Tariff war goes a different direction dragging markets with it. Options expiry sees some stocks assigned, some tidy winners and some hostages to volatility spiking. Did I mention moly a few times last week - hope you paid attention?
Portfolio News
Market Rally Stutters
Trade discussions with China hit a roadblock and markets drift lower
The negotiating game between US ad China took a different tack with Trump imposing restrictions on China telecom suppliers, Huawei and ZTE during the week, and removing tariffs on Canadian and Mexican steel and aluminium.
This puts extra pressure on China steel and aluminium as the playing field levels change again. US steel and aluminium stocks take the brunt of the hit though - e.g., Century Aluminium (CENX) dropping 5.72% in Friday trade. So much for tariffs to help US producers - just pawns in a bigger game. The chart for CENX looks like a dead duck looking to be put out of its misery - tariffs did not help one bit - they were announced at the top of the 2nd cycle. My options trade is worthless.
Australian Election
Incumbent Australian Prime Minister pulls off a miracle election win against the odds.
Australians categorically reject a Labour manifesto that seems to be too radical - especially in Queensland, Western Australia and even in parts of Melbourne. Australian Dollar pops one percent stronger in early Monday trade and settles back to 0.4% up. With an expected majority in the lower house, expectations are for a pro-economy set of measures flowing starting with personal income tax cuts. Will it be enough to kickstart an economy that was just beginning to teeter? The China trade will ultimately hold the key.
Britain Bumbles
The bumble just bumbles along with a new date set for next parliamentary vote.
Talks with Labour Party start to go soft - there will be one last ditch vote in Parliament before Theresa May hands in her clogs. Boris Johnson might be lining up a bid for the poison chalice - sucker move that is, to my mind. The British Pound gets smashed below the Brexit low (dotted green line).
General Moly, Inc(GMO) Molymbenum. I wrote about the rush to General Moly in TIB420 - another pop takes all my holdings into positive territory.
Bought
NVIDIA Corporation (NVDA): US Semiconductors. Nvidia presented strong earnings during the week and price did not really respond. Jim Cramer was vocal about buying the dip - I added another small holding in one portfolio and really disappointed to see price close even lower.
Sold
Roku, Inc. (ROKU) With closing price of $84.03 closed out December 2021 65/80 bull call spread for 47% profit based on 23% width of the spread. This trade is part of a calendar call spread risk reversal which has a November 2019 strike 45 put sold put still running. If price stays above $45 at November expiry overall profit for the trade will be 153% across both portfolios. Price has to drop 46% from current levels for that to be at risk.
American International Group Inc (AIG): US Insurance. Assigned on covered call for 8% loss since February 2015 with 3.17% clawed back on income trades. 30% loss in another portfolio since January 2017 with only 0.02% clawed back. This was an investment predicated on rising interest rates. Some major management shortfalls did not help.
Dell Technologies Inc (DELL): Assigned on covered call for 17% profit since March 2019. Jim Cramer idea to play their investment in VMWare (VMW). I will watch this for a chance to buy back in. First month of covered calls and 0.75% earned.
Frontline Ltd. (FRO): Oil Shipping. Assigned on 9 strike covered call with closing price at $9.01 for 47% blended profit since March 2017/March 2018 and 6.16% extra from income trades.
Shorts
Two banking trades closed on expiry
Citigroup Inc. (C) With closing price of $65.07 just above the strike price of the bought leg of a 65/62.5 bear put spread, I closed out the bought leg after market open to recover some premium. 32% loss for five weeks. In another portfolio loss was 36% to add to the loss from April rollover. Set up as hedging trade to hedge a specific long position. Quick update on the chart shows that a two month timeline (covering two trades) may not have been a long enough timeline for the hedge - price did come all the way back to the bought put strike (65) but only below it for a few days this week. A ratio spread might have been a stronger trade.
Wells Fargo & Company (WFC) With closing price of $45.70 above the strike price of the sold leg of a 47.5/45 bear put spread I had to choose whether to close the whole contract, close the bought leg or let the trade run to expiry. I chose to close out the whole contract rather than running the risk of being exercised short the stock and price not passing below the buy back level. Trade made 188% profit for a 6% spread (182% in another portfolio). This trade was predicated on weakness expected through earnings - well proved. Quick update on the chart from TIB395 shows price did follow the red arrow price scenario (twice) which was not enough to reach maximum profit.
