That's actually DOWN $5,530 since our last review as our Short-Term Portfolio (our hedges) took a pretty good hit on the recent rally. That's fine as I'd rather have a relaxing summer not worried about losing these ridiculous gains so parking the portfolio in neutral into earnings was a sensible way to play.
We gained $186,448 (almost 10%) in the previous month so locking that in was a good goal but now we're past earnings and past the Fed and we'll have to decide what to do next. We're already 50% in CASH!!! and we love our positions and we even added a few new ones to the LTP over the past month as we have that Fear Of Missing Out disease that's rampant among the investing population.
Still, our overall portfolio performance is a barometer and we can sense changes coming when we can't make money but, as I said, the LTP itself gained $38,000 over the past month, it's the STP that dragged our paired portfolios lower – but that's what it's supposed to do in a bull market – this just indicates we played the month a bit too bearish so we can either hedge less (no way!) or add some more longs. That's a work in progress.
In our last review, we got more aggressive on BABA and SKT and, since then, we added new trades on AFL, CIM, FNF, HAL, MO, RIO, SC and VLO – so it's been a pretty busy month – even though it seems pretty dull day to day. Here's the LTP update:
- TTE – Was TOT and they haven't fixed the options yet so those are missing. Love this company but currently toppy.
- Short Puts – These are essentially a watch list of stocks we'd like to buy if they get cheaper. We just pulled the trigger on RIO, turning it into a full spead from a short put. We have collected $117,050 for promising to buy 17 stocks if they get cheaper and, if they don't get cheaper, we keep the money. The remaining net is $76,368 so that's what's left to gain if the rally persists and, if not – this will be our next LTP collection.
- CIM – Recent addition and we just sold more puts as well. This is a $30,000 spread at net $29,150 and deep in the money – we're just in it for the dividends, which will be $900 this month.
- SKT – We just rolled the short $10 calls to the $15 calls and this is now a $120,000 position that's fully in the money at net $111,800 and they just paid us a $1,424 dividend, which is better than we do on cash, so no reason to kill it. $8,200 left to gain. Keep in mind that 6 more dividends is $8,544 so $16,744 will be about 1% per month on our money – PSW Members are spoiled but that's a very nice return!
- BABA – We just got more aggressive on these and, realistically, I expect to see $260, which would be $60,000 on the long calls and currently we're net $32,625 so that's $27,375 left to gain but we'll improve that by selling more calls when we do pop.
- BIG – Glad we sold those short calls. It's a $40,000 spread that's 100% in the money at net $8,200 so a very healthy $31,800 (387%) left to gain if BIG can simply hold $65 so I'd say that's good for a new trade, wouldn't you? Options are amazing! Your entire risk on this trade is having to buy 1,500 shares of BIG for $40 ($60,000) plus $8,200 if that is lost as well so net $45.66 is 30% below the current price – that's your WORST CASE….
- BRK.B – Berkshire is a proxy for the S&P 500 and I like it better as they are the best of the S&P. We are miles in the money at net $47,292 on the $50,000 spread but we don't need the money so $2,708 left to gain by Jan.
- CHL – Dead until they figure out what's happening with the options.
- CSCO – This is a $60,000 spread that's now in the money at net $52,310 so only $7,690 left to gain but by Jan as well. Again, we are very spoiled at PSW as we look at 14.7% over 6 months and feel like it's too boring to keep.
- FB – At the heart, it's a $20,000 bull call spread and we Butterfly'd it by selling short puts and calls for incime. All going well at net $217 and hopefully we do better than $19,783 as we have 18 months to keep selling short calls as well.
- FL – Miles over target at net $34,425 on the $37,500 spread. It's not worth keeping so let's kill it.
- FNF – Still has that new trade smell and cheaper than our entry. It's a $12,000 spread at net $5,725 so $6,275 left to gain and, obviously, this is just the initial entry so we'd love it to go down so we can buy more.
- GILD #1 – Clearly we love these guys, we bought them twice. We're 100% in the money at net $8,917 on the $15,000 spread so $6,083 left to gain here.
- GILD #2 – This is a $100,000 spread and currently we're at net $69,150 so $30,850 left to gain is a nice amount for a position that's 100% in the money already.
- GOLD – A $45,000 spread that's net $9,135 after slipping to just $5,000 in the money. With $35,865 (392%) left to gain, it's good for a new trade and the rolls to $15 or $10 are too expensive (more than 0.50 per $1 in strike) so we just watch and wait on those but I do feel like it's a good time to buy the 50 short 2023 $27s back for $1.75 because, if GOLD goes higher – we sell them again for more money and, if gold goes lower, we sell the $20s (now $3.80) and use that money to roll lower. Keep in mind we're up $10,000 on those already.
- GS – Surprisingly, it's only net $33,150 on the $40,000 spread despite being almost 200% in the money. With $6,850 (20%) left to gain over the next 18 months – one could argue that this may be the best trade in the World at the moment…
- IBM – I love our Trades of the Year! This one is miles in the money but we should have covered at $150 as that was silly. Let's sell 10 2023 $140 calls for $16.50 ($16,500) and buy back the short puts ($8,200), not because I'm worried about them but because I think we can resell higher puts for more money on a pullback. That leaves us with 10 at $25,000 and 10 at $40,000 for a potential $65,000 and net $50,950 on the positions with $14,050 left to gain.
- IMAX – Now I wish we did more. $25,000 spread at net $16,950 has $8,050 left to gain, which is 50% but seems boring.
- INTC – Our current Trade of the Year is a $75,000 spread at net $50,025 also has a 50% upside of $24,975. Yawn… It makes that money only if Intel doesn't drop 14% from where it is now.
