The week before option expiry is often quiet as all the action comes on Friday. This was no exceptions though there was a changing of the guard at Action Alerts Plus - that changed my stock picking framework.
Portfolio News
In a week where S&P 500 rose 1.83% after a rocky start, my pension portfolio rose a more modest 1.62% with big contributions from Europe technology, solar power and Japan. Month to date booked profit is 1.0% of portfolio value - nice if I could do that each month
It is a game of which headline to believe?
Same day same data and different headlines - one driving fear and the other driving greed. The change in the week were the first few earnings releases - it seems that earnings growth fears were somewhat unfounded = really unfounded.
Big movers of the week were Cobalt Blue (COB.AX) (+34.5%), Weatherford International (WFRD) (+32.7%), Cameco Corporation (CCJ) (+17.3%), Sunpower (SPWR) (+14.9%), Sunrun (RUN) (+12.5%), Castillo Copper (CCZ.AX) (+12.1%), Canadian Solar (CSIQ) (+11.1%), SBI Holdings (8473.T) (+10.1%).
The underlying themes are alternate energy, rising oil prices and crypto - SBI is the single largest holder of XRP coin benefitting from the rise in crypto generally
Glencore (GLEN.L) (+9.9%) was bubbling under - a partial alternate energy play with huge cobalt properties.
Action Alerts Plus
There has been a change in the management of the Action Alerts Plus portfolio - Jim Cramer has handed over the reins to Bob Lang and Chris Versace. They have been involved behind the scenes in the Real Money venture. Their words
Powering the investment process will be the combined fundamental and technical experience we've garnered over the years as portfolio managers, option traders and index builders as well as watchers of the global economy and monetary policy. The goal will be to build on the success we've had in the past, preserve the best of AAP's rich history and chart a path forward.
The last Jim Cramer video came at a difficult time in markets and sounded like a bad kid in the headmaster's office. I have used the service as a source of ideas but only have a small overlap with the few problem children in the portfolio. The new team are already tidying some of those up - I have yet to decide. I think I will keep running the covered call income trades and let the market decide exit points - some are coming up this options expiry - e.g., Well Fargo (WFC).
Crypto booms
Big news breaking into the weekend is the possibility of the SEC approving a Bitcoin Futures ETF. Never mind what a Bank of England deputy has to say - let the markets decide
The story floating earlier in the week that an ETF containing stocks leveraged to crypto markets was likely to be the first - the two sets flowing together propelled Bitcoin price.
Bitcoin price drifted lower at the the front of the week and then pushed higher 9% higher than the open.
The price action pushing toward the all time high was after the weekend
The altcoins are lagging the big move though Polkadot (DOT) had a pump to 29% higher than the open before dropping back.
Bought
Applied Materials, Inc. (AMAT): US Semiconductors. First of the new ideas from AAP Plus team. With price opening at $128.78, I put in place a short term call spread risk reversal. I bought a December 2021 130/145 bull call spread for a net premium of $4.89 offering maximum profit potential of 207% if price moves 13% from $128.78 opening price. I funded the premium partly by selling a December 2021 strike 115 put option which reduced the net premium to $1.95 and levered up the maximum profit potential to 670% with 12% price protection.
Let's look at the chart which shows the bought call (130) as a blue ray and the sold call (145) as a red ray and the sold put (115) as a dotted red ray with the expiry date the dotted green line on the right margin. The trade idea is simple - get back to the top of the range price has been in since April 2021 - that is why I chose an expiry date as close as December 2021. The sold put (115) is well below the bottom of that range - I am comfortable buying the stock at $115 if I have to. I could have gone closer to the bottom to reduce the net premium further but chose not to.
I bought a small parcel of stock in one portfolio - not enough to write covered calls. In that portfolio, I set up a 130/145/110 cash neutral call spread risk reversal with June 2022 expiry - the same call spread strikes but the sold put (110) was even further out-the-money.
Livent Corporation (LTHM): Lithium. Made a mistake and had a pending order on a strike 25 covered call hit just as price moved over strike closing at $25.43 which left me with an uncovered call option in-the-money. With price moving strongly, I bought a covering parcel of stock and sold a November expiry strike 22.5 put option. That leaves me with only $0.05 per share exposure provided price stays over $22.50 to November expiry. As I am keen to remain invested, I did also buy replacement stock at 3.9% premium to likely assigned price. This position is already profitable
Sold
A busy options expiry in my pensions portfolio with assignments across a range of sectors especially in Europe (banks, utilities, HR services) and in alternate energy (solar, uranium, cobalt). Rising yields pushed a few US banks into assignment too
Banco BPM Società per Azioni (BPM.MI): Italian Bank. Assigned on a covered call for 30% profit since February 2021
Commerzbank AG (CBK.DE): German Bank. Assigned on a covered call for 2.8% blended loss since May/July 2021 in one tranche and 1.9% profit since September 2021 on the other tranche. The July and September tranches were averaged down.
Deutsche Bank AG (CBK.DE): German Bank. Assigned on a covered call for 10% profit since September 2021.
Electricité de France S.A. (EDF.PA): French Utility. Assigned on a covered call for 3.7% blended loss since January/February/April/June 2021. This is one example where the covered call process found an exit point too low - closing price was above my average cost. That said income trades have contributed more than four times the capital loss in profits since January 2021 (mostly covered calls with only 2 naked puts written)
Randstad NV (RAND.AS): Europe HR Services. Assigned on a covered call for 1.45% loss since July 2021.