Hedge Trades
Hedge trades expired worthless. I did pay the price for not fully reading through Ravi Krishnan's excellent book on hedging called The Second Leg Down.
He suggests doing ratio spreads for hedging trades - I set these up as ratio trades after the initial set up by which time premiums on the sold legs had dropped. Proved to be a $250 price tag for hedging in each of two portfolios. Given the size of the selloff during the cycle it was a price worth paying.
SPDR S&P 500 ETF (SPY) Closing price of $285.84 for a 262/254 put spread hedge
Invesco QQQ Trust (QQQ) Closing price of $183.04 for a 163/154 put spread hedge
Hedges for July expiry have been set up as ratio spreads last week (see TIB419).
Expiring Options
The Coca-Cola Company (KO): US Consumer. 50/52.5 call call spread missed with a $49.20 closing price. This trade never got over the bought call strike.
Direxion Daily MSCI Real Estate Bear 3X Shares (DRV) $6.56. This was the shocker 9/15 call bull call spread entered in November 2018 aimed at playing the continued rise in interest rates. When the Federal Reserve did not raise in January 2019 this trade moved rapidly to zero value (because it is 3 times levered). The updated chart shows the change in direction by the Fed killing off a trade that was headed right.
Western Digital Corporation (WDC): US Semiconductors $44.63. This was trading above the 52.5 bought call a week before earnings. Earnings and a selloff week smashed that idea.
Cisco Systems, Inc (CSCO): Network Management This trade was predicated on earnings disappointing a 2nd time like Intel had - they did not and price closed at $56.35 for a 51.5/48 bear put spread. I am holding short 50 strike put options with June expiry and long 45 strike call options = looking good on those.
Electronic Arts Inc (EA): Video Gaming. I was holding a 98.5/100 calendar call spread with May/June expiries. Price closed on Thursday above $98.5 implying I would have to deliver stock if price stayed at that sort of level. Pullback for the day on Friday looked like it would push price below the sold strike - so I left it to run. With price closing at $97.26, the sold leg is now in the bank. This makes up for a few losers. The updated price chart shows the spell above 98.5 (black rings)
With this leg now closed, the open 100 strike call option with June expiry cost only $0.70 vs the original $2.76 premium.
Facebook, Inc. (FB): Social Media. Sold put leg of a 155 call spread risk reversal expired with closing price of $185.30. Overall profit for the trade was $968 with no cash down. Updated chart shows the trade exactly following the modelled price scenario (blue arrow)
Income Trades
All European covered calls expired in my favour. Stock assigned in US portfolios on 3 stocks listed above (AIG, DELL, FRO). Average income percentage on 31 trades was 1.13% to daily closing prices = well above my 1% target.
Cryptocurency
Bitcoin (BTCUSD): Price range for the weekend was $2121 (27% of the open). Friday saw a massive price plummet on the back, apparently, of one big trade followed by a recovery back above the resistance level at $7761 - two dotted red lines from the top.
Nobody saw that coming.
One new trade added on a 4 hour reversal before the weekend - that looked very unhappy in the price drop.
Ethereum (ETHUSD): Price range for the weekend was $48 (17% of the high). The weekend's price action was fully contained by high and low on Friday with price just missing the top resistance level at $277 and testing down to the level below at $222, finally settling in the middle of the range.
One new trade added on a 4 hour reversal before the weekend
CryptoBots
Profit Trailer Bot Three closed trades (2.03% profit) bringing the position on the account to 7.86% profit (was 7.78%) (not accounting for open trades).
I have not yet fixed up PT defender structure. The big run up in Ethereum price has put a lot of pressure on altcoin pricing.
New Trading Bot Trading out using Crypto Prophecy. No closed trades
Currency Trades
Outsourced MAM account Actions to Wealth closed out 3 trades on GBPUSD and GBPNZD for 0.78% losses for the day. Trades open on GBPNZD and EURUSD (0.07% positive). I did say that being long GBP was not smart in the middle of Brexit. I did have a trade order open on GBPNZD which did not trigger - I got lucky and cancelled the order.
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
Bitcoin: Get started with mining Bitcoin for as little as $25 http://mymark.mx/Galaxy
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May 17, 2019