Set up the short squeeze trades in Monday trade just as the squeeze subsided but in a cash neutral way. Nibbled away to add to a few quality positions and added to a punt on European oil. Some healthy profit action in crypto space as Ethereum hits all time high
Portfolio News
In a big week that S&P 500 rose 4.7%, my pension portfolio rose only 4.2%. The key difference is it was a week where a hedged portfolio would under-perform.
Big movers were Aphria (APHA.TO) (+36%), Scorpio Bulkers (SALT) (+24%), Dawson Geophysical (DWSN) (+20%), Harvest One Cannabis (HVT.V) (+20%), Denison Mines (DNN) (+18%) - interesting to see shipping stocks start to move.
Surprising moves were in European banks with BBVA up 17% (BBVA.MA) and Intesa San Paolo (ISP.MI) up 15%. Italian stocks all moved up with news that Mario Draghi will form a government as new Italian Prime Minister. There was some bubbling under the surface for lithium and copper stocks. In Japan portfolio only one stock was down on the week.
Crypto booms
Bitcoin price just rolled higher with a small test lower down 5% and finishing the week 14.5% higher than the open.
Real action was in Ethereum making an all time high with a swing lower of 7% and then peaking 28% higher than the open for the week.
Star in my top 10 portfolio was ADA, up 47% by Friday and over 105% by the end of the weekend. Binance Coin (BNBUSD) went up 52% in the week but did not scale to doubling.
Bought
BP PLC (BP.L): Europe Oil. Rounded up holding to average down entry price and be able to write covered calls (multiplier is 1000 shares per contract). Wrote covered call at 0.8% premium for 10% coverage.
Johnson & Johnson (JNJ): US Pharmaceuticals. Added another small holding - trickling up to get to 100 shares
Navios Maritime Holdings Inc (NM): Shipping. Short squeeze candidate - averaged down my entry price. With trade price at $4.72, wrote strike 5 covered call at 17% premium for 6% coverage. Also bought a September 2021 5/7.5/2.5 call spread risk reversal for a net premium of $0.08 - effectively a cash neutral trade when one considers the size of the premium from the covered call. This provides a trade range of 88% to the downside and 59% to the upside.
Options market only has strikes at $2.50 intervals (i.e., 2.50, 5.00 and 7.50 - that is is)- this makes for wide ranges on the trade ideas.
Pan American Silver Corp (PAAS):Silver Mining. Did a quick scan of leading US silver producers in the light of the silver short squeeze. PAAS has gone up less than CDE and HL - added a July 21 37/45/28 call spread risk reversal. The net premium on the call spread is $2.515 offering a 218% profit potential for a 23% move up in price from $36.38 close. Downside coverage is 30%. Trade is cash neutral.
Let's look at the chart which shows the bought call (38) as a blue ray and the sold call (45) as a red ray and the sold put (28) as a dotted red ray with the expiry date the dotted red line on the right margin. Hindsight is marvellous as the silver short squeeze did not happen and price pulled well below the bought call. However, it has held above the sold put strike (28). Quite frankly I would not be unhappy being forced to buy at $28. Of course, I could have simply sold the 28 strike put as a hedge income trade. Buying the call spread does give me a shot at some of the upside if we see a blue arrow price scenario playing out (that scenario is cloned from the 2016 run)
Walmart Inc (WMT). US Retail. Added another 100 shares - Jim Cramer idea to add more. Wrote covered call at 1.3% premium with 5.4% coverage with 3 weeks to run. Dividend yield 1.55%
DuPont de Nemours, Inc (DD): Basic Materials. DuPont completed the merger of its Nutrition & Biosciences (N&B) business with International Flavor and Fragrances (IFF) - share price was hit hard on Monday. The deal was structured as a split off and not a spin off - this is not dilutionary. Jim Cramer view is that the change has positioned DuPont better for the longer term - more attuned to cyclical recovery. I added it back to one portfolio and wrote a covered call at 1.27% premium with 8.3% coverage for 3 weeks to February expiry. Dividend yield 1.64%
Sold
VanEck Vectors Vietnam ETF (VNM): Vietnam Index. Reduced holding to free up cash for purchases made - locks in 17% profit since June 2016. Part of the rationale for selling is there is no options market on this stock - cannot write covered calls.
Shorts
No change
Cryptocurrency
Ripple (XRPBTC). As I intimated in the last blog, XRP became a pump and dump target. The pump happened overnight (Jan 31) while I was sleeping - it was spectacular with an 82% rise on the day to the peak. The dump came soon after - I chose to cut my holding in XRP back by 40% to bank some profits and to reduce holding back to around A$200 entry level. That locked in a tidy profit of 39% in 8 days.
Why did they choose XRP? Selling pressure has been huge since the SEC lawsuit was filed and that would have encouraged lots of short interest.
Litecoin (LTCBTC): Switched the proceeds of XRP sale into LTC as the LTCBTC chart shows the most potential from improvement relative to LTC - and it was a free trade.
NEM (XEMETH): With ETH making an all time high switched a portion of ETH to add 11th coin to top 10 portfolio. Not logical to have 11 coins in a top 10 but there you go - not totally convinced about keeping XRP in the portfolio.
The chart shows the trade idea. ETH makes an all time high. Take profits there and deploy in a coin that is showing signs of breaking out from the lows - the blue ray shows the trade entry. Looks like I got that one right (well so far it does)
Income Trades
Covered Calls
6 covered calls written with all but two with premium over 1%. Coverage ratios are well over the 8% mark
Naked Puts
1 naked put written with premium over 1% on Canadian Solar (CSIQ). Any chance to re-enter solar at a lower entry is worth the risk
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
Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices
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February 1 - 5, 2021