Markets got scared by inflation, the Fed and growing Covid numbers. This was not the month to have more naked puts exposed than I have had to date - time to bank profits to raise cash. This report covers trade action in the week and not the options expiry trades.
Portfolio News
S&P 500 dropped 2.31% in a rocky week with the Federal Reserve bringing forward the end of bond purchases to March 2022 and signalling the start of rates hikes after that. The surging case count for Omicron variant did not help - even though symptoms seem less severe. Maybe it is time to talk about hospital admissions and not cases.
Big movers of the week were few and far between - Yooma Wellness (YOOM.CN) (+112%), Honey Badger Silver (TUF.V) (+15.4%), ProShares UltraPro Short QQQ (SQQQ) (+9.45%).
There is a clue in the step up in SQQQ = a down week. Yooma Wellness move was a small tranche of stock (only 9,500 shares) and there is no news evident in the market
Solid Power Inc (SLDP): Battery Manufacturer. Solid Power lists following reverse merger with Decarbonization Plus Acquisition Corporation III (DCRC). Closing price for DCRC was $13.10 - disappointing to see Solid Power drop 16% in Monday trade to close at $9.58 - some averaging down needed.
Crypto booms
Bitcoin price cycled quietly lower all week on the 4 hour chart ending 5.9% lower than the open. This is looking a bit like stock markets - cycling lower. This is not what I like to see as Bitcoin has tended to offer uncorrelated returns.
MATIC bucked the tend and moved up 13% on the week with a peak to trough swing of 31%.
The only other coin in my portfolios ending up was XRP
Bought
iShares MSCI Italy ETF (EWI): Italy Index. Italian economy has rebounded especially since Mario Draghi took over as Prime Minister. It seems he has a better handle on holding the banking engine together. He knows everyone that counts.
Star Bulk Carriers Corp (SBLK): Bulk Shipping. Replaced stock assigned on covered call at 6% discount to assigned price. Price dropped ex dividend by more than the $1.25 dividend amount. Wrote January expiry covered call at that 22 strike for 2.2% premium
Airbnb, Inc (ABNB): Travel Services. Action Alerts trade idea to add to holding. I rounded up to be able to write covered call. Wrote January 14 expiry covered call at 2.3% premium with 9.5% price coverage.
Applied Materials, Inc (AMAT): US Semiconductors. Action Alerts trade idea to add to holding. I added a stock holding to add to the options trades I am holding. Wrote January expiry covered call at 1.1% premium with 11.8% price coverage.
Electricité de France S.A. (EDF.PA): French Utility. EDF announced that it is closing down a further 2 of its nuclear reactors for maintenance which is expected to drop production by 1 TWh (equivalent of 3 coal power stations). They changed EBITDA guidance to a range of €17.5 to €18 billion Euros vs an estimate of €17.7 billion - i.e., it could fall by €200 million. My brain tells me the new guidance includes the last estimate. Share price was smacked 15% to close at €10.03. I am exposed to strike 12 naked puts - which will go to assignment. I bought a parcel at the lower prices to average down. My holding is modest - I will ride this out with income trades. First covered call written at 2.9% premium with 6.6% price coverage.
https://finance.yahoo.com/news/edf-reactors-civaux-chooz-nuclear-205100193.html
Abbott Laboratories (ABT): US Pharmaceuticals. Switched half the proceeds from sale of AbbVie (see below). Action Alerts are looking at increasing their holding - I have a small one - I went early.
Coeur Mining, Inc (CDE): Silver Mining. Assigned early on naked put at 20% premium to $5.00 closing price. Breakeven on this trade is $5.70 based on one month's naked put premium ($5.45 for this series of naked puts). I use silver mining as part of my hedging trades - the risk lies in the debt load the business carries in the face of rising interest rates - debt to equity is 58%. Income trades have been working well for the last 18 months.
Helmerich & Payne, Inc (HP): Oil Services. Averaged down entry price in one portfolio following the harsh selloff in the sector - down one third since the start of November.
Nokia Corporation (NOK): Network Equipment. Replaced stock likely to be assigned on covered call at 1% premium to likely assigned price. Wrote January covered call at 1% premium with 5.3% price coverage. There is a chance price could well close at expiry below the covered call strike ($6). I am OK with holding Nokia given its strong lead in 5G.
Sold
Reviewed naked put exposure in my pension portfolio with quite a few positions likely to go to assignment. There is not enough margin available to buy all the possibles - so time to release some cash across the board.
Xtrackers Physical Gold ETC (EUR) (XGDU.MI): Gold. 5.7% profit since March 2020 - not quite enough to cover 18 months inflation.
Wisdom Tree Agriculture ETF (AGAP.L): Agriculture. 23% blended profit since March 2016/February 2018. Averaging down helped (see TIB184 for the rationale for entry)
db x-trackers - Stoxx Europe 600 Banks UCITS ETF (XS7R.L): Europe Banks. 16% blended profit since March 2016. It has taken time to recover from the negative interest rates introduced by ECB.
Wisdom Tree was ETFS Grains (AIGG.L): Agriculture. 34% blended profit since January 2018/September 2020. Chart shows the story of farming - a long period of price cycling lower and then boom. See TIB181 for the entry rationale
Wisdowm Tree was ETFS Corn ETC (CORN.L): Agriculture. 41% blended profit since July/December 2018/March/April 2019. Corn chart looks the same as the Grains ETF as it makes up one third.
iShares Gold (CH) (CSGOLD.SW): Gold. 36% profit since July 2018. As reported last week, I would have made a better return just buying XAUUSD on the forex market.