Barclays PLC (BARC.L): UK Bank. Assigned on a covered call for 4.1% profit since September 2021 (two weeks) on one tranche and 0.24% loss on another tranche since August 2021. 2021 profit performance for Barclays has been disappointing with income trades only just recovering capital losses since March 2021
Centrica plc (CNA.L): UK Utility. Assigned on a covered call for 13.7% blended profit since November 2020/September 2021. These two tranches did average down a high entry price on the first tranche bought in April 2018 - some way to go to cover that.
Glencore plc (GLEN.L): Global Mining. Assigned on a covered call for 3% blended profit since May 2017/August 2021. The assignment has produced an odd lot as the multiplier was not a round 1000 shares. I remain exposed with a small holding (9 shares less than the 1000 shares multiple)
HSBC Holdings (HSBA.L): Global Bank. Assigned on a covered call for 6.1% blended loss since May/June 2021. This is another example of a stock pick that dropped hard after purchase and was working its way back when the covered call process found an exit too low.
Alerian MLP ETF (AMLP): US Oil. Assigned on a covered call for 11.8% profit since September 2021. I will look at ways to replace the oil exposure.
Cameco Corporation (CCJ): Uranium. Assigned on a covered call for 8.6% blended profit since June/September 2021. I will look at ways to recover uranium exposure as I also assigned out of Global X Uranium ETF (URA) of which Cameco is 23% holding. I do have some bull call spreads open.
Invesco was Powershares Agriculture ETF (DBA): Agriculture. Assigned on a covered call for 11% profit since March 2021. This has been a long slow journey to make money our of food - it seems the processors make a lot more than the farmers.
iShares Australia Index (EWA): Australia Index. Assigned on a covered call for 1.4% profit since July 2021. Feels like a lucky escape given the disastrous way latest pandemic lockdown has been managed here down under. Trade idea came for ETF Trade idea service from my broker.
Ford Motor Company (F): US Automotive. Assigned on a covered call for 0.8% blended profit since June/September 2021 on one tranche and 5.5% profit on the other tranche since September 2021 (two weeks). This has been a hot Jim Cramer idea. We will see what the new team thinks.
Huntington Bancshares Inc (HBAN): US Regional Bank. Assigned on a covered call for 5.2% blended loss since April 2021.
Northfield Bancorp, Inc. (Staten Island, NY) (NFBK) US Regional Bank. Assigned on a covered call for 4.7% blended profit since may 2018/May 2021.
Navios Maritime Holdings Inc (NM): Shipping. Assigned on a covered call for 6.9% blended profit since August/September 2021. Still some way to go to cover capital cost of the early tranches.
Sunpower (SPWR): Solar Power. Assigned on a covered call for 15% profit since May 2021.
Unum Group (UNM): US Health Insurance. Assigned on a covered call for 0.9% blended profit since January/September 2021. Averaging down helped.
This is what I wrote in January in TIB520
Replaced at 15% premium to assigned price. This is a high premium but I feel pretty sure that Democrats will be good for healthcare insurance stocks.
Well that did not quite work out that way until recently
Wells Fargo & Co (WFC): US Bank. Assigned on a covered call for 6.1% profit since September 2021. Action Alerts Plus team have also sold their holdings as they feel it has already reached the price target. I retain a small holding and will keep writing covered calls until the market chooses an exit point. I will stop writing naked puts as the stock is no longer on the buy list
Weatherford International plc (WFRD): Oil Services. Assigned on a covered call for 29% blended profit since June/July 2021. Last tranche was bought as a piece of bottom fishing (see TIB550) - I like that sort of outcome.
Shorts
iShares 20+ Year Treasury Bond ETF (TLT): US Treasuries. With price closing at $145.03, assigned on a naked put at 1.3% to closing price. When I set the trade up initially the spread was 147/144.5 - I widened that to make it 147/143 and price did end exactly where I wanted it in this portfolio - between 147 and 143. With Friday closing of $145.03, the short trade has recovered double the net cost of switching the width of the spread. I do have a naked put sitting below the current price for November expiry - that will close out the trade if price drops below $143.
Chart shows price did dip below $143 and closed above. The dark blue arrow is a move size borrowed from prior times - this was the reason for widening the spread - that size arrow.
Cryptocurrency
I went looking in one of my exchange accounts to see if I could trade AKITA - price had already run. I dug around and noticed a few things
Tron (TRXUSDT): I noticed that I had a holding of TRX in this account. Given the nature of the TRON takeover of Steemit.com, I am not a fan of Justin Sun and Tron. He is the antithesis of what decentralised cryptocurrency is all about. I sold my holdings for USDT for a 34% loss since January 2018. The sad part of the story is the lost opportunity - I used mined ETH to buy the TRX - those ETH would be worth 4.93 times the US Dollars today.
AAVE (AAVEUSDT): I topped up my holding of AAVE to be able to offer it as lending liquidity - earns a small rate of return while the coin is being held.
Litecoin (LTCUSD): Someone I have followed on Twitter for a while does good chart comparisons of coin relatives - his current favourite is Litecoin. I applied some of the TRX sale proceeds into Litecoin.
The chart shows a few higher lows and higher highs - maybe this was the bottom. This trade was done in an exchange where I set up one of my 2018 portfolios - it has a lot of rats and mice - I will progressively shut them all down and sweep into a top 10 coin, maybe Litecoin it will be.
Income Trades
For the month in the pension portfolio, 70 covered calls written (US 56, Europe 9, UK 5) of which 22 were assigned (US 11, Europe 6, UK 5) and 20 naked puts written (US 17, Europe 3) with no assignments. Income trades delivered half the capital profits for the month.
Currency Trades
None
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
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
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October 11-15, 2021