Philstockworld September Portfolio Review



That is DOWN $195,130 for our paired portfolios for the month, but still up over 100% for the year. We have a very large, very volatile bet on Tesla (TSLA) that we're riding out and that let both to last month's huge gain and this month's huge loss but last month showed us the massive potential the position has as it's currently net -$881,087 so, if TSLA ends up between $300 and $380 in January (now $450), we stand to almost double our entire portfolio on that one position.

I was going to say I don't like the super-volatile positions but that's not true – I do like them as we're selling TONS of premium to people who think stocks go up or down forever and have no rules but I DON'T like them in margin-limited portfolio or in portfolios that aren't miles ahead and can afford to take chances. Not only can we afford to take a chance this year but we're also locking in our 100% gains using TSLA as it pays us almost as much to the downside ($881,087) as our entire Long-Term Portfolio (LTP) is worth ($1,043,965)!

But, spoilers, let's just take a look at where we stand and move on from there. As we expected, the Fed and Congress have fired their stimulus guns this week and the reaction from the market has been a big shrug as evidenced by the shouldering down move in the S&P 500 this week:

SPX Sept 17 2020

While that's going on, Donald Trump's victim count is hitting 200,000 but that's nothing compared to what we're about to see as our kids finish their second week at school as two weeks is just about the time when it's already too late and local Governments realize what a huge mistake re-opening too early has been. While we know Trump doesn't care about California and New York having 100,000 combined deaths this year, he'll be losing 60,000 voters in Florida and Texas as well.

Virus Sept 18 2020

Early indications are that sending the kids back to school is already becoming a "super-spreader" event for the whole country and 50,000 more Americans will be dead by election day (45 days) and over 200,000 more Americans will die of incompetence (and that's being kind) before Joe Biden can be sworn into office in January – just 4 months away.

This is the environment in which I am advocating playing the markets with extreme caution. We don't know what the future will bring but it sure is good to have some CASH!!! on the sidelines for whatever may come along so it's all about protecting our wealth at the moment – and the hedges reign supreme.

Short-Term Portfolio Review (STP): $160,357 is up 60.4% for the year but down $254,797 from our last review as TSLA does another one of their wild swings. Our STP is not supposed to be up when the LTP is up – we've just been very spoiled this year with some fortunate calls but mostly it's because we were miles ahead that we gambled on TSLA, which is both an excellent hedge (as it's not likely to stay up if the market falls) and a bet that's hopefully going to pay off – even in a good market.

Is the market good? That's the big question. We have left so many positions alive in the LTP we HAVE to have some massive hedges to protect what is now over $1M in longs but, in reality, we've made no progress from $1.2M (up 100%) that the LTP/STP hit in June so a pretty dead summer spent keeping our money safe.

STP Sept 17 2020

CANE – Well it's tracking properly. Sugar is up 20% since we went in and CANE is up 20% too but only just now putting us in the money. Now the fun starts, hopefully, if we can break over that resistance.

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TQQQ – We got more aggressive and we just have the long puts. If the Nasdaq falls 10%, TQQQ falls 30% to $85 and we have the same $75,000 we have now. We already made $7,000 on the short puts so I don't think there's enough upside here to justify keeping it - done with this.

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  • INTC – Newish.
  • WBