A selloff Monday makes for a good time to do some bottom fishing and a busy week setting up income trades - a change in tactic will extend the life of many holdings.
Portfolio News
In a week where S&P 500 rose 2% to close at all time high, my pension portfolio was up only 0.25%, with the big drag the two Pilbara gold explorers, De Grey Mining (DEG.AX) and Kairos Minerals (KAI.AX) and Japanese stocks (only one went up)
The week was something of a rollercoaster - the headlines are from every 2nd day - disaster (Monday) - gains (Thursday) - records (Friday). This happens a lot during earnings season - the one set of numbers investors like are earnings numbers. Economic data (and pandemic data) they shrug off fast if earnings look right.
Big movers of the week were SunRun (RUN) (+9.2%), Pilbara Minerals (PLS.AX) (+8.5%), and Zinc of Ireland (ZMI.AX) (+7.6%), Lennar (LEN) and American Airlines (AAL) and McKesson (MCK) were all up just over 7%. UBS Group (UBSG.SW) (+6.3%) stepped up well after announcing good earnings.
Crypto booms
Bitcoin price kept pushing lower another 8% down and then rebounded to finish 8% higher than the open.
I drew in the buyer's box a few weeks back. Last week I drew in that red horizontal line. A friend asked me where will it stop falling? I just said "Watch the buyer box. If it holds. Buy". Looks like I got that one right this week.
All the altcoins showed the same pattern - continued to drop and turned with trough to close moves bigger than Bitcoin - biggest move was AAVE with 35% trough to close.
Bought
Did some bottom fishing in Monday's selloff.
Delta Air Lines, Inc (DAL): US Airline.
Ford Motor Company (F): US Automotive. Good to see Jim Cramer had this on his top up list too (after I had made my trade)
JinkoSolar Holding Co (JKS): Solar Power.
Loop Industries, Inc (LOOP): Specialty Chemicals.
Nordic American Tankers Limited (NAT): Oil Shipping. Dividend yield 10.69% - doubt that will hold when the income buyers cotton on.
Navios Maritime Holdings Inc (NM): Bulk Shipping.
Safe Bulkers Inc (SB): Bulk Shipping.
Teekay Corporation (TK): Oil Shipping.
Weatherford International plc (WFRD): Oil Services.
Of note: only one of the stocks above is paying dividends - they have all suffered greatly from the Covid-19 pandemic = a classic collection of bottom fishing stocks. I will make up for the lack of dividends by writing covered calls.
Randstad NV (RAND.AS): Europe HR Services. Replaced assigned stock at 1.7% discount to assigned price. Wrote a covered call at 1.2% premium with 5% coverage. Dividend yield 2.46%
iShares Australia Index ETF (EWA): Australia Index. Received signal from ETF Trade Signal service suggesting a bullish trade based on an engulfing bullish bar. Bought a small parcel. Also bought a one strike out-the-money call option for August expiry. With a premium of $0.37, price has to move 3% to reach breakeven. There was not enough liquidity for next strike up to run a call spread - I do have a pending trade pout there. Dividend yield 2.22%
Nokia Corporation (NOK): Network Equipment. Missed out on replacing this stock in Monday's selloff in one portfolio - that cost a bit but replaced at 4.8% premium to assigned price. I wrote a covered call with 1.9% premium at 13% coverage. I also added in a double size naked put below the last assigned strike.
Wynn Resorts, Limited (WYNN): Consumer Cyclical. Jim Cramer added again to average down his cost base. To date I have been preferring the Van Eck Vectors Gaming ETF (BJK) to reduce company specific risk. Looked at the WYNN chart - down 30% from June 2nd high - decided to have a go and bought a small parcel of stock. This is a reopening trade. The chart suggested a call spread trade - bought a January 2023 110/130 bull call spread. With a net premium of $6.76 this offers maximum profit potential of 195% for a move of 25% from $103.57 closing price (that was lower than my purchase price). I chose not to set this up as a cash neutral call spread risk reversal. Instead I will sell naked puts month by month - first one done at 1.2% premium with coverage of 12%.
Let's look at the chart which shows the bought call (110) and 100% profit as blue rays and the sold call (130) as a red ray with the expiry date the dotted green line on the right margin. I have shown the first naked put (95) below the previous low.
What stands out is the way price has traded up to the 130 level a few times after the China trade war and since the March 2020 collapse. That is the simple trade idea - trade up to the levels seen just 2 months ago. 5 naked puts will make this overall trade cash neutral.
Sold
Wisdom Tree Coffee ETF (COFF.L): Coffee. Closed out holding at 52 week high for 3.6% blended profit going back to 2016 with averaging down in 2019, 2020 and 2021. Profit was modest. In another portfolio, blended profit was 31% with purchases in Q3 of 2018, 2019 and 2020 - with no purchases in 2016, profit was better than modest.
United States Natural Gas (UNG): Natural Gas. First profit target set at 1.27 Fibonacci extension hit for 8.4% profit in 2 weeks. I will now put in a stop loss (if I can at this level for the other part of trade.) I found out how to run a target and stop loss on a stock on my broker platform - only possible on desktop platform.
As it happens the trade hit the stop loss for 8.2% profit - I remain invested via a call spread which is in-the-money.
Shorts
Invesco QQQ Trust (QQQ): Nasdaq Index. With price opening at $354.05 (July 19), I opened an August expiry 338/325 ratio put spread in a cash neutral trade. This offers price protection for a drop between 4.7% and 8.9%. With price closing the week at $368.20, that outer range for protection is 13%, which means I can comfortably buy back the sold leg (325) and sell another closer to 338.
Cryptocurrency
I did start the process of buying parts of the new Rising Alts portfolio after the big selloff in Bitcoin dragged all the alts down - this is a good time to sell BTC or ETH as the alts rise. The portfolio holds the fastest rising altcoins since December 2020 measured on market capitalisation
I will show one chart to show the principle. In my trading accounts, I hold core holdings of Bitcoin (BTC) and Ether (ETH). I scan through the target list and look for charts that have turned over relative to either BTC or ETH - i.e., they have shown a willingness to strengthen relative to either BTC or ETH. That is when I am interested to buy.
I bought Polygon (MATICBTC), Harmony (ONEBTC) during the week and ThetaFuel (TFUELBTC) ion the weekend.
Here is the target list - $100 will go into each when the chart looks right. I already hold Solana. See TIB547 for the process I used to arrive at the list.
Income Trades
Covered Calls
Small adjustment to process for writing covered calls. Till now, I have decided on the strike price based on a % move from current level. If the holding is profitable the percentage is smaller (5% - more for tech stocks) and if the holding is unprofitable he percentage is larger (10% or more if I can get 1% premium). I do have quite a few holdings with different cost bases. For example - Delta Airlines (DAL) - I just bought a parcel on Monday selloff a lot less than my other holding. Rather than apply a single strike price to the calls I write, I am now splitting the trades into components with different strike prices (no more than 2 per stock). This adds to the work effort a bit but it does reduce the number of stocks that will be assigned.
In my pension portfolio I wrote 69 covered calls (US 51, Europe 12, UK 4, Canada 2) and 17 naked puts (US 13, Europe 2, Canada 2)
In my other portfolios I wrote 39 covered calls (US 28, Europe 8, Canada 3) and 9 naked puts (US 7, Europe 2). Fewer naked puts in this portfolio as the free margin to cover assignments is lower.
Currency Trades
Sold US Dollars and Euros to fund Canadian Dollar purchases on marijuana assignments last week.
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
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July 19-23, 2021