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TIB: Today I Bought (and Sold) - An Investors Journal #583 - Travel Services, US Industrials, Nasdaq Index, Europe Financials + Retail + Chemicals, US Oil, Oil Services, Copper Mining

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Update in my other portfolios of trades coming about with options expiry and some strong lessons on the use of call spread risk reversals and trade management of bull call spreads.

In the coming weeks I am starting a new options training program with OptionsAnimal to improve three areas

  1. Risk capital management
  2. Fixing problem trades
  3. Protecting and profiting in down markets.

This portfolio dropped 5.25% compared to drop of 5.75% in S&P500 with the biggest drags Canadian marijuana stock Aurora Cannabis (ACB.TO) down 19% and Applied Materials (AMAT) down 19% and US Steel (X) down 24%. This portfolio is not as well hedged in gold and silver as the other portfolio.

Airbnb, Inc (ABNB): Travel Services. With price closing at $156.73, exercised on bought leg of 150/200/135 call spread risk reversal. Breakeven on the trade is $153.49 - so marginally profitable at this point. This trade marginally reduces my average price and with the covered call written this month, is at $149.62 for breakeven.

A look at the chart shows there was opportunity to exit the trade above the sold call (200) not long after the sold put (135) expired. That is a good example of eye off the ball trade management, especially as the sold put was already out of the way. With price now below breakeven this is gong to be a bit of road back very dependent on the reopening trade and the Federal Reserve not triggering a recession.

General Electric Company (GE): US Industrial. With price closing at $96.30, exercised on bought leg of a 96/160 call spread which expired in the money literally by $0.30. This trade is a little complicated as there was a 1 for 8 reverse split between trade time in January 2020 and expiry. The odd lot was cash settled. I did write two naked puts against this trade which made the trade cash neutral - i.e., a breakeven of $95.95. Earnings reaction in Tuesday trade suggests a bit a drag to make that. Trade parcel is only 12 shares.

In TIB501, I wrote "The chart shows a sad tale of trying to catch the bottom - just failed for the January 2020 expiries". This trade was predicated on new CEO, Larry Culp making a difference. The chart shows that he was making progress and then fell over in the Covid-19 sell off and was just back level again 12 months later. Time to stay away from GE as it is pretty clear that price is never going back to the 2017 highs or even the 2018 highs. I do not think I will be rounding out the holding by 88 shares to write covered calls.

Global X NASDAQ 100 Covered Call ETF (QYLD): Nasdaq Index. Assigned on naked put at 0.3% premium to $20.43 closing price - a whisker. I am testing out this ETF which writes covered calls on Nasdaq stocks. Not sure I will keep up writing naked puts.

Assigned on a bunch of covered calls mostly European financials. I will replace some of these as they do rise with rising interest rates.

ABN AMRO Bank N.V. (ABN.AS): Dutch Bank. Assigned on covered call for 5.4% profit since October/November 2021

AXA SA (CS.PA): French Insurer. Assigned on covered call for 8.3% profit since December 2021

Deutsche Bank AG (DBK.DE): German Bank. Assigned on covered call for 0.7% profit since October 2021.

BASF SE (BAS.DE): Europe Chemicals. Assigned on covered call for 2% loss since June 2021/January 2022. Averaging down to cover mistake covered call helped reduce the loss.

Carrefour SA (CA.PA): French Supermarket. Assigned on covered call for 1.2% blended profit since August/October 2021

Alerian MLP ETF (AMLP): US Oil Assigned on covered call for 5.8% loss since June 2021

Baker Hughes Company (BKR): Oil Services. Assigned on covered call for 2.5% profit since October 2021.

NOV Inc (NOV): Oil Services. Assigned on covered call for 1.4% profit since October 2021

Global X Copper Miners ETF (COPX): Copper Mining. Assigned on covered call for 5.4% profit since October 2021

Yamana Gold Inc (AUY): Gold Mining. With price closing at $4.21, 5/7 bull call spread expired worthless. This trade was set up in April 2020 looking for a price continuation which is what played out with price just touching the sold call level (7) and then falling away

I use Yamana Gold as a hedging trade with long position in the stock supporting income trades. As I look at the chart I see the potential for another breakout trade forming similar to the break we saw from mid 2019.

Citigroup Inc (C): US Bank. With price closing at $63.27, 70/80 bull call spread expired worthless. This spread set up in July 2021 was partly funded by a sold put (62.5) which expired in November.

A look at the chart shows a trade that started out right and then traded sideways and fell over about the time the Infrastructure Bill was killed. The fall began when they announced a new CEO, Jane Fraser, who started in the new role in February when news flow goes to a better price story. Rising rate environment might work for Citigroup, but they do need to fix their investment banking businesses

The next chart shows that Citigroup has dragged behind the Wall Street giants other than JP Morgan (JPM) and State Street (STT). I remain invested in the stock and will keep writing covered calls until I get taken out.

Cronos Group Inc (CRON): Canadian Marijuana. With price closing at $3.43, 8/12 bull call spread expired worthless. The chart going back to January 2020 trade set up shows the worst case of trade management failure

Trade set up is textbook - break the downtrend and pick a target less than half way to prior highs. Exit should have been when the sold call (12) is breached or at least start protecting the downside with a rollup strategy. As I am long the stock, there is scope to look for the next breakout setting up - not yet.

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. Details of this trade can be seen in TIB582.

Alphabet Inc (GOOGL): Internet Services. With price closing at $2,607.03, 1000 strike naked put expired - nice big profit there from November 2019.

Look at the chart shows a better way to manage a profitable call spread - take the exit when price closes above the sold call level (1400). The less clever part is running exposed to buying 100 shares at $1,000 a share for two years. Profits from the naked put expiry account for 60% of profits made on Alphabet in that time. I have written a few more along the way.

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. Details of this trade can be seen in TIB582.

AT&T Inc (T): US Telecom. With price closing at $26.61 40/47 bull call spread expired worthless. This trade was a rolling up in November 2019 of profitable trades looking for momentum to continue.

A look at the chart shows that momentum stalled with the Covid-19 selloff. AT&T was then caught out with the success of competing TV streaming businesses which they have never been able to catch up. I remain exposed to the stock and will use covered calls to find an exit.

IN TIB582, details of the naked put exit in my other portfolio. I did not want to buy the stock at $28. Chart tells the story.

iShares MSCI Turkey ETF (TUR): Turkey Index. With price closing at $20.00 24/30 bull call spread expired worthless. This trade was set up in March 2021 as a 24/30/20 call spread risk reversal with the sold put (20) expiring worthless in November. I wrote in TIB530, that I could not see the stock dropping 38% by November. I got that right.

As the call spread was fully funded, I just let it run to expiry as there was not really an opportunity to recover some premium from the call spread. The chart does show the value of writing naked puts with shorter expiry than the call spread.

United States Steel Corporation (X): US Steel. With price closing at $19.25 24/32 bull call spread expired worthless. This was fully funded by 22 strike put which expired in October and another in December.

A look at the chart shows price only getting halfway to target and then falling over when the Infrastructure Bill failed. I remain exposed to the stock with average cost at $24.17 (blue arrow). This needs the infrastructure bill passing in some form.

37 covered calls written of which 10 were assigned (in brackets) (US 30 (4) Europe 7 (6)) and 5 naked puts (all US) of which one was assigned.

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

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January 21, 2022

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