US markets sink with weak US manufacturing data. A few profit taking exits before the fall helps. A few contrarian trades looking for price overreaction to normalise. Time to fix some of the naked puts. Agriculture surges again.
Portfolio News
Market Flip Flop
Markets open happy enough and then collapse with weak US manufacturing data.
There is little doubt that the trade war is having an impact on China demand and manufacturing. Data from Europe confirms that. On the flip side, agriculture commodity prices suggest there is progress being made in the talks. I am beginning to think maybe the genie has been out of the bottle too long. That said, I am wary of reading too much into the data just yet as there is a seasonality issue to consider - US data is quite often adjusted after the event.
Treasury yields slide again and gold and silver bounce after some steady selling for several days before
Bought
United Health Group (UNH): US Healthcare. Averaged down entry price in two portfolios at smaller scale following Jim Cramer doing same in Actions Alerts Plus portfolio. His view is this is the best managed US heathcare business and the Medicare-for-All fears are overblown.
FireEye (FEYE): Cybersecurity. Price has dropped below $14 by some margin, at which level I had sold puts expiring this week. First level idea was to buy at a lower entry as price was improving rather than buy back the sold puts. I did that in the two exposed portfolios. As price kept moving higher the sold put premium started to slide - so I bought those back anyway.
Interactive Brokers Group, Inc. (IBKR): Investment Brokers. Charles Schwab announced it is ending commissions for online trading in U.S. stocks, exchange-traded funds and options.
This smashed the stock values for the mainstream online brokers over 20%. I figured this is an over-reaction and bought a parcel of stock in Interactive Brokers, who are already very competitive on brokerage rates and platform reach. Price dropped only 9.48% on the day. I was disappointed to make a trade at the ask instead of the mid-point between bid and ask. That cost me 2% for not paying attention. The relative chart shows IBKR trading in a quite narrow range for some months now and outperforming TD Ameritrade (AMTD) and Charles Schwab (SCHW) over the last 18 months or so.
Lyft, Inc. (LYFT): Ride Sharing. My Lyft call spread risk reversal trades are looking very sick with price around the $40 mark and I have sold puts at $50 and $55. One of those expires in October. I figured one way to fight back was to buy at the depressed price in the hope that I could average out a breakeven trade if price gets back halfway to the sold put levels. Or just run a buy and hold forever and watch the disruptor trade win. This could be more of a falling knife trade.
KraneShares CSI China Internet ETF (KWEB): China Technology. Idea from David Dierking on WhoTrades. His view is the pullback in US-listed China Internet stocks was an overreaction and that the "ban on listing" news was just a ploy by Donald Trump to pressure the trade discussions. Trade idea is to run back to the recent highs (about a 10 percent return). Now when I look at a chart which goes back to the time when the trade war started, there is a 60% return if the trade discussions get sorted.
Maybe I will aim for a halfway mark, which is about where the iShares China Large Cap ETF (FXI - red line) has traded to.
Sold
Apple Inc (AAPL): With price trading steadily over $225 in the early session I closed out October 2019 215/225 bull call spread for 66% profit in 4 weeks. Trade idea was to trade through the iPhone 11 launch period. Market certainly liked the launch details taking the trade out the top of the spread in week one and then building back to do it again after a 2 week pullback.
AT&T Inc (T): US Telecom. Sold January 2020 33/42 bull call spread. Price had moved above $38 when Elliott, the activist shareholder, increased their stake. My sense is there is not enough time for price to move another 10% before expiry and there are major concerns about the future of their DirectTV satellite investment. Booked 140% profit since July 2018. In TIB257, I set out the rationale that AT&T could catch up with Facebook and Google in ad revenue as they had bought the content and some key ad skills. The question I had then was whether management could pull it off. A quick update of the chart which shows this trade as the blue rays.
Price did move the right way after the trade and then fell over. When I set up the 2nd trade (pink rays - now closed), price was heading in the right direction after breaking the downtrend. The pink arrow (new) suggests that, if price can keep on the same momentum, this trade could reach the maximum. My exit says not and the fact that I could buy back the sold call (42) at a profit too suggests the options market does not think so either.
Chicago Wheat Futures (WEAT): Wheat. One contract closed on a trailed stop loss for $6.00 (1.2%) per contract profit. One new contract opened on a 1 hour reversal looking for a bullish engulfing bar to form. It did and I am now trailing a stop loss beyond breakeven
Expiring Options
FireEye (FEYE): Cybersecurity. With price trading below $14 for a few days, bought back October 4 strike 14 put options for 48% loss. This trade was part of a recovery process for covered calls that risked being assigned.
Income Trades
One naked put written
Apache Corporation (APA): Oil Producer. Sold October 25 strike 23.5 put option (1.7% of strike) to replace the puts that expired on September 27. This is 9% coverage from the $25.60 opening price. Day's activity did see price drop 5.2% to $24.27.
One covered call written
ProShares UltraPro Short QQQ (SQQQ): Nasdaq Index. 0.8% premium with 19% coverage.
Cryptocurency
Bitcoin (BTCUSD): Price range for the day was $336 (4% of the open). Price did push to get through resistance at $8400 but could not hold on and closed below.
One contract closed on a trailed stop loss for $225.46 (2.8%) per contract profit.
Ethereum (ETHUSD): Price range for the day was $12 (6.6% of the open). Price traded either side of support at $177 but did push out a new high.
One trade closed on a trailed stop loss for $4.30 (2.5%) per contract profit. One new contract opened on a confirmed 1 hour reversal right around that $177 level.
Ripple (XRPUSD): Price range for the day was $0.01776 (6.8% of the high). Price could not hold above $0.26 and traded below prior day high to reach down to support at $0.24754
CryptoBots
Profit Trailer Bot No closed trades
New Trading Bot Trading out using Crypto Prophecy. No closed trades
Currency Trades
Outsourced MAM account Actions to Wealth closed out 2 trades on GBPUSD and NZDUD for 0.03% losses for the day. Trades open on USDCHF, USDJPY, GBPUSD (all short USD) (0.11% negative)
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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Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers
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Bitcoin: Get started with mining Bitcoin for as little as $25 http://mymark.mx/Galaxy
October 1, 2019