Energy was the story of the week both in oil and in alternate sources. Some profits taken by mistake and by choice. Itching for the reddit crowd to get more widely into alternate energy.
Portfolio News
In a week where S&P 500 rose 0.4% to touch an all time high, my pension portfolio rose 1.03% driven by strong moves in solar power, shipping and marijuana stocks.
I love the difference in headline writing style - climbs to record vs ekes out record gives quite a different message.
Big movers of the week were Star Bulk Carriers (SBLK) (+19.4%), Safe Bulkers (SB) (+18.2%), Maxeon Solar (MAXN) (+17.1%), Jinko Solar (JKS) (+14.1%), Sunpower (SPWR) (+13.4%), Navios Maritime (NM) (+12.8%)
The big news event is the G7 Summit in Cornwall UK over the weekend. This headline from BBC News grabbed me.
The G7 declaration will spell out a series of concrete steps, including:
- Slashing the time taken to develop and licence vaccines, treatments and diagnostics for any future disease to under 100 days
- Reinforcing global surveillance networks and genomic sequencing capacity
- Support for reforming and strengthening the World Health Organization (WHO)
The first bullet point is a gem - refer to my sale of Eli Lily (LLY) below - somehow Joe Biden is going to have to put a rocket up the US FDA in the same way Donald Trump did for Operation Warp Speed.
https://www.bbc.com/news/uk-57450585
Crypto booms
Bitcoin price pushed lower early in the week down 15% and finishing the week 9.3% higher than the open. The week's low was almost exactly the same as the week before.
Over the last few weeks (months) Ethereum (ETH) has performed better than Bitcoin - not this week with price dropping 9% against USD and 16% against Bitcoin.
Bought
Cameco Corporation (CCJ): Uranium. After reviewing the performance of Paladin Energy (PDN.AX) in TIB541, I decided to add a producing uranium mine to the portfolio and bought a parcel of stock. Dividend yield 0.30%. With trade price of $21.65, I also added a January 2023 22/30 bull call spread. With a net premium of $2.18 this offers a maximum profit potential of 266% for a 39% move in price.
Let's look at the chart which shows the bought call (22) and 100% profit as blue rays and the sold call (30) as a red ray with the expiry date the dotted green line on the right margin. The green trend lines come from earlier trades - I should really have been onto this idea a lot earlier. It looks like the trade may have run away.
Going back in to the run after the GFC shows a huge run - a repeat of that and this trade will win. Now I am thinking that the world is going to have to use more nuclear power as the anti-coal lobby grows. Both Russia and China are increasing nuclear power with India not far behind.
Wrote June expiry covered call for a 2.6% premium with 1.6% coverage - this is a bit tight but it does make for a nice dividend given the low dividend yield.
Next day I added a call spread risk reversal with closer in expiry. I bought a January 2022 22/27/18 call spread risk reversal. With a net premium of $1.45 this offers a maximum profit potential of 244% for a 25% move in price and one year less to run. The sold put (18) with October 2021 expiry funds the entire premium. I will not be unhappy buying the stock at $18 if I have to.
First Solar (FSLR): Solar Power. Opened a new position in one portfolio to match the one made last week in another. Wrote June expiry covered call for a 0.9% premium with 5.4% coverage
JinkoSolar Holding Co (JKS): Solar Power. Replaced stock that is likely to be assigned on a 40 strike covered call at 1.3% premium. I have a feeling that we are seeing the next drive up in solar stocks. Wrote June expiry covered call for a 1.7% premium with 11% coverage
Solar stocks have been on the move again - quick update on Invesco Solar ETF (TAN) trades by chart.
Closing price of $79.82 is now above the lower bought call (75) strike and just below the other sold put (80) strike. It is hard to say that price has reversed but it seems safe enough given how individual solar stocks have moved.
Weatherford International plc (WFRD): Oil Services. I wrote in TIB541 about the relisting of Weatherford and the bounce in oil services stocks. The price of call warrants that I received in the bankruptcy has moved ahead steadily - I was looking to buy some more to get a marketable parcel BUT did not have the right trading permissions. Instead I bought a parcel of stock. Nice to see a 6% pop on day one. Next day, I did work out he trading permissions - needed to allow penny stock buying. Got a partial fill on a parcel - still below the minimum.
Valaris Limited (VAL): Oil Drilling. I was able to round up my holding of call warrants also received in bankruptcy proceedings. The aim will be to recover some of the losses on the back of rising oil prices and then dump a now marketable parcel
BASF SE (BAS.DE): Europe Chemicals. I have some BASF calls due to expire in December 2021 - that got me looking at the charts. Price has hit a consolidation zone and is reaching down to the bottom of the channel. I figure that with GDP growing around the world, this might be the base from which price will jump. rather than buy more options I bought a parcel of stock with which to write covered calls. Covered call premium for July expiry was 1% with 4.2% coverage - a bit less than I like.
