May Portfolio Reviews – Members Only

Not much to report here, GMCR burned us but now we can turn that into a nice winner if it comes back down.  Since we made $5 on the short puts, our break-even is $14.50 and we're almost there already.  USO not going to well but not worth adjusting either.  I'd like to roll up to the $39 puts, now $1.99 for .50 or less if oil goes higher (now $102.45).  NFLX we just added today. 

Butterfly Catching Portfolio:  

I cannot stress enough how great this portfolio is for the conservative investor.  We're using just 1/6 of our buying power and generating 20% profits on the whole portfolio.  That means that 1/6th that's working is up 120% so far!  You never want to go more than 50% invested – just in case one of your positions blows out and you have to adjust but we have plenty of room to add more – when we identify another stock with options that are priced more volatile than we expect the stock to be.  It's a rough criteria but we seem to find them often enough.  The low VIX makes it rough at the moment.  Still, up 5% since last month – not too shabby!  

• BTU – That one has been a wild ride and we'll need to roll the May $16 caller ($3.15) to the Sept $17 calls ($2.70) for net .45.  We're getting more confident in the long story here, so we'll spend $450 to move up $1,000 in strike on our 10 contracts.  Don't forget, these trades don't terminate in 2016 – we'll simply roll our long positions out to 2017 or 2018 when the time is right and keep on rolling the short positions - RAWHIDE!  
• CZR – This one is like a little cash machine.  Looks like we're on the nose this month and that means we're profiting almost all of the $3,200 worth of puts and calls that we sold on 3/31 (45 days) against our $6,600 long position, so that's 48% back on our money in 45 days.  If you like making 1% a day on your money – these kinds of trades are for you!  Now we have to think of where CZR will be in Sept (there is no July or Aug and June is too soon) and I'm liking them to get back to $22.50 by then and we can sell the Sept $21 calls (to be safe) for $2.10 and the Sept $20 puts for $2.60 to drop another $4,700 in our pockets (71%) over 128 more days (0.55% per day).  

• DIS – Just over our $80 goal but we sold $3,150 in May premium and we're paying back $1,300 of it ($1.30 for the May $80 calls) for a net gain of $1,850 against a $46,910 long position, which is 4% in less than 30 days – still a very nice rate of return in a different variation of our usual spread.  Because of the structure, we could care less if DIS goes up or down (we're covered both ways) and they do have July contracts so we'll sell the $82.50 calls for $1.95 and the $80 puts for $1.90 and drop another $3,850 in our pockets.  
• TXN – This is our first month on this one and we nailed it, with both the puts and calls expiring worthless for $1,400 against our $6,350 long.  That's 22% back on our money since 4/23 – not bad!  Our premise remains this stock goes nowhere so we'll sell the July $45 puts for .98 ($980) and the $47 calls for .90 ($900) and drop another $1,800 in our pockets.   Pay-offs are lower this month because the VIX is so low – nothing we can do about that.  

Income Portfolio Review:

Fortunately, we don't really have anything to move here as our trades are all longer-term.  Our $500,000 Portfolio has $570,000 in cash because we are Being the House and collecting a lot of premium.  So far, we've realized a 7.1% gain for the year ($35,600) but, of course, we cashed out at the end of March and we're only just rebuilding our positions.   

At this moment, cashing out has been a failure compared to riding it out as the LTP, which was also up about 7% in late March, is now up 12% BUT the LTP does not have $570,000 in cash – it "only" has $520,000…  If the positions in the Income Portfolio do what we expect and the premiums we sold expire worthless, we'll be up the same 12% – the real difference is the LTP positions are more mature and are already realizing their profits.  

On the other hand, we have tons of buying power in the Income Portfolio, so I'll be a lot more inclined to add some of those new positions, like the ones we discussed in yesterday's webinar.  Whichever ones are cheaper next week – those are the ones we're likely to buy.  

Meanwhile, we're not fighting the generally bullish market and selling short calls just yet, especially at these crappy option prices (due to low VIX).  There's not a position here I wouldn't be happy to double down on if it got cheaper – so waiting and seeing is our plan over here.   

Short-Term Portfolio Review (STP):  Always keep in mind the STP and LTP are PAIRED portfolios.  The $100,000 STP is primarily a hedge for the $500,000 LTP and is generally bearish.  We play around with other positions to try to make back the money we lose on our insurance plays but, in general, we don't expect to make any profits here – unless the market has a sharp correction, of course.  

That means we're usually looking for BEARISH plays to include in this portfolio but, once in a while, we'll risk a long position if we think it has good odds of a quick pay-off.  

