Delayed report for a quiet options expiry week - going contrarian on yields. As markets are uncomfortable discretion suggests to not do too much
Note: this report is a week delayed from normal schedule
Portfolio News
In a week where S&P 500 dropped 2.39% and Europe dropped 2.80%, my pension portfolio dropped 2.41% - right in line. Japan and UK were in positive territory. Biggest drags were NuScale Power (SMR down 34%) and lithium and solar stocks
Big movers of the week were Delivra Health Brands (DHB.V) (+25%), Pantoro Limited (PNR.AX) (+15.8%), Direxion Daily Real Estate Bear 3X Shares (DRV) (+15.3%), 3D Systems Corporation (DDD) (+14.7%), Azincourt Energy (AAZ.V) (+14.3%), St Barbara Limited (SBM.AX) (+13.5%), Whitehaven Coal Limited (WHC.AX) (+12.4%), Mayne Pharma Group Limited (MYX.AX) (+10.4%)
Hard to see any themes in this week's movers other than rising yields hitting real estate and a pop in two gold mining stocks. Maybe that is the theme - both of those stocks have been on a steady slide till now. Time to hedge with gold
The news was dominated by Jerome Powell though a week ago search does not really mention that - the Middle East war, the housing market and rising yields and a dent for Nvidia (NVDA) as US restricts China access to AI chips.
The bond market is really driving the agenda pushing the 10 year yield over 5% despite the thought that the Federal Resere may hold off raising rates any further and certainly not at the next meeting.
Crypto Bounces
Crypto markets were heading in the opposite direction
Bitcoin price pushed higher all week finishing the week 9.6% higher than the open with an 11.5% trough to peak range.
Ethereum price was a little more up and down ending the week up 6.4% with a trough range of 8.2% - a tighter range but more volatile.
Quite a few alt coins in my holdings followed the move higher - a few examples. Avalanche (AAVE) up 31% from the lows and still going
My largest holding, HIVE found buyers and popped 17% and going higher
Chainlink (LINK) also moving up 42%
Polygon (MATIC) has been in the doldrums and found buyers to pop 22%
There were quite a few more - just a sample shown.
Bought
Redbubble Ltd (RBL.AX): Advertising. Stock has been on the big movers list a few times after resolving their US legal problems - averaged down entry price in personal portfolio.
Bank of America Corporation (BAC): US Bank. Earnings came in better than expected. Added back at 7.5% lower price than stock was assigned in June 2023. Wrote covered call for 0.48% premium with 7.34% price coverage.
iShares 20+ Year Treasury Bond ETF (TLT): US Treasuries. Am exposed to sold puts at a price quite a bit higher than current price - added a parcel of stock to average down entry price should those sold puts go to assignment. Yields are dancing an uncomfortable dance around 16 year highs while inflation numbers are moderating. Gut is suggesting the flattening will not be too far off. There is nothing in the charts that supports this gut. Did notice the article headline popping up on the charts - maybe I am not the only contrarian in town
https://www.tradingview.com/news/DJN_SN20231017010075:0/
Note: this article emerged before the Jerome Powell speech.
Wrote covered call for 0.95% premium with 2.49% price coverage. This is a little inconsistent with an averaging down strategy as stock could be called away before the averaging down is helpful.
With price opening at $84.89 (Nov 17) did open up a hedging November expiry 84/82 ratio put spread. Trade is cash neutral and offers protection for a drop in price between 1.1% and 3.5% in price. With Jerome Powell scheduled to talk in the week, this felt like a smart safe move. So it turned out with price dropping on his speech to $82.77 - do need it to stay above 82 to expiry.
A quick chart comparison to show what is happening in bond markets. The chart plots 20 year Treasuries (TLT - the bars) and 7 to 10 year bonds (IEF - dark blue line) and short term Treasuries (SHY - light blue line). When yields are rising the standard strategy is to switch to shorter duration to reduce capital risk. There are a range of investors that have to be invested in bonds - like pension funds and life companies. Since the Q3 2022 highs, the relative performances are staggering - 14 and 25 percentage points lower for longer duration. This is what my trade is about - grabbing the acceleration when this starts going back up.
Consolidated Uranium Inc (CUR.V): Uranium. Scaled into small holding. Disappointing to hit the high of the day for the entry after price dropped 2.2% on the day. Price was however only 1% premium to buying the equivalent stake in IsoEnergy (ISO.V) which dropped only 1.3% on the day. See the post last week for the IsoEnergy merger details.
Trinity Capital (TRIN): Asset Management. Exercised on 12.5/15/10 call spread risk reversal. Breakeven is $12.65 as the call spread was not fully funded by the put premium and is 8% in-the-money compared with the $13.65 close (Oct 20). Did try to exit the spread trade during market hours but the broker would not allow the trade as I already have a covered call held on the other part of the holding - their computer got confused. AAPlus idea.