Microsoft (MSFT): US Software. 165% profit since June 2019. Initial trade idea from Jim Cramer suggesting it was cheap compared with Alphabet (GOOGL).
Quick update of the chart suggest that Microsoft did move in valuation more in line with Alphabet and even outperformed some of the time. Of note, the chart shows a 1000 strike sold put for Alphabet which was part of a call spread risk reversal. I have long since sold the call spread - will bank the profit on the sold put next month.
ETFS Soybeans (SOYB.L): Agriculture. 44% profit since February 2020.
The Estée Lauder Companies Inc (EL): US Consumer. Action Alerts idea to close out for 24% profit since May 2021. Initial idea from Jim Cramer days
AbbVie Inc (ABBV): US Pharmaceuticals. Action Alerts idea to trim the holding. I closed out for 20.4% profit since September 2021. I switched half the proceeds to Abbot Labs - Action Alerts still like this counter.
Honeywell International Inc (HON): US Industrials. Trimmed half my holding for 13% blended profit since October 2020/July 2021. The later tranche was sold at a small loss. Best profits from Honeywell has been selling naked puts.
Victoria's Secret & Co. (VSCO): Intimate Apparel. With price opening at $49.07, I am exposed to a strike 50 naked put. I am also long the stock. Buying back the put was $1.37 per contract - I sold the stock at $49.21 and will buy back at $50 = $0.79 to buy back the put. The sale did trigger an ugly loss of 32% since August 2021. See TIB553 for the trade rationale - looking for a reopening trade and low relative PE. The buy back at $50 is below the price stock relisted after the demerger.
UBS Group AG (UBSG.SW): Swiss Bank. With price opening at SFr16.24, closed out December 2022 strike 15 call option for 56% profit since April 2021.
Income Trades
Wrote a few income trades for January expiry: 8 covered calls (US 8 Europe 1) and 1 naked put (Europe)
Naked Puts
A few naked puts bought back to preserve capital
Adyen N.V. (ADYEN.AS): Payments Services. With price opening at €2305, I bought back a December expiry 2500 strike naked put for 86% loss since August 2021. This put option is part of a 2800/3000/2500 call spread risk reversal. With a multiplier of 10, I was needing to find €25,000 - rather take the loss up front. This reduces the profit potential on the call spread.
Quick update of the chart shows two trades and this naked put ringed. The first trade was a chase the trade entry - 2nd trade is more tidy though it is not looking pretty a week later. Adyen does well in lockdown as that is its business is helping business do online ordering. A repeat of the blue arrow price scenario and the trade will win
iShares MSCI India ETF (INDA): India Index. With price opening at $44.78, I bought back a December expiry 45 strike naked put for 120% loss since November 2021. This put option is part of a 45/55 call spread risk reversal on which I have rolled up the sold puts twice already. I chose to close this out as I do not want to be long the stock at this time.
Bed Bath & Beyond Inc. (BBBY): US Retail. With price opening at $16.29 bought back a 20 strike naked put for 241% loss. The venture into the old L Brands businesses has not been pretty with covid-related curbs on shopping hitting outcomes. I chose to buy back as I cannot see a recovery for the stock
iShares Russell 2000 ETF (IWM): US Small Caps. With price opening at $217.58 I was comfortable holding the 217 strike naked put. When I got up for the last hour of trade, price had dropped 2% and well below the sold strike. As contract size is large I bought back the put for 236% loss. I did sell a January expiry naked put for a similar sized premium (1.9% of strike) with 5.5% price coverage. With better margin management, I will be happy to buy the stock at those sorts of levels
Loop Industries, Inc. (LOOP): Recycling Chemicals. With price trading at $12.18, bought back strike 12.5 naked put. Premium paid was same as premium received. This is one stock I will add to once the cash position is clear.
Stem, Inc. (STEM): Battery Technology. With price opening below $18 at $17.92, I bought back the 18 strike naked put for a 40% loss. Normally, I would let a position this close run to expiry and take my chances. I chose not to as I also have a 20 strike naked put open and am mindful of the tight cash position. Too bad I did not go with the normal rules as price closed on Friday at $18.80 = above sold strike.
NVIDIA Corporation (NVDA): US Semiconductors. Share price has been under pressure since UK regulators blocked the takeover of ARM Holdings. With the tech selloff, price dropped another 6.8% taking it below 290 strike naked put. Bought back the put for 25% loss as I do not want to lay out the cash for such a large position. In 2021, naked puts have generated sufficient profits to buy 20 shares at the latest close. As it happens, that is how many shares I hold in this account and income trades are nearly double the capital appreciation showing.
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
Kucoin offers a wider range of altcoins than many of the other exchanges. I do like to diversify my holdings in case an exchange gets knocked over. Grab 15% discount on your trades when you open an account on this link https://mclnks.com/kucoin15
Tracking: Keeping track of your crypto trades is a whole lot easier with CoinTracking.info. Get 10% off all your account upgrades https://mymark.mx/CoinTracking
December 13-17, 2021