This was a big week for the Federal Reserve to bring calm with another big swing in yields driving tech stocks lower.
Portfolio News
In a week where S&P 500 dropped 0.8%, my pension portfolio rose 0.14%. Tis was a big week for the Federal reserve and another big swing in yields driving tech stocks lower.
One big move drove all of the improvement in my pension portfolio, with gold explorer, De Grey Mining (DEG.AX) rising 24% on the week
Big movers of the week were Navios Maritime (NM) (+70%), 88 Energy (88E.AX) (+55%), De Grey Mining (DEG.AX) (+24%), Shibuya (6340.T) (+13%). For a 2nd week in a row my Japan portfolio had only one stock that fell - Sharp again - with a few bank stocks rising over 10% each. Solar stocks were the main sector losing down all over 10%
One sneaky piece came out from the Federal Reserve - they will reinstate some capital requirements on large banks that were relaxed during the pandemic. The requirement pertains to holding capital against US Treasury assets. This is a strange relaxation at a time when the Fed wants banks to up their lending. The ide of capital requirements is to hold capital against the riskiness of the assets. US Treasury bonds are viewed as risk free. The conspiracy theorist in me suggests that US Treasuries are not as risk free as people might like to believe - hence the change of requirement.
I read it in the Wall Street Journal - they were scathing as they feel this is an Elizabeth Warren hobby horse that does not make sense here is a free source
https://www.bizjournals.com/charlotte/news/2021/03/22/supplementary-leverage-ratio-exemption-expires.html
Crypto booms
Bitcoin price drifted lower to end the week 5% lower but with a low 11% down from the open.
Biggest swing of the week in my portfolios was ADA with a 40% swing low to high but ending the week up only 12%. Biggest ending move was STEEM up 33% on the week and still rising - looks like a pump and dump to me.
Bought
Higher yields are pushing bank stocks higher and I will could see I would be assigned this week on a few bank stocks that have moved more than 10% up in a month. Some I looked to replace early.
Unicredito Italiano (UCG.MI): Italian Bank. Used a down day to replace stock likely to get assigned on covered call this week at a 3.2% premium. Sold a covered call for 0.6% premium with 13% coverage for April expiry. Got the multiplier wrong and did not see enough.
Barclays PLC (BARC.L): UK Bank. Used a down day to replace stock likely to get assigned on covered call this week at a 8.9% premium. Sold a covered call for 1.3% premium with 7.9% coverage for April expiry.
Coeur Mining, Inc (CDE): Silver Mining. With price closing at $9.96 exercised on a 9/11/7 call spread risk reversal. Breakeven price for the trade is $8.69 = happy with that.
Let's look at the chart for the original trade set up which shows the bought call (9) as a blue ray and the sold call (11) as a red ray and the sold put (7) as a dotted red ray with the expiry dates the dotted vertical lines. The chart shows the concept of the trade quite well - looking for price to break up and clear the sold call level (11) - it did that twice. More importantly set up is to keep above the sold put level which was selected below recent prices (at trade time). That level (7) was respected well with 3 bounces off it.
There are two price scenario arrows on the chart taken from 2017 (outside the left of picture). Now that I have taken delivery of the stock a move of that length would yield solid profits. With expectation of rising inflation, this feels like a solid hedge trade. I will continue writing covered calls against the long position.
salesforce.com, inc (CRM): US Software. With price closing at $212.20 assigned on a 220 strike naked put. With cumulative naked put premiums this is only a 1.6% above current price - I will earn that back on the first covered call written as I now have a 100 share parcel.
Eli Lilly and Company (LLY): US Pharmaceuticals. With price closing at $184.29 assigned on a strike 192.50 naked put. Breakeven on the trade is $189.91 - 3.0% above closing price
Star Peak Energy Transition Corp (STPK). US Energy. With price closing at $29.97 assigned on a strike 30 naked put - missed it by just 3 cents. Breakeven on the trade is $29.25 - 2.4% below Friday closing price. This is a SPAC added to the bullpen by Jim Cramer at Action Alerts Plus - I sold a naked put 57% below price on the day for 2.5% premium. This breakeven price feels like a solid entry - of note is Jim Cramer has not yet bought the stock. I might well bank the profit and wait until he does or sell and add in another naked put even lower.
Hecla Mining (HL): Silver Mining. With price closing at $6.50 exercised on strike 6 call options - some part of a 6/8/4 call spread risk reversal.. As the naked put expired out-the-money, breakeven price is $5.99 - also a hedging trade idea to hold for a while.
