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TIB: Today I Bought (and Sold) - An Investors Journal #505 - French Utility, Marijuana, Ride Sharing, Solar, US Healthcare, Pharmaceuticals, US Retail, Homebuilding, Europe, Technology, US Automotive, Agriculture, Crypto

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Mark Carrington
@carrinm
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Markets traded with earnings until the scale of the China virus outbreak became a little more clear. Trade action is mostly buying back stocks assigned the week before and some bottom fishing in marijuana and taking advantage of the pullback in healthcare. Big week of covered call writing

Portfolio News

Market Rally Weakens

China reported outbreak of corona virus in the week.

Markets ignored it for a few days and then started to take notice in Thursday and Friday trading. The talking heads are in a spin as this news comes right in the middle of a solid earnings season.

Bond markets are a lot more concerned with a 20 basis points drop in 10 year yields. The headlines show the shift in mood.

Bought

ENGIE SA (ENGI.PA): French Utility. Replaced stock assigned on last month covered call to continue writing.

Sunrun Inc (RUN): Solar Power. Replaced stock assigned on last month covered call.

Canopy Growth Corporation (WEED.TO): Canadian Marijuana. Replace stock assigned on last month covered call. New call written at 5.53% premium. I have made a number of marijuana trades. You may be wondering why? The charts shows classic break out and retest from a long running downtrend. Here is a sample chart.

Also, implied volatility is high which makes writing covered calls interesting.

Cronos Group Inc (CRON): Canadian Marijuana. Averaged down entry price and aiming to write covered calls (4.47% premium).

Aurora Cannabis Inc (ACB.TO): Canadian Marijuana. Averaged down entry price and aiming to write covered calls (6% premium)

Uber Technologies, Inc (UBER): Ride Sharing. Replace stock assigned on last month covered call. Was happy to buy back as this level was below the level I initially bought at. Also added into another portfolio to write covered calls.

CVS Health Corporation (CVS): US Healthcare. Jim Cramer idea to buy back into US healthcare on a down day occasioned by the corona virus outbreak. Will write covered calls on this.

Costco Wholesale Corporation (COST): US Retail. Jim Cramer idea to step back to quality names when pressure builds. I bought before he did. With the weakness at the end of the week, he was not keen to buy - waiting.

Lennar Corporation (LEN): US Homebuilding. Added to my holding on back of positive news on US home starts and levels of remortgaging.

Lyxor MSCI Eastern Europe ex Russia UCITS ETF (CECD.L): Eastern Europe. Deployed some profits from Europe into Eastern Europe to average down a holding.

Interactive Brokers Group, Inc (IBKR): US Brokerage. Averaging down entry price and looking to write covered calls.

Bristol-Myers Squibb Company (BMY): US Pharmaceuticals. Jim Cramer idea to buy on a week of pull backs as corona virus takes centre stage.

Sold

Starting to get 5% liquidity warnings in one portfolio - time to make a few sales to take off the pressure and to keep open the chances to buy bargains.

iShares Euro Dividend UCITS ETF (IDVY.L): Europe Index. 8% profit since April 2011. I have averaged down holdings in this stock over time - this is the most expensive tranche held. Not a great return for nearly 9 years of holding. Dividend yield is currently 4.82%

Microsoft Corporation (MSFT): US Technology. Sold entire holding for 32% profit since June 2019. Initial trade idea to enter was Jim Cramer idea. He is not selling yet.

NVIDIA Corporation (NVDA): US Semiconductors. Sold partial holding for 70% profit since May 2019.

Agricultural Commodities

The US-China trade deal was somewhat vague about which commodities would be included and what the timing was. Price action was clear that soybeans was not a winner but all grains fell in the immediate aftermath. I traded into wheat, corn and soybeans. The chart shows soybeans and the date of the trade deal signing - collapse right from then.

Chicago Wheat Futures (WEAT): Wheat. 2 contracts closed on trailed stop losses for $1.05 (0.19%) per contract profit.

Corn Futures (CORN): Corn. 4 contracts closed on profit targets and trailed stop losses for $5.13 (1.33%) per contract profit.

Soyabeans Futures (SOYB): Soybeans. One losing contract (-$639 for -4.47%) closed to release margin to trade wheat. Sadly the wheat profit did not recover the soybean loss. I remain exposed to 5 contracts = ouch. The cororna virus is not helping as market fears this will suppress demand. The chart above shows one limit trade on the way down and one reversal trade and a pending order on the current reversal

Shorts

General Motors Company (GM): US Automotive. Had been exercised a short position in GM on last expiries. Not keen to hold the short position as I have to pay away the 4.36% dividend yield. Initial idea was to sell a February 2020 strike 34 put option which locks in the buy back price better than breakeven and adds a 1.7% income premium. Next day I decided to close the short position for a 0.13% profit against breakeven. I just need price to stay above $34 until February expiry to keep the sold put premium.

