Let's see if the bargains are still out there.
Follow the links to see the whole Trade Alert, here we're just recapping th
Top Trades for Mon, 04 Apr 2022 16:01 - DELLThat's net $13,250 on the $37,500 spread and I'll be very disappointed if all we do is make $24,250 (183%) at $55+ (10% higher than we are now) but what we have is a nice, uncovered gap where we can sell 5 or 10 short calls, like the June $52.50s, which are $1.55 so if we sold 10 for $1,550, we'd be using 74 (11.2%) of our 655 days to make 11.6% of our net entry back.
This is an interesting one as the plan on April 4th was to double down if Dell went lower (which it did):
That seems worthwhile but we'll wait for it to get higher in the channel or, if it goes lower, we could sell 20 of the July $50 calls, which are now $3 ($6,000) and use that money to roll our 25 2024 $40 calls to the $30 calls, which are now $20 for hopefully $5 or less so $12,500 and then we'd buy 10 or 15 more for maybe $16 so let's say we bought 15 more for $24,000 and then we'd have
And we would have spent $13,250 - $6,000 + $12,500 + $24,000 = $43,750 for the $100,000 spread so instead of looking to make $24,250 at $55, we're now looking to make $56,250 and, of course, we could still reduce that cost along the way with 18 more month to sell when the short Julys run out and, if they don't - we can easily roll them up at least $5 and our spread would be back on track so - on the whole, we'll basically be very disappointed if all goes "well" and we only make 183% on this one.
Those are the kind of moves we make in the Live Chat Room all the time as the original entry was simply dipping our toes in the water but, since I don't have pricing for the roll - let's just see how the original spread is doing:
Top Trades for Tue, 12 Apr 2022 13:51 - BASince I'm very sure I want to buy 1,000 shares of BA for $135 in our $2.4M portfolio (which is well-hedged), then I still consider our original $15,000 collected to be free money and now we can put it towards a bull call spread in the LTP:
That's net $43,000 on the $110,000 spread and we sold the puts for $15,000 so net $28,000 with $82,000 (292%) upside potential but, as a new trade, you can sell the 2024 $200 puts for $43.65 and that's $21,825 and the net of a new spread would be just $20,175 with $89.825 (445%) upside potential. Should BA go lower, THEN I'll want to sell 5 more puts and roll the $170s to the $150s (now $54) for $10 or less so $20,000 more intended to spend if BA goes lower less any additional net from more puts sold - which will depend on WHY they go lower. If we think the reason is silly - then we'll do an aggressive sale. If we think BA is weak, we'll do the 2x roll to 2025 which won't net us more money.
Either way, I expect to be able to also make money selling calls along the way. July $200 calls are $6 so just selling 5 of those brings in $3,000 for the Quarter (one of 7 we have to sell) but let's see how earnings look first.
All Biotechs are taking a beating this quarter and yesterday, in our Live Trading Webinar, we were discussing putting more eggs in fewer baskets and MRNA is still our favorite (not counting PFE) but we have a severe loss in our Long-Term Portfolio on that spread:
In context, of course, we promised to buy $280,000 worth of MRNA stock and we're down $82,288 though we did buy back the short calls with a net $24,000 gain so that's a net net $52,288 loss, which is only 20.8% of our commitment to $280,000 worth of the stock. Also, notice the stock is down 25% since January so we were better off with the options play than owning the stock. That's because our short puts were PROMISES to buy the stock if it got cheaper, rather than paying $200 at the time.
If we do intend to stick with MRNA for the long haul - it is beyond foolish not to improve the LTP position. Our 20 2024 $150 calls are $44.28 ($88,550) and the 2024 $130 calls are $52 and of course it makes sense to spend net $7.72 to push ourselves $12 in the money and gain $20 in strike. That will cost us $15,440 but we can offset that cost by selling 20 of the $200 calls for $30 ($60,000). Since that would put us +$44,560 and 20 more longs only cost $104,000 - why not sell 15 more of the 2024 $200 calls for $45,000 and buy 20 more of the 2024 $130s for $104,000 and then we will have spent net $14,440 to move from 20 long 2024 $150 calls to 40 of the 2024 $130 calls, covered with the $200s.
This is also good as a new trade, of course.
At $200, we would recover $280,000 and, since we have 5 open calls, we can sell 5-10 short-term calls, like the July $170s for $10, to pick up some extra income along the way. Selling 10 July calls for $10,000 would use 78 of the 631 days we have to sell and 5 extra short calls carry very little risk. Perhaps we could make $50,000 doing this consistently while we wait - but not yet - let's see how earnings go before selling short calls.
