdings to raise cash and locked in 32% blended profit since December 2019/September 2021. Original idea was a Jim Cramer idea.

Wells Fargo & Company (WFC): US Bank. I am a bit short of cash in one portfolio. With price closing at $55, I closed out the bought leg of a 52.5/60 bull call spread set up in October 2019 for a small profit assuming the sold leg (60 expires worthless). Thinking about interest rates, this was not a good trade action. I would have been better off selling something else to raise the cash. The new position in KRE does make up for this as position size is a little bigger.

Dawson Geophysical (DWSN): Oil Services. Tendered small holding following the merger offers from Wilks Brothers LLC. I have been holding off looking to see if a better offer arrives. The terms of the tender offer are not pretty if one lands up with a minority shareholding in the remaining business. Locks in 71% blended loss since December 2016/March 2017 - the last oil price heydays. The trade rationale is set out in TIB7 - breakout trade in oil services. . This shows the value of writing a journal and publishing - too bad the images are gone. I will have them backed up - might dig them out to see.

Follows is the list of covered calls assigned - mostly banks riding higher interest rates

UBS Group (UBSG.SW): Swiss Bank. Assigned on covered call for 17.8% blended profit since January 2016/January/December 2021

ABN AMRO Bank N.V. (ABN.AS): Dutch Bank. Assigned on covered call for 5.3% profit September/October/November 2021.

Credit Agricole (ACA.PA): French Bank. Assigned on covered call for 1.4% loss since October 2021.

Banco Bilbao Vizcaya Argentaria, S.A (BBVA.MC): Spanish Bank. Assigned on covered call for 5.7% loss early 2018/November 2020/January 2021. Averaging down helped reduce the size of the loss

Commerzbank AG (CBK.DE): Assigned on covered call for 5.8% profit since November 2021

HSBC Holdings (HSBA.L): Global Bank. Assigned on covered call for 6.4% profit since October 2021

**ING Groep (INGA.AS): Dutch Bank. Assigned on covered call for 2.4% profit since October 2021

Wells Fargo & Co (WFC): Assigned on covered call for 14% profit since September 2021

Carrefour SA (CA.PA): French Supermarket. Assigned on covered call for 1.8% profit since August 2021.

Centrica plc (CNA.L): Europe Utility. Assigned on covered call for 6.5% profit since November 2021.

Alerian MLP ETF (AMLP): US Oil. Assigned on covered call for 1.6% profit since November 2021

Baker Hughes Company (BKR): Oil Services. Assigned on covered call for 2.8% profit since October 2021

Unum Group (UNM): Health Insurance. Assigned on covered call for 3% loss since November 2021

Shorts

Invesco QQQ Trust (QQQ): Nasdaq Index. With price trading down to $361.72, I closed out the 370/353 ratio put spread. While price is 2.4% above the sold put strike, I am not totally convinced that we will not see a drop that big in Friday trade. After all price did drop 2% in the last hour of Thursday trade. With a negative net premium of $0.11, this turned into a hugely profitable trade recovering total premium of $6.63 per contract. The fact that there were profits on both legs suggests to me the market did not think price would drop another 2.4% in one day.

Market was wrong as price closed below $353 - I got that one right.

Expiring Options

The next few updates cover call spread risk reversals that had different outcomes.

Chevron Corporation (CVX): US Oil. With price closing at $126.91, 110/125 bull call spread expired in-the-money with a 13% profit on stock leg. This spread was partly funded by selling naked puts (twice) with the overall trade returning a 6,000% profit on the $0.25 net premium

A look at the chart shows a trade that was not looking pretty for the entire front half of the trade and only stepped into profit in the last week. The level of the sold put (100) was correct below the consolidation but it also highlights the risk of writing naked puts - there was a one month period where the holder of the put contract could have sought exercise.

iShares Biotechnology ETF (IBB): Biotechnology. With price closing at $128.68 155/175 bull call spread expired worthless. This was fully funded by strike 140 put option which expired in December.

A look at the chart suggests a story of lost opportunity. Price did reach sold call (175) twice. That was the time to close the trade or roll out to a higher sold call. Why the drop-off? I am going to guess declining efficacy on the covid vaccines - people were still getting covid. The chart also shows the value of selling a put option at a strike below recent lows (140) and for a shorter duration than the call spread.

Biggest lesson is the trade idea came from a trade signal service which is really short term focused based on technical factors - look for trades maybe 3 months out is the lesson. My trade set up was possibly too far out.

Delta Air Lines, Inc (DAL): US Airline. With price closing at $37.86, 50/57.5 bull call spread risk reversal expired worthless. This spread was fully funded by a sold put (46) which was assigned in September.

A look at the chart shows a trade idea that never wanted to work. Not once did we see the arrowed price scenarios playing out. The reopening trade just did not flow with any momentum and underperformed S&P500 by 24 percentage points - we might have to wait for Summer 2022 for this one to come home. Profits on income trades to date are greater than capital loss if the shares were sold today.

iShares Silver Trust (SLV): Silver. With price closing at $22.38, 25/30 bull call spread risk reversal expired worthless. This spread was partly funded by a sold put (20) which expired in July. I have written one more naked put on Silver since then to get close to fully funded.

A look at the chart shows price not keen to hold above the bought call level (25) for very long but comfortable to hold above sold put level (20). The intervening sold put was around the 22 strike level. As I use Silver for hedging purposes, I will review the whole portfolio's silver and silver mining holdings to explore whether to replace this trade - it looks like it wants to break up (two level lows and a higher high off support).

Cryptocurrency

Stayed out all week.

Income Trades

Was a slightly lower activity month in income trades in my income portfolio with 63 covered calls written of which 13 went to assignment (number in brackets) (UK 2 (2), US 47 (4), Europe 14 (7 plus one bought back)) and 13 naked puts of which 4 went to assignment (US 12 (4), Europe 1). It was a smart move to reduce naked put exposure this month

Covered Calls

Deutsche Bank AG (DBK.DE): German Bank. Bought back covered call as I want to hold the stock. Made a 20% profit though trading costs ate most of that. Wrote a February covered call for 1.2% premium with 10% price coverage.

Naked Puts

AT&T Inc (T): US Telecom. With price opening at $27.28 and trading lower, I bought back a January strike 28 put option as I did not want to buy the stock. This leg was part of a January 2023 35/40/28 call spread risk reversal. This trade changes the net premium from fully funded to $0.11. I must say I am not confident the call spread will ever make it but I can squeeze ou the positive net premium by selling another naked put, well out-the-money.

Currency Trades

Australian Dollars (AUDUSD). Sold US Dollars to fund home expenses - was a good down day to do that.

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

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January 17-21, 2022

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