A big week in markets with Iran tensions put aside (for now). A lot of action tidying up upcoming January options expiries, booking profits in technology and agriculture and crypto. Buying is all about looking for under valued stocks that have been a little left behind in the rally.
Portfolio News
Market Rally meets Iran
Markets shake off the Iran tensions and focus in on the data and the China trade deal.
Treasury yields do react to a softer jobs report. Soft but not bad as US is reaching full employment - not a lot of people left to get to work.
Time to look at the trusty old U6 rate chart - dropped below the 2008 low and almost reaching the 2000 low - no more workers to be found. US needs an increase in participation rate if more work is needed. Maybe wages will rise harder.
https://fred.stlouisfed.org/series/U6RATE
Bought
Tyson Foods, Inc (TSN): US Food. Topped up holding in one portfolio to average down and to write covered calls (with February expiry). Jim Cramer idea based on swine fever problems in China likely to drive demand for pork supplied by Tyson. Added a small parcel in another portfolio following a Jim Cramer idea to keep adding.
Nokia Corporation (NOK): Europe Network Equipment. I bought into Nokia on the back of their 5G exposure a little before their last earnings announcement = bad timing. Trade structure was a January 2021 5/7/4 call spread risk reversal. Price has been trading below $4 ever since that announcement. During the week, Nokia announced a venture with Vodafone (VOD.L) on 5G. That propelled share price from a week low of $3.65 to $3.95 on Monday close. January 2021 strike 4 put options were selling for $0.59 with price between $3.95 to $3.99 for the day. First trade idea was to sell more 4 strike puts which would take my entry price to $3.46 if I was forced to buy at $4.
Then I looked at pricing of the 5/7 bull call spread - I could buy that for $0.23 = a totally free trade and $36 per contract goes into the bank. 5G works for Nokia - that move is possible. The sold put premium was $0.59 which levers up the trade handsomely and brings break entry price for the trade to 9% better than the $4.02 close. Did the same in another portfolio with price crossing $4.
American Airlines Group Inc. (AAL): US Airline. Airline and transport sector has taken a bit of a bashing. One of the talking heads suggested transports as a sector that could ride well if 2020 continues to show growth. Buying in on a higher oil prices down day seems OK he says. I picked American Airlines - in the process of resolving their union dispute but still hampered by Boeing 737 Max grounding. I was looking at long range options which seemed a bit pricey - need to do spreads. As I cannot hold short call without cover in one portfolio, I bought a small parcel of stock to be able to buy a call spread. Bought a January 2021 28/35 bull call spread with a net premium of $2.27 which offers maximum profit potential of 208% for a 28% jump in price from $27.32 closing. I picked 2021 options as that was the furthest out offering strike 28's (2022 has 30's). I am figuring that Boeing will have resolved the 737 Max problems in time.
iShares Silver Trust (SLV): Silver. Added an open ended Janaury 2021 strike 18 call option as a hedging trade in one portfolio at 7% premium to strike. Price has to move 14% from $16.94 close to break even.
Yamana Gold Inc (AUY): Gold Mining. Price has been inching up towards $4 opening at $3.88 on the day. I have in one portfolio a 2.5/4 bull call spread - wanted to keep the top end possibility of the hedging trade open. So I added to the January 2021 4.5/5.5 bull call spread I am holding. This new trade had a net premium of $0.23 offering maximum profit potential of 334% for a 41% move in price.
iShares MSCI Thailand Capped (THD): Thailand Index. Rounded up small holding I bought while I was in Thailand as price keeps drifting lower.
iShares Transportation Average ETF (IYT): US Transportation. One of the talking heads talked again about transports as being relatively undervalued. His view was that if the economy is as strong as the market is suggesting, transports will make up some of the gap to the way S&P500 has moved. With price closing at $196.90 I bought a June 2020 198/210 bull call spread for a net premium of $5.49. This offers maximum profit potential of 118% for a 6.7% price move with premium 2.8% of close.
Let's take a quick look at the chart which shows the bought call (198) as a blue ray and the sold call (210) as a red ray with the expiry date the dotted green line on the right margin. It also shows the gap to S&P 500 (blue line). That gap is 34 percentage points. Close half that gap and this trade hits maximum. The maximum is also in line with 2018 highs. The technical character is a triangle with higher lows being compressed into a flat line around the $200 level. A break up will be strong. Just look at the GOOGL chart below to see that.
Xilinx, Inc (XLNX): US Semiconductors. Semiconductor stocks have been pushing ahead in the market rally. Xilinx has lagged a bit. Added a small holding to average down entry price in one portfolio.
Corn Futures (CORN): Corn. Added one new contract on a 4 hour reversal (right hand blue dot). The price action after that trade shows why I trade this without stop losses until I get past break even.
Sold
Alphabet Inc. (GOOGL): US Technology. With price opening on $1419.79, closed out call spread leg of a January 2022 1275/1400/1000 call spread risk reversal for a 24% profit on the call spread alone since November 2019. Were I to close the sold put (1000) leg, profit would be 66%. Percentages are modest but trade size is large.
This is what I wrote in TIB487
Trade is looking for price to break the horizontal resistance line and rise some 10%.
I must say I was surprised to see price move so quickly - why else buy a 2022 spread? I am thinking to hold onto the sold put as an entry 43% below current levels could be interesting.
The updated chart shows the big run up - steeper than anything ever seen going right back to 2009.