As to the short puts, $200 is still our target so we'll wait for earnings as we are in the puts at net $175 and net $140, which is where we are now, the rest of the loss is paper premiums, which shouldn't bother us as long as we REALLY want to own the stock - and we do! There are about $100,000 worth of short puts but the 2024 $150 puts are $45 so we could bump up to 20 of those at $90,000, paying $10,000 to drop to the lower strike and, as we collected $52,000 originally, we'd be in the 20 short puts at net $42,000 or $21 per put so our net entry would be $129 - even lower than we are now. And that's before we roll out to the 2025 puts, which should come out in July.
This is how we "fix" a trade but that only works if we were right about the long-term value of our stock and that remains to be seen but MRNA is one I am happy to take a chance on. Most of our other Biotechs we will be pulling the plug on in favor of this spread, which hopefully will get us our money back and more for the whole group.
LOL - and that is just the "short" version! Let's no one say we don't have a trading plan, right? Let's simplify it and assume we stuck with the 5 short 2024 $200 puts at $79.18 ($39,588) and bought 20 of the 2024 $130 ($52)/200 ($30) bull call spreads at $22 ($44,000) and that simple entry was net $4,412 on the $140,000 spread, so what's not to love about that?
I think JXN is a good add to the Dividend Portfolio since there's good premium in those options. Let's add a block:
That's net $23,750 and we get called away at $40,000 or we get assigned 1,000 more shares at $40 ($40,000) to average $31.875 per share, not including the expected $3,850 in dividends. That brings our net net down to $19,900 for the 1,000 shares and we'll be disappointed to be called away at $40 (almost 10% lower than it is now) with a double in 20 months.
Catastrophic failure here with JXN dropping about 40% more. At $25.96, the stock is $25,960 and the $40 calls are $1.55 ($1,550) and the $40 puts are $17 ($17,000) for net $7,410 and that's a loss of $16,340 (68.8%) . We're already obligated to own another 1,000 shares at $40 ($40,000) and we will roll and adjust when 2025 options come out but, at the moment, I'd consider it in at $63,750 on 2,000 shares so $31.875/share but the good news is you can sell the 2024 $25 calls for $7 and drop the basis to $24.875 so there's a path to get even and 2025 calls should pay more and more short put sales can enhance that too.
The 2024 $25 puts are also $7 so if you sold the puts and calls for $14, your basis on 2,000 (assuming the assignment of the $40 puts) would be cut to $17.875, potentially called away at $25 with a nice profit OR being assigned 2,000 more shares at $25 ($50,000) for net $85,750 on 4,000 shares ($21.4375/share). So, if you don't want to own 4,000 shares of JXN at $21.44, then best to take the $16,340 loss now but I kind of like the idea and the upside potential at just $25 is $14,250 if JXN goes up from here instead of down .
That is why we scale into our positions, even a loss as catastrophic as JXN can be fixed, as long as our original trade block was a workable size to begin with.
Top Trades for Thu, 28 Apr 2022 13:28 - BA and GNRCI take it back, we did follow-through on the April 12th Top Trade Alert:
Even cheaper now!
When the VIX is around 30, we need to look at everything and think "How can I sell more premium?" Rolling down has that affect as we roll to a position (usually) that has less premium and we sell covering calls that have more.
In this case the BA 2024 $170s are $28.28 and the $150s are $37.15 so net $8.87 to roll down $20 is worth $17,740 to widen the spread by $40,000. Owning 500 shares at net $170 certainly doesn't scare us and I think we'll save a potential DD for if they go lower. In theory, we could buy 20 more of the $150s ($74,300) and sell 5 2024 $175 puts for $40 ($20,000) and we sell 20 $200 calls for $18.50 ($39,000) then we're only spending net $15,300 to buy another $100,000 spread so that spread (5 short puts and 20 of the $150/200s) is a no-brainer as a new trade. Now that I write it out - I decided to make it official as it's too good to pass by.
While we are at it then, let's sell 5 GNRC 2024 $180 puts in the Earnings Portfolio for $18 ($9,000) to remind us to keep an eye on them. No worries about the net $162 entry, which is $70 (30%) below the current price.
The $150s are now $42 ($84,000) so a $5,000 gain on that roll from the original above. As a new trade, the $175 puts are now $41.25 ($20,625) and the $200 calls are now $22.25 ($44,500) so the new trade is at net $18,875 from the (adjusted) original $15,300 so is certainly still good for a new trade on this $100,000 spread with $81,125 (429%) upside potential at just $200.
As to GNRC, the $180 puts are now $28.50 ($14,250), so those are down $5,250 (58%) at the moment and, of course, I love them for a new trade - we just picked the wrong day to get started.
So April was no prize with 6 trade ideas yielding 4 losses and 3 wins for net $-12,752 loss to date but it's early innings and you've got to be in it to win it - as they say.
