Busy week taking advantage of selloff days and also preparing for January options expiry.
Portfolio News
In a week where US markets went down - 1.6% down for S&P 500, my pension portfolio rose (around 0.5%). Big moves up for the week Tilray (TLRY) (74%); Castillo Copper (CCZ.AX) (50%); Cobalt Blue (COB.AX) (54%); Northern Minerals (NTU.AX) (24%); Navios Maritime (NM) (22%). This aligns a bit with what we saw last week with solid moves in marijuana and electric vehicle components and an underlying basic move in copper.
Cannabis stocks move hard as Democrats take control of the senate - legalisation can move ahead now.
Sharp Corp (6753.TK) (13%) and General Motors (GM) (16%) were the surprise moves.
Laggards for the week were solar stocks with Sunrun (RUN) and JinkoSolar (JKS) both down 12%. Italian stocks also sank with the government falling apart and my Italian portfolio stocks all dropping around 5%.
What were the Motley Fool 5 ideas? Digital payments, software as a service, telehealth, US cannabis, pets. Read it if you want
https://www.fool.com/investing/2021/01/17/5-must-own-trends-for-a-biden-bull-market-in-2021/
Crypto booms
A tough week in crypto markets with Bitcoin exactly touching $42,000 on Jan 8 and then plumbing as low as $30,261, 3 days later.
Price did make a bounce and then fell back - the formation looks like a healthy correction though the last high was a lower high (on the daily)
Bought
Took the chance on selloff day on Monday to average down a few positions.
Boeing Co (BA): US Aerospace. Jim Cramer is nibbling on this.
Crown Castle International Corp (CCI): US REIT. Rounded up to get to 100 shares to write covered calls. Dividend yield 3.54%. Jim Cramer keeps adding.
Invesco Agriculture ETF (DBA): Agriculture. With price a little over $16, I added a new position as I am likely to get assigned on a 16 strike covered call. Agriculture prices ae moving up, especially corn.
Nokia US ADR (NOK): European Telecom. Currently exposed to January expiry 4 strike put - this trade averages down ahead of being assigned (if it does). I am a firm believer that Nokia will benefit from 5G roll out in Europe as pressure builds on Huawei China government connections.
PepsiCo, Inc (PEP): US Consumer Beverages. Jim Cramer idea. Dividend yield 2.89%
Wells Fargo & Co (WFC): US Bank. Jim Cramer added this to buy list as he likes the cost story. Price is below Q3 tangible book value. Rising interest rate yields will help net income margin. Dividend yield 1.20% - these are currently restricted by Federal Reserve.
iShares Silver Trust (SLV): Silver. Price has pulled back over the last few days - adding to hedging position.
End of week action was focused on replacing stocks that are likely to be assigned at options expiry this week on covered calls. Stocks have shown a willingness to go up 5 to 10% in a month suggests to me there is value in keeping going. Why buy back in advance? Price could well keep motoring past expiry and give a higher entry is my thought. Writing February covered calls on each stock as I add them in.
Alerian MLP ETF (AMLP): US Oil Producers.
Global X Uranium ETF (URA): Uranium. Uranium has been a big winner of the move away from carbon-based energy and commitment in Defense Appropriation Bill to revamp the US nuclear arsenal. Iran also adding to its enrichment effort.
SPDR S&P Oil Explorer/Production ETF (XOP): US Oil Producers. A solid stock to write covered calls and buy stock each cycle.
Aurora Cannabis Inc (ACB.TO): Canadian Marijuana. Did a quick scan to find marijuana producers that are lagging Tilray (TLR) and Cronos (CRON) both likely to be assigned. Sold a February strike 22 covered call for 6% premium and price coverage of 44%. The sector is totally on fire.
Cronos Group Inc (CRON): Canadian Marijuana. Replaced stock likely to be assigned - part holding. Covered call for February expiry was 2.92% premium for 36% price coverage.