Chicago Wheat Futures (WEAT): Wheat. Prices moved on the positive news from China - I chose to close out all trades before Friday close rather than trail stop losses. 3 trades closed for average profit per contract of $7.77 (1.40%).
Soyabeans Futures (SOYB): Soyabeans. Prices moved on the positive news from China. 2 trades closed on trailed stop losses for average profit per contract of $2.00 (0.21%). Replaced one trade on a 4 hour reversal on Jan 10.
Shorts
iShares 7-10 Year Treasury Bond ETF (IEF): US Interest Rates. Been waiting for days when interest rates rise to extricate myself from a short trade gone wrong. Closed out another portion for a 9.2% loss since August 2018. Loss is quite a bit worse as I have had to cover dividends along the way (some are covered by long holdings of BlackRock MuniYield Quality Fund III, Inc. (MYI))
Expiring Options
I have a few January 2020 options that are close to strike prices - I do not want to miss out by being a few cents short. So I looked at options to buy more time - in some cases I added in naked sold puts to fund any shortfall in premium.
Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR): China Index. With price opening at $29.94 rolled out a 29.71 strike call option to February 2020 strike 31. This locks in a 77% loss since May 2018 but did not require additional premium. I was comfortable going up a strike as the signing of a China trade deal will push China stocks higher. Overall this new trade structure needs to recover $2.52.
Fifth Third Bancorp (FITB): US Bank. With price trading through $30 to close at $29.85 rolled out a 30 strike call option to February 2020 strike 31. This locks in 88% loss since November 2017. Funded the shortfall in premium by selling a 26 strike put option. Overall this new trade structure needs to recover $3.06. Same trade in another portfolio funded by February 21 strike 27 put - same end result.
Huntington Bancshares Incorporated (HBAN): US Bank. Price traded above $15 last week and drifted lower on Iran news. Rolled out a 15 strike call option to February 2020 strike 15. This locks in 98% loss since April 2018. Funded the shortfall in premium by selling a 14 strike put option. Overall this new trade structure needs to recover $1.62. Quick update of the chart adds in the new expiry line (vertical red line) and adds in two pink rays (the sold put (14) and the break even.
The trade buys an extra month for no additional cost (but it does add in some risk of price closing below $14). The chart has made a higher high and a higher low in this cycle. It is following what looks like the blue arrow price scenario (newly cloned from the left). If it follows the pink arrow scenario it will make breakeven. The trade idea is simply to reduce the risk of closing below $15 at January expiry and trade somewhere above at February expiry. Calculations do not take into account the sold call (22) premium from the initial trade (a benefit)
Coeur Mining, Inc (CDE): Silver Mining. With price closing at $6.55 rolled out January strike 6 call options to March 2020 strike 7. This locks in a 23% loss since August 2019 but did release some cash. In this portfolio, I do not have enough capital to go to exercise. This is a frustrating trade as this position was well in-the-money at the end of December.
Financial Select Sector SPDR Fund (XLF): US Financials. With price closing at $30.69 rolled out January strike 28 call options to February 2020 strike 31. This locks in a 36% profit since July 2018. In this portfolio, I do not have enough capital to go to exercise. I chose to roll up as talking heads are positive about US financials
Income Trades
6 covered calls written at average premium of 1.07% with average coverage ratio of 6.36%. This brings month to date average to 0.98% and 7.87% coverage.
Naked puts sold on Apple (AAPL), FireEye (FEYE); VanEck Vectors Gold Miners ETF (GDX), Genworth Financial, Inc. (GNW), Uber Technologies, Inc. (UBER)
Cryptocurency
Bitcoin (BTCUSD): Price range for the week was $1121 (15.3% of the low). Price pushed higher from the start of the week to get through resistance at $7761 and tested right up to $8400 where the sellers came in to test right down to $7761 level again, which held.
6 trades closed on a mix of trailed stop losses and profit targets for average profit per contract of $225.05 (3.01%). Some of these trades have stood since November 2019.
Ethereum (ETHUSD): Price range for the week was $12 (8.9% of the low). Price worked away from support at $132 to test up to resistance at $146 before drifting half way back for another go. This makes a higher high with a higher low conformed by a fraction of a dollar.
4 trades closed on a mix of trailed stop losses and profit targets for average profit per contract of $3.35 (2.52%). Some of these trades have stood since December 2019.
Ripple (XRPUSD): Price range for the week was $0.03094 (16% of the low). Ripple started the big move first and pushed hard through resistance at $0.20584 to test $0.21 and $0.22. It tested back to $0.20 where it found buyers.
4 trades closed on a mix of trailed stop losses and profit targets for average profit per contract of $0.012 (6.13%). Some of these trades have stood since December 2019.
CryptoBots
Profit Trailer Bot Nine closed trades (1.68% profit) bringing the position on the account to 10.34% profit (was 10.13%) (not accounting for open trades).
Dollar Cost Average (DCA) list drops to 5 coins with ADA moving off and onto profit after one level of DCA.
Pending list remains at 10 coins .
New Trading Bot Trading out using Crypto Prophecy. No closed trades
Currency Trades
Outsourced MAM account Actions to Wealth closed out 20 trades on EURUSD, XAUUSD, USDJPY, EURCHF, GBPCAD, UK100, NZDCAD, AUDUSD for 6.78% profits for the week. Trades open on EURCHF, UK100, AUDUSD (0.60% negative). Those gold longs were closed in profit before the pullback in gold.
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. U6 Rate chart is credited below the chart. 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
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
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
January 6-12, 2020