Sold
Trade action during the week
Allianz SE (ALV.DE): Europe Insurance. With price closing at €213.35 closed out December 2021 185/200 bull call spread for 84% profit since March 2020.
Navios Maritime Holdings Inc (NM): Oil Shipping. Last week I wrote that oil shipping was heating up. I got that right.
On a day when price shot up 18% to close at $10.38, a pending order I had to close out a September 2021 5/7.5 bull call spread was hit for a modest 19% profit. This profit is small as there is time to expiry and implied volatility has spiked. This trade did include a sold put leg at strike 2.5 - that will run to expiry.
Assigned part holding on covered call for 3.8% blended loss stretching back to 2016 and 2018 with averaging down done at scale in February 2021 - loss is under $100.
The chart shows the nature of the move with price getting back to previous highs before the pandemic led oil price collapse.
And a busy options expiry time
ABB Ltd (ABBN.SW): Europe Industrials. Assigned on covered call for 7.7% profit since January 2021.
Banco BPM Società per Azioni (BAMI.MI): Italian Bank. Assigned on covered call for 11.8% profit since February 2021.
Unicredito Italiano (UCG.MI): Italian Bank. Assigned on covered call for 9.5% profit since February 2021.
Axa SA (AXA.PA): French Insurance. Assigned on covered call for 8.4% profit since November 2020
Deutsche Bank AG (DBK.DE): German Bank. Assigned on covered call for 8.1% profit since January 2021 and 6.1% profit since January 2021 in another portfolio.
Deutsche Telekom AG(DTE.DE): German Telecom. Assigned on covered call for 3.6% blended profit since December 2020/January 2021.
ING Groep (INGA.AS): Dutch Bank. Assigned on covered call for 9.9% profit since February 2021.
Randstad NV (RAND.AS): Europe HR Services. Assigned on covered call for 9.6% profit since December 2020
Barclays PLC (BARC.L): UK Bank. Assigned on covered call for 16% blended loss since April/June 2017 - one trade that got hit by Brexit shenanigans and is now recovering.
DuPont de Nemours, Inc (DD): Specialty Chemicals. Assigned on covered call for 1.9% blended profit since February 2021 and 1.3% profit since February 2021 in another portfolio.
Huntington Bancshares Inc (HBAN): US Bank. Assigned on covered call for 43% profit since November 2020.
Linde plc (LIN): Specialty Chemicals. Assigned on covered call for 4.5% blended profit since February 2021
The Boeing Company (BA): US Aerospace. Assigned on covered call for 9.7% blended loss since October 2020/January 2021. Averaging down has helped mitigate this loss.
Frontline Ltd (FRO): Oil Shipping. Assigned on covered call for 13.5% blended loss since June 2020/February 2021 - partial holding assigned.
The Mosaic Company (MOS): US Fertilizer. Assigned on covered call for 39% profit since January 2021
NortonLifeLock Inc (NLOK): US Cybersecurity. Assigned on covered call for 0.3% profit since December 2020. Small profit as price has slid since the initial purchase - with this the 2nd month of writing covered calls in this portfolio.
Tyson Foods, Inc (TSN): US Consumer Food. Assigned on covered call for 18% blended loss since December 2019/January 2020/January 2021. Was a Jim Cramer idea to capture potential wins from China swine fever outbreak. Trade war killed that trade.
Shorts
Hedge trades on Europe (VGK) and Nasdaq (QQQ) expired above the bought put level - another successful hedge trade month with net premiums close to zero.
Cryptocurrency
No trades.
Income Trades
A busy options expiry period on what was a big month for income trades especially with a ramp up in naked puts on high ticket stocks like TSLA and GOOGL.
Covered Calls
Of the 51 covered calls written for the month (22 - Europe, 28 - US, 1 - Canada), 9 were assigned in Europe and 4 in US
Naked Puts
Of the 22 naked puts written (4 - Europe, 18 - US), 3 were assigned in US - the best winner was TSLA which traded below the sold strike 590 at one point but closed at $654.87
Star of the March expiries was a combo covered call and naked put on Canadian marijuana producer, Tilray (TLRY) paying 17% combined premium in a week where stock price dropped 8.7% - for these high implied volatility stocks I write with really wide coverage ratios
Currency Trades
Only 3 trades made in the week as I took time off - 1 winner and 2 losers ending better than breakeven
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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March 15 - 19, 2021