Sold
Aphria Inc (APHA.TO): Canadian Marijuana. With price closing at $15.28 closed out a January 2022 6/7.5/4 call spread risk reversal. The call spread yileded a 105% profit since Auguts 2020 and the naked put ws bought back for a 60% profit. The original trade was cash neutral (i.e. the sold put was big enough to cover the cost of the call spread).
This trade was really set up as a small move idea rather than a long term trend catcher. Trade was entered as price was correcting (start of the bars). Trade structure was to buy a call at the current pirce ($6) and sell a call at the top of the recent range ($7.5). The 4 strike put was sold with same expiry to fund the entrire trade and placed around the level of the previous low.
Let's look at the chart which shows the bought call (6) as a blue ray and the sold call (7.5) as a red ray and the sold put (13) as a dotted red ray with the expiry date the dotted green line on the right margin. I have had a pending order out for some time to close the trade - these do not close readily until time value of the options starts to decay. I pushed this along by dropping the sell price a bit more.
Shorts
Am starting to get nervous about the potential impact of last day actions from Donald Trump. If 5% of the Qanon stuff is true and executable, markets could be in for a rocky ride. Losers of the Google, Apple and Amazon action on Parler closure could well be tech stocks.
Invesco QQQ Trust (QQQ): Nasdaq Index. With price around $314, set up a 5%/10% ratio put spread buying a February expiry 298 strike put and selling two 282 strike put options. This is a cash neutral trade.
Let's look at the chart which shows the bought put (298) as a red ray and the sold put (282) as a blue ray with the expiry date the dotted green line on the right margin. Chart does not show breakeven as trade is cash neutral. I have cloned in two arrows from prior big moves down - the blue one is recent and the red one from further back in time. This shows if a blue arrow correction comes along in a few days that the bought put will end in-the-money and the sold puts will expire worthless = exactly what the hedge is for. A red arrow correction is less likely to be complete by expiry.
Trade management is to buy back half the sold puts if price moves up appreciably. So far price is below entry point after 2 soft days after set up.
Vanguard FTSE Europe Index Fund ETF (VGK): Europe Index. With price around $62, set up a 5%/10% ratio put spread buying a February expiry 59 strike put and selling two 56 strike put options. This is not quite a cash neutral trade - it cost $20.
Cryptocurrency
Binance Coin (BNBAUD): Watched the bounce in price and converted A$200 into BNB. Looks like I timed that one just right with price making an all time high since Binance floated the pair for trading. I have been helping a friend learn trend trading. The last lesson was looking for continuation reversals - I applied the lesson. Why BNB? It is a top 10 coin by market capitalisation.
The chart is a 4 hour chart from the big dump on January 10. The principle of continuing reversals is to look for price reversing with a long tailed bar or engulfing bar or two consecutive bars in the direction of the trend coming off a level. This one is tidy with the levels through earlier closes. 4 tidy cycles - the technical analyst aficionados would prefer reversals to be on significant Fibonacci levels (0.788 or 0.618). None of these are - closer to 0.5.
Income Trades
Covered Calls
Started writing covered calls for February expiry a little earlier than normal. Calls written on CCI, NAT, NKE, WFC, AMLP, CQQQ, DBA, NOK, SLV, URA, WFC, XOP, CRON
Naked Puts
I have quite a few holdings that will be assigned on covered calls at expiry this week. Prices have moved a bit further than I would like to buy back comfortably. Instead, I started to write naked puts at prices around 10% below current price instead of replacing stock on stock I am happy to own. That way I get the income and I get a lower entry price if I do get assigned. Naked puts written on F, GM, TLRY, CVS, AMLP, and WFC - all stock I am happy to own.
I will write a separate post updating all the stock assignments on January 15 expiry - there were a lot
Currency Trades
Starting to go back to using options markets to trade big trends in currency markets. Added a EURUSD 1.2220/1.2815 bull call spread for July 13, 2021 expiry. Did run into margin problems in this account - sold a December 2021 AEX strike 600 call option for a tidy profit to fund the margin.
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
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January 11-15, 2021