Top Trades for Mon, 02 May 2022 15:34 - JPMThat's net $9,500 on the $50,000 spread with $40,500 (426%) upside potential at $140. Since we're very happy to own JPM at $100, the spread is a small commitment and, if for some reason JPM drops 20% (our puts are still safe) then we'll be THRILLED to roll the long calls down $20 for $10 more ($25,000) and we'd be in the $100,000 spread for net $34,500 with $65,500 upside potential - we can certainly live with that!
When the worst case sounds better than the base case - it's a good trade!
I love this one. Though JPM is a bit lower, post-earnings the volatility has calmed down and the $100 puts are $9.55 ($9,550) and the $120s are $13.40 ($33,500) and the $140s are $6.50 ($16,250) so we're net $7,700 for an $1,800 loss at the moment and still great for a new trade with $48,200 (2,677%) upside potential.
Top Trades for Tue, 17 May 2022 13:43 - BFIThey do have options but very thinly traded but, in the Future is Now Portfolio, let's sell 40 of the 2024 $2.50 puts for $1 as that's a net $1.50 entry so we're collecting $4,000 with a $6,000 risk if they go BK - nothing wrong with that. The 2024 $2.50 calls are $1.45 and the $7.50 calls were 0.65 this morning so that net 0.80 spread is interesting enough to buy 50 of for $4,000 and we'll see how that goes. From the perspective of our whole spread, we're in for net $0 on the $25,000 spread and our worst case is only owning 4,000 shares at $2.50 ($10,000).
We don't play a lot of penny(ish) stocks but, as noted in the Alert - I know this chain well and they are serious so just the fact that they continue to exist should make us money - and it already has.
Top Trades for Thu, 26 May 2022 11:42 - JD, MDT and GLWIn the LTP, let's do the following trades from our Watch List:
That's net $12,500 on the $50,000 spread that's $32,500 in the money. Upside potential is $42,500 (340%).
MDT had a recent failure in glucose monitoring but it's a $141Bn company at $101 with $32Bn in revenues and $7.5Bn in profits and generally solid growth despite little mis-steps like this one. For the Future is Now Portfolio, let's:
That's net $1,500 on the $15,000 spread so we have $13,500 (900%) of upside potential at $100 - a 10% bump from today.
That's not bad as a new trade but, as a new, new trade - I'd go for this:
That's net $1,000 on the $20,000 spread that's $8,400 in the money to start and the upside potential is $19,000 (1,900%) if INTC can scratch it's way back to $50 in the next 18 months. You see, there's no need to bet on crazy stocks or take crazy risks to make huge returns. The worst case in this spread is owning 1,000 shares of INTC for net $46,000 or $46/share - just a little bit more than buying the stock today and, of course, we can roll the short calls to lower strikes in 2025.
What a disaster so ar. Again we are saved by the very conservative, narrow spread but still, the short puts are now $8.90 ($8,900) and the spread is now $6.60/2.85 or net $3.75 ($7,500) which is a $1,400 credit and a $2,400 (240%) loss at the moment . The $35s are $9.20 so $2.60 to roll down the $40s - that's what I would do . That would put you in the now $30,000 spread for net $6,200 with $23,800 upside potential .
So May is closed with 3 wins and 3 losses and a net gain of $7,000 thanks to some very conservative entries. Still a lot of room for them to grow. Generally, we try to keep a 2:1 reward to risk ratio so, even when we are only 50/50 on our picks - we are still able to make some gains. Top Trades for Mon, 06 Jun 2022 11:21 - GOOGLIn the LTP, let's sell 1 GOOGL 2024 $2,000 put for $200 ($20,000). I think we have good support there - $2,400 is right about 20x so $2,000 is about 17x and our net $1,800 is 15x and we can always roll from there.
They split the stock 20:1 so, effectively, we sold 20 2024 $100 puts for $10 and, sadly, they are now $11 ($22,000) so we are down $2,000 .
TGT/Millard - From scratch, I'd go with:
That's net $18,625 on the $60,000 spread with $41,375 (222%) upside potential in 18 months if TGT can get back to $170.
I like these guys but they are getting sold heavily on this news. They sell modular furniture and $28 is just $430M in Market Cap and they expect to make $50M this year and $70M next, which is on-par with their growth track. Let's take advantage of this silly reaction and add them to our Future Is Now Portfolio:
That's net $1,000 on the $7,500 spread so $6,000 of upside potential if they can just hold $30.
In the Earnings Portfolio, let's:
Here we're taking a bigger position as this portfolio has more cash and is way ahead. It's net $7,500 on the $31,250 spread so we have $23,750 (316%) in upside potential - but that's for just 6 months, so very nice.
Top Trades for Fri, 10 Jun 2022 12:47 - IBM and CIMIBM is our Stock of the Year and still stubbornly at $135 (because it's so great) and pays a lovely $6.60 per $135.78 share (4.7%). You can buy the stock and sell the 2024 $125 calls for $25 and that nets you in for $110.78, called away at $125 with a 14% gain in 18 months plus the dividend - better than keeping it in the bank and, if they drop 20% to $108, you can sell the 2024 $100 puts (now $8.65) for what the $125 puts are $14 or better and then your net is $96.78.