SPDR S&P 500 ETF Trust (SPY): US Index. With price closing at $331.30, set up a 314/305 ratio put spread. This provides protection for a price drop up to 8.6%. Best protection comes if price drops between 5.5% and 8.6% - more than 8.6% brings risk in the trade.

Invesco QQQ Trust (QQQ): US Index. With price closing at $223.28, set up a 209/201 bear put spread. This provides protection for a price drop from 6.8% to 11.1%. I did not set this up as a ratio spread as I wanted to explore selling the 2nd part of the ratio if prices start to drop.

I put this trade up during the week and was just feeling the charts were a bit extended to make it a normal ratio spread. Encouraged to watch a CNBC Options Action segment saying just that. Carter Worth posted a daily chart with a 150 day moving average on it (green line).

He highligted the pull backs to the moving average - with price as extended as it is now, do not be surprised, he says. The size of the pull backs are around 10% each time - I just cloned one and placed it in a few places. So instinct was telling me that I might need a bit more cover. A quick look at the chart which shows the bought put (209) as a red ray and the sold put (201) as a red ray.

Note: this chart was made after the trade was set up - price was still moving up. The good news is the sold put is right on that moving average which is below the drop size of the blue arrow scenario. Expiry also comes along before that shape of drop is completed. The other good news is I have scope to sell a put at a lower strike and a higher premium and turn the trade into a cash neutral trade. The red arrow suggests where protection may be needed - possibly for March or April expiry.

Expiring Options

Naked Puts on VanEck Vectors Gold Miners ETF (GDX), and Cisco Systems (CSCO) expired out-the-money. Using weekly options cycles sometimes gives better returns.

Income Trades

A quick reminder on my process for writing Covered Calls.

  • Select stocks I am happy to sell if I get exercised.
  • Calculate coverage percentage move up in price from previous day close (5% for profitable stocks; 7.5% for technology and marijuana stocks; 10% for unprofitable stocks; 20% for leveraged stocks)
  • Choose a one month out call option closest to coverage move up in price.
  • Place a bid between bid and ask. Ideally one should aim for a premium of about 1% to make this worthwhile - this last month was above 1%

48 covered calls written in the week with average premium of 1.29% and coverage ratio of 8.62% bringing the average premium for February expries to 1.34% at 8.92% coverage (58 trades) - not accounting for two marijuana (excludes 2 marijuana trades)

Naked Puts written on VanEck Vectors Gold Miners ETF (GDX), Honeywell International Inc. (HON),

Cryptocurency

Bitcoin (BTCUSD): Price range for the week plus one day was $976 (10.6% of the high). Exuberance of trade deal sees price pushing above resistance at $8891 and then trades inside the width of that bar for 4 days before heading lower to test support at $8400. This is where the buyers were to be found with a strong move in two days to propel back past resistance at $8890.

2 contracts closed for $78.42 (0.92%) per contract profit.

Ethereum (ETHUSD): Price range for the week plus one day was $22 (12.4% of the high). Price fails to clear resistance at $177 and pushes back into no-mans land making a lower high and higher low in the process (i.e., feels like a triangle forming)

3 contracts closed for $2.46 (1.50%) per contract profit.

Ripple (XRPUSD): Price range for the week was $0.03760 (15% of the high). Price action looks like ETH pushing away from resistance and then reversing well above support. Cannot say this is a higher low as the prior reversal high has not been breached.

1 contract closed for $0.004 (1.80%) per contract profit.

CryptoBots

Profit Trailer Bot No closed trades

New Trading Bot Trading out using Crypto Prophecy. No closed trades

Currency Trades

Outsourced MAM account Actions to Wealth closed out 27 trades on AUDNZD, UK100, EURUSD, XAUUSD, AUDCAD, WTI, CHFJPY for 0.09% profits for the week. Trades open on EURUSD, CADCHF, USDCAD (0.09% negative). a lot of work in the week for little return. With oil prices falling, these open trades are not likely to end well.

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

Corona virus Image by Gerd Altmann from Pixabay

Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers

Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices

Bitcoin: Get started with mining Bitcoin for as little as $25 http://mymark.mx/Galaxy

January 20-26, 2020

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