- LYG – One of our newer ones and we almost got to $3 but pulling back again. There's no sense in covering as the Jan $3 calls are just 0.15 and we're already up $3,250 on the net $2,250 spread so 150% in 3 months is very nice. We'll just let this play out.
- MMM – Miles over our target on the $45,000 spread at net $42,743 and, since it's Jan (and since we have nothing better to do with the money), we'll wait to collect the last $2,257. Of course I guess we should put all this spare cash in that GS trade to make 50%, right?
- MO – $30,000 spread at net $133 has $29,867 (22,456%) left to gain so I'd say that's good for a new trade!
- NRG – We just rolled the longs lower and doubled down on the last dip. I say $42 would be $17 on the calls for $34,000 and we're at net $25,425 now but we'll seel some short calls like the $40s, which are now $3.25 for maybe $5 ($10,000) and then we'll be net $15,425 on a $30,000 spread so let's call it $12,500 of upside potential.
- PAA – We're miles over target and just collecting dividends here. They just paid us $1,440 and we have $44,560 tied up so that's 3.2% per Q for keeping our money here instead of cashing out.
- PBR – Fairly new trade with a $25,000 spread at net $14,625 already as it really took off since our net $1,250 credit entry (because we did that aggressive put sale). Still another $10,375 to go and we're already 100% in the money.
- PFE – $35,000 spread is already 100% in the money at net $21,537 so $13,463 left to gain.
- PHM – Recently added $30,000 spread and only net $13,200 so $16,800 left to gain is more than 100% – great for a new trade.
- QSR – $18,750 spread tested our target already and now net $4,450 has $14.300 (321%) left to gain so also good for a new trade.
- REYN – Just a $10,000 spread which is 99% in the money at net $5,450 with $4,550 left to gain. Just a starter position, we'll buy more if they pull back.
- RIO – Another new position. This is a $30,000 spread that's mostly in the money at net $4,975 so $25,025 (503%) left to go is great for a new trade.
- SPWR – Take a hint, it's in every portfolio! Here we have a $56,000 spread that's 200% in the money at net $52,820 but we can do better so let's kill this trade and move to 75 of the 2023 $20 ($10)/35 ($5) bull call spreads at $5 ($37,500) and sell 30 of the 2023 $25 puts at $7 ($21,000) for net $16,500 on the net $112,500 spread and we put $36,320 back in our pocket too on what was originally a net $2,160 entry. Our upside potential on one of my favorite stocks is now $96,000 (581%).
- T – It's an $80,000+ spread as it's not fully covered and it's only trading at net $35,875 so the $44,125 upside potential would seem very exciting if we hadn't just done that SPWR trade.
- UBS – Fairly new $12,500 spread is 100% in the money at net $7,900 so $4,600 left to gain is 58% but it's by January so nice.
- VIAC – Last year's table-banger is down in the dumps again. We already got more aggressive so just waiting now. Let's call it a $50,000 spread at target of $50 and currently net $34,235 but if we sell 20 $50 calls for $8, that will knock $16,000 off that net for $8,235 on the $50,000 spread so let's call it a $30,000 upside potential to be conservative. Fantastic for a new trade -stupidly undervalued – again.
- VLO – $30,000 spread and we just sold 5 short calls as they hit our goal and we're at net $11,307 so $18,693 left to gain, not counting more short call sales. Consider that, with our $11,307 spread that has 165% upside potential (10%/month) we sold 5 (1/3) short calls for $2,250 for about a month of the 18 months we have left. That's 20% of the $11,307 as a BONUS to our regular position – IN A MONTH – that's why this portfolio is up 283.9% in less than two years. It's not complicated, we pick good value positions, play them to rise in price and, when it gets to our fair value level, we sell even more premium for income. Wash, rinse, repeat.
- W – A short! This is a $50,000 bear put spread and we sold 3 Aug $300 calls as well so we're at net $27,420 with $22,580 left to gain and, of course, there will be more short call selling. In a bear put spread, the short call is like a short put with a bull call spread.
- WBA – Last year's other table-banger. We have a $75,000 spread that's 120% in the money at $62,389 so the thrill is gone with $12,611 left to gain. The short puts are not doing us much good so let's buy them back and wait for a dip (or the 2024s) to sell more. Since we have 50 longs, we may as well sell 20 Aug $52.50 calls for $2.10 ($4,200) to generate a little more cash as well.
- WPM – Another old Trade of the Year! We could just have a Trade of the Year Portfolio and retire on that. This is a $30,000 spread at net $7,925 for no good reason so great for a new trade with $22,075 (278%) upside potential at $50.
- WU – Just a $20,000 spread and good for a new trade at net $3,175 with $16,825 (530%) of upside potential at $30.
So we have a very health $676,193 of upside potential which is 35% of the entire portfolio and 70% of the net value of the open trades. We also have about $350,000 of downside protection in the Short-Term Portfolio, which itself is just over $200,000 so, even if it gets wiped out in a huge rally, we'll still net over $400,000 to the upside (assuming our positions go with the market).
It's very important to know what you expect out of your positions so we can see if they are on track or off-track and also if they are worth having at all. Making $676,193 is a good use of $2M so, unlike Sept of 2019, when we shut down our last set of portfolios – we're keeping these going – even though we've passed the $2M mark from our $600,000 beginning. The difference is the VIX, which is still hovering around 20 and is giving us great premiums to sell – making it more worth the risk than it was in late 2019.
We don't mind taking chances – as long as we're being compensated for doing it!