Bad day to look at IBM as they just tanked. Only makes me love them more. Let's say it was 500 share which are now $129.71 ($64,855) and the $125 calls are now $17 ($8,500) so net $112.71 would be a loss of $1.93 ($965) and the short $100 puts stopped at $7 so far but, now that earnings have passed, I'd sell 5 $110 puts for $9.20 ($4,600) to drop the net cost per share to $103.71, potentially called away at $125 and collecting those dividends.
And, of course, there's CIM at $9.57, who pay a $1.32 dividend (13.4%) and you can buy those shares and sell 2024 $10 calls for 0.80 and the 2024 $8 puts for $1.50 and then you are in for net $7.27, called away at $10 with a $2.73 (37.5%) gain and collecting 0.33 (4.5%) PER QUARTER while you wait. How can you not love that?
$9.27 this morning and the $10 calls are 0.70 and the $8 puts are still $1.50 so net $7.07 is an 0.20 loss and I would have done at least 2,000 for a $400 loss so far but they paid an 0.33 ($660) dividend on June 29th so net winner, winner for $260 ! And THAT is why we love our dividend stocks.
Top Trades for Tue, 21 Jun 2022 10:09 - LEVI and FThey pay a pretty nice 0.40 dividend but so does F for a lot less money so we should stick with options for the LTP:
That's net $650 on the $25,000 spread. That's an upside potential of $24,350 (3,746%) and it would cost us $20,000 more to be in the $10s, so it's not worth it as I think $23 is an easy target.
Still, if we say they make $5Bn a year until inflation gets them back to their usual 5% Net Profits and we give them 10x in a non-panicked market - that's going to be a $50Bn valuation at about $12.50. That's where we'd draw the line. So, as a new play on F, I would like:
That would be net $3,250 on the $25,000 spread so the upside potential, at $15 or above, would be $21,750 (669%) and we're starting out $6,000 in the money already. Worst-case scenario is owning 2,000 shares of F at $12 and, if we lose the $3,250, our net cost would be $13.62/shar but then we could sell 2026 puts and calls and knock $4.65 off that price, right?
Meanwhile, F pays a nice 0.40 dividend so we could do the above as a stock play as such:
In this case, we're in 2,000 shares at net $11,560 or just $5.78 per share and that makes the 0.40 annual dividend 6.9% while we wait to get called away at $12 ($24,000) for an additional $12,440 (107%) in profits - and that's at $12 - LOWER than the stock is trading now. The worst-case scenario to the downside is you are forced to buy 2,000 more shares for $12 ($24,000) and then you are in 4,000 shares for $35,560 or $8.89/share - which is 20.8% below the current price. Not even including the dividends.
When your worst-case scenario is something that sounds pretty good - then it's a good trade to make, right?
Top Trades for Tue, 21 Jun 2022 13:58 - TROX, BBYI think, for the LTP, let's just sell 20 of the TROX 2024 $18 puts for $4.50 ($9,000). That nets us in for $13.50, which is a 20% discount and it will remind us to keep an eye on them.
The puts are now $4.75 so we're down 0.25 ($500) at the moment . Still like it, of course.
For the LTP, let's put our foot down here: That's net $8,300 on the $60,000 spread so we have $51,700 (622%) upside potential and we're $20,000 in the money to start. Aren't options fun? Downside risk is owning 1,000 shares at net $78.30 - 10% higher than it is now but I don't think that's too aggressive and we could sell another $25.60 set of puts and calls and we'd be back to net $51.70 - that would actually be a good thing to have! When you love the worst case - it's a good trade!
MMMB is stupidly cheap again at $1.22. Small little company but a great value down here.
It's up 0.10 so lets say 5,000 shares would net $500.
That's net $8,875 on the $62,500 spread so the upside potential is $53,625 (604%) over $135 and we're being aggressive on the short put sale as I'm very comfortable with the target and it's rollable, etc. After 152 years in business I think they'll be fine and they just passed their stress test - although they were in the bottom of the bunch but that's because they are poised a bit bullish and taking on risk - which I agree with.
So that's a lovely 9 wins and 4 losses in June and we made $20,735 and, for the quarter, it was 16 winners and 10 losers for a net gain of $14,983 and again, I cannot emphasize enough how important it is to always have a good risk/reward ratio so you don't have to be right all the time to make good gains.
These gains are so-so, not even good but it was a terrible quarter and we have a lot of great entries - I'm very happy.
Now that we have some earnings data and the market has stopped falling - expect more Top Trade Alerts to close out the month next week and plenty more going forward - if the markets don't collapse...