Quick update on the chart shows how sad the options trade is - tariff action and the pandemic nuked it and I have been slow to look at the turn around.
iShares MSCI Indonesia (EIDO): Indonesia Index. Added a small position to another portfolio looking to ride on rising oil prices.
Linde plc (LIN): Specialty Chemicals. Rounded up my holding in one portfolio to be able to sell covered calls. Jim Cramer idea to add - of note is this is also a hydrogen play (not mentioned by Jim Cramer). Covered call premium for July expiry was only 0.5% with 6% coverage - I will lever this up by selling June and July naked puts.
Nordic American Tankers Limited (NAT): Oil Shipping. Looks like I will be assigned on a covered call in Capital partners (CPLP), a competitor. With rising oil prices, I am keen to stay invested in oil shipping so I doubled position in one portfolio to average down early entry prices. This is a second averaging down. Wrote July covered call on the whole position for 1.47% premium with 13% price coverage. I am hoping price moves less than this for the next month as exercise would be just breakeven accounting for this premium. I may well average down again.
Union Pacific Corporation (UNP): US Railways. Added to position in one portfolio. Jim Cramer idea to add as management announced an accelerated share purchase program. Initial trade idea is to ride the pandemic traffic recovery (see TIB527 for the initial rationale)
Sold
The Estée Lauder Companies Inc (EL): US Consumer Goods. Jim Cramer sent out a signal to take profits on Eli Lily (ELY) ahead of the FDA announcement on Biogen's Alzheimer drug decision in case the decision went the wrong way. I sold half my holding in EL rather than in LLY for a 3.1% profit since May 2021. Not every time does a trading mistake work out well - Ely Lily share price jumped 10% when the FDA approved Biogen's drug.
Royal Mail plc (RMG.L): UK Postal Service. Price reached a long set price target for a 30% profit since July 2018. In TIB272, I set out the rationale that increased parcel delivery from Amazon would replace profits lost on letter delivery.
That did not work out as the China Tariffs trade war came along and disrupted trade which was reinforced by the pandemic. The recovery since the pandemic has been stellar - my price target was to reach the previous high. It did.
Eli Lilly and Company (LLY): US Pharmaceuticals. Jim Cramer made the call to exit despite the price surge after Biogen's Alzheimer drug was approved.
The approval was not unanimous and the dissenter wrote this
FDA is not "presently capable of adequately integrating the Committee's scientific recommendations into its approval decisions," and adding that "this will undermine the care of these patients, public trust in the FDA, the pursuit of useful therapeutic innovation, and the affordability of the health care system."
Locks in 18% profit since March 2021. Timing was good as dividend was paid the day before the sale. In another portfolio, I could well be assigned on a covered call next week - profit will be smaller.
PIMCO 25+ Year Zero Coupon U.S. Treasury Index ETF (ZROZ): US Treasuries. I calculated breakeven on this position based on data held by my broker and exited at what I thought was breakeven. My broker changes entry price anytime there is a ticker change - guess that is what happened as the trade incurred a 4.6% blended loss since March 2020/May 2021. The averaging down I did last week did help but not enough.
Shorts
iShares 20+ Year Treasury Bond ETF (TLT): US Treasuries. Yields are drifting lower despite the inflation expectations rising. With price trading through $140 opening at $140.66, I closed out the short 134.5 put option and sold a 136 put option. This increases the net premium received by another 12% and coverage is now at 3.4% compared with the 3.1% at trade time for the initial spread.
Invesco QQQ Trust (QQQ): Nasdaq Index. Somehow I set up hedge trades on Nasdaq Index for June 14 expiry. The introduction of daily options in the last few weeks got me confused. The hedges I set up will expire worthless. With price opening at $340.36, I set up July expiry 323/310 ratio put spread. This gives me protection for a drop between 5.4% and 9.8% - the 2 to 1 ratio of sold puts to bought puts is fully cash neutral.
Cryptocurrency
I had a look at portfolio I opened some time back for my wife. The Ethereum that went into their from mining operations is doing very nicely. I did close out a few rats and mice holdings - will focus everything into top 5 coins and then convert to cash to reduce her mortgage.
Income Trades
Quiet week for income trades across two portfolios with 9 Covered Calls (US 7 Canada 1 Europe 1) and 5 Naked Puts (US 4 Canada 1)
Apple Inc (AAPL): Consumer Electronics. My small holding in Apple in one portfolio is trading just below breakeven. With price opening at $125.89, I sold a June expiry strike 120 put option for 0.5% premium and 4.9% coverage for two weeks.
Ford Motor Company (F): US Automotive. I have been in and out of Ford as the covered calls have been assigned (5 times since November 2020 in two portfolios) and it looks like the next one will be this month (in both). Jim Cramer has just lightened the holdings to bank some profits even though price is below his target. With price trading just below $16, I sold a strike 15 naked put for a 1.33% premium - that might be a good place to re-enter if the market wants to.
Currency Trades
No trades.
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 adn BBC news. 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
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June 7-11, 2021