Update of the chart shows price following the blue arrow price scenario almost exactly. Better trade management would have had the trade adjusted when price popped over the sold call level (red ray - 15). As AAPlus were still on the trade was happy to keep going. The concern now is price has rejected that level three times and the moving averages have reversed(20 below 50). See TIB651 for the initial trade rationale
Société BIC SA (BB.PA): Europe Consumer Products. Assigned on naked put at same price stock was assigned at in September. Breakeven is at €59.73. Wrote covered call for 1.17% premium with 3.8% price coverage.
Expiring Options
Gannett Co (GCI): US Media. With price closing at $2.47 (Oct 20), 3/4/2 call spread reversal expired worthless. As the sold premium fully funded the spread, the trade was marginally profitable. Trade idea was for price to continue its upward movement as the business made its transition from a print media business to more digital.
Quick look at the chart shows price crabbed sideways for two months after entry and then had one run at heading into profit before falling over as yields kept risng and fear of recession grew.
ASX Portfolio
The segment reports trading in ASX fractional share portfolio. Trade entries are made based on stock screens looking for undervalued stocks (price to book, price earnings, price to sales) that are showing technical signs of breaking a downtrend. Exits are made at 30% profit or 20% if 52 week high is lower than 30% advance. New buys are in $200 lots. Scale ins and top ups in $100 lots. Decided to do some averaging down entries on laggards - gold miners to add a hedging dimension to the portfolio.
Scale Ins
BHP Group Limited (BHP.AX): Base Metals. Dividend yield 5.00%
Top Ups
Summerset Group Holdings (SNZ.AX): Aged Healthcare. Dividend yield 2.20%
Quick update of the chart showing 5 trade entries - the blue and green rays. All were supposed to be based on stock screen rules - the 2nd one there was a mistake in the code. Stock has tried to break the down trend in 3 places - maybe this time the break will hold.
Metcash Trading (MTS.AX): Retail. Dividend yield 5.70%
Chart looks a little more promising after the last break upwards could not keep momentum - this time there are a series of higher lows all coming back to the uptrend line.
Fixer Upper
Aeris Resources Limited (AIS.AX): Copper/Gold Mining. Reviewed candidates for exit. Saw a broker upgrade of target price - figured if they are right could average down entry price and exit a little more comfortably than current levels.
Chart shows price has made a reversal off the lows - maybe time to resume the uptrend toward the breakeven level (dashed red ray)
St Barbara Ltd (SBM.AX): Gold Mining. Was left with a small holding when St Barbara sold their Leonora gold mine assets to Genesis Minerals (GMD.AX). A the time I topped up the Genesis holding and closed that our for a profit. Did some computation on breakeven for left over holding after the Genesis sale - not far above where price is currently trading. With a price target from one of the brokers above the breakeven - added to the holding to find a breakeven exit.
Chart shows price has made a reversal off the lows - maybe time to resume the uptrend toward the breakeven level (dashed red ray)
Cryptocurrency
Holo (HOTETH). Added to my holding on the back of the break of the downtrend.
Price had dropped hard during all of 2023 and then started to flatten off the support level (horizontal red line). Break looks solid enough - looking for an exit at the top of the steeper downtrend about half way to last entry.
Holo is to cloud hosting what Airbnb was to hotels — anyone can become a host by turning their computer into a source of revenue, getting paid in HoloFuel for hosting peer-to-peer applications. By hosting P2P apps, you support a web that empowers your peers and communities.
Income Trades
61 covered calls went to expiry with no assignements (Aus 1 UK 1 Europe 22 US 37). Only two naked puts went to expiry with one assigned (Europe 2 (1)). Credit spread exposure was low with the spread on McDonalds (MCD) expiring worthless.
Nine new covered calls written for November expiry (US 9)
Naked Puts
Wynn Resorts (WYNN): Gaming. With price opening at $90.95 (Oct 16), 100 strike sold put could go to assignment. Rolled out to November expiry for 63% loss on the buy back but 7.6% cash positive. Breakeven after all the Wynn trades should the November put go to assignment will be $71.67 = plenty of margin there.
Fiverr International (FVRR): Internet Services. With price opening at $24.16 (Oct 16), 30 strike sold put could go to assignement. Rolled out to November expiry for 118% loss on the buy back but 7.2% cash positive.
POSCO Holdings (PKX): Korean Steel. With price opening at $94.00 (Oct 16), 105 strike sold put could go to assignement. Rolled out to November expiry for 516% loss on the buy back but 6.1% cash positive. Breakeven after all the Posco income trades should the November put go to assignment will be $97.73 = work to be done there to cover that. Posco trade is all about their transition to becoming a battery maker and not to do with steel.
Resources
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
Investing: Interactive Brokers provides comprehensive global markets coverage with very competitive commissions. Open an account to earn up to USD 1,000 in IBKR stock. https://mclnks.com/ibkr
Crypto 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
Aus/NZ Investing Sharesies provides low cost, fractional share investing for Australian and New Zealand residents covering stocks in those countries and US. Start investing with as little as $20 https://mclnks.com/shares
October 16-20, 2023