• DXD – This is our primary hedge and DXD is a 2x Ultra-short on the Dow, now $26.40.  So we need a $2.45 move (10%) in DXD to get to $28.85 where our calls get in the money so, on a 5% Dow drop, our protection kicks in at which point each 5% additional drop on the Dow pays off $2.50 x 60 contracts or $15,000.  That's our insurance policy.  It has a deductible (the first 5% drop) and it cost us $5,100 to cover ourselves through July.  The key is that our LTP positions, if the Dow stays this high through July, should make a lot more than $5,100 – as the premium we sold will continue to burn off.   That's all there is to it!  
• SLW – Even though it's down 40%, I still love this trade.  Silver popped from $19 to $20 but SLW only went from $21.50 to $22.24 so I think they've got more in them.  I'm sorry we didn't DD sooner but let's do it now and roll our 10 Jan $20 calls ($3.40) to 10 2016 $18/27 bull call spreads ($3.65) and we'll sell 10 2016 $18 puts for $2 which drops our net to the original $5.70 + .25 for the roll – $2 for the short puts is net $3.95 on the $9 spread that's $4.22 in the money.  Effectively, we're taking $1,750 off the table and drastically improving our position.  
• TWTR – Those long calls are the dead remains of a spread we already cashed in.  
• SCO – Those are dead.
• GMCR – We just bought back the short calls.  Hopefully GMCR breaks back below $110.
• NFLX – Brand new this morning.  
• CI – We're going to move these to the LTP, more on that next week (remind me).
• RIG – Also needs to move to the LTP – these were bullish offsets to bear trades and have done their job but no sense keeping them in our active portfolio.  
• CAKE – This was an earnings play and we're hit it right.  May as well buy back the short June $47 calls, now .25 and I like CAKE long so let's buy back the Oct $49 calls too (0.90) and see if they can get back over the 200 dma at $45.75 next week.  If not – we move them to the LTP!  
• CMG – We should have sold the calls this morning at $14 as we're sick of them.  Nothing wrong with this trade – just needs more time and we can dump them to the LTP if they don't close well this week.  
• FAS – Right on the button on our short calls.  Would be great if XLF flatlines at $22 into Friday.  We will have to roll these if they don't expire but we'll also have to wait and see.  Either way we'll be selling more June calls as this is a great little income producer.  
• FB – Right on the button but doesn't expire until June.
• FSLR – They dropped more than we thought but it was a bearish credit spread so no big deal.  Too early to cash out as we still have $600 more to collect on the short calls.  
• LQDT - Brand new spread, just added.  
• TSLA – The spread is up $2K so that's good but it gives me a headache trying to figure out what want.  I guess we want TSLA to be below $200 but not too far below and today it's at $190 so that's perfect and, if that keeps up through Sept, we have another $10K coming – so worth waiting for…

Long-Term Portfolio (LTP):  This is the crux (along with the Income Portfolio) of our "Get Rich Slowly" strategy.  We are not going for big wins here – we are going for STEADY wins – about 20% a year, year after year can do wonders for your bottom line.  The Income Portfolio concentrates more on generating cash – as it was originally set up for my Mom and her friends to draw some spending money off their retirement accounts.  The Long-Term Portfolio assumes you're on at least a 10-year plan and the goal here is to accumulate a lot of positions that are safely in the money and THEN we will begin to draw a regular income as well.  

As usual, I love the entire short put section.  If we didn't have 40 HOVs, I'd want to DD but committing to 8,000 shares, even at net $4, is a lot so we'll leave it at 40 contracts.  

• RRD – On the other hand, we just made a new play on so let's take the 20 short 2016 $15 puts (now $2.75 = $5,500) and move them to 15 of the $17 puts at $4 ($6,000) so we get $500 more and drop our exposure from 2,000 at net $12.80 ($25,600) to 1,500 at net $13.92 ($20,880) and we'll add 15 of the 2016 $15/20 bull call spreads at $1.30.  
• TASR - Now the stock is cheap enough ($12.98) that we want it so let's buy 1,000 shares and sell 10 of the 2016 $13 calls for $3.30 too.  Since we already sold the $15 puts for $3, that gives us a net of $6.68/10.84.  
• DBA – $2.75 out of a possible $4 with the spread 100% in the money.  We wait.  
• GLL – $6.50 out of a possible $8 with the spread 100% in the money.  We wait.  
• HK – Nicely on track with a huge gain.  
• AAPL – Nicely on track with a huge gain.  
• ABX – On track.
• BRCM – We wisely sold the May $30s and they are expiring worthless.  VIX is too low to bother selling Junes at the moment.
• BTU – Nicely on track with a huge gain.  
• CLF – Nicely on track with a huge gain.  
• EBAY – On track.  
• IRBT - The Dec $35 calls are $3.40 and we can roll them to the $30 calls at $5.50 for $2.10, which is worth it to get $1.55 in the money, of course.  No other changes yet.  
• LGF – Time for more of these.  The 2016 $25 calls are $5.50 and the $20 calls are $8.25 so $2.75 to roll down $5 is reasonable.  We'll also buy back the short 2016 $35 calls for $2.40 and see how that goes.  
• LULU – On track.  
• MSFT – Nicely on track with a huge gain.  
• RIG – On track.  We were supposed to sell calls when they tested $45 – out bad for forgetting!  

• SHLD – Now they are selling off Canada.  What's going to be left.  We're way up on this one but, if the stock can't hold $42 next week, I think we pull the plug.  
• SLW – An aggressively bullish play, nice for a new entry.  
• SPY – Our bet is the S&P finishes the year over 1,800.  Well ahead at the moment.  
• T – On track.  
• TWTR - Let's buy 5 more 2016 $23 calls for $13.85.

Not a bad group of stocks.   Very nicely diversified and well-hedged.  Up $60,000 in 4 months is pretty good too!  Hopefully we can keep up the $15,000 per month pace (and we'll discuss this in our Portfolio Management Webinar) and net out $180,000 for the year – that would be a great start to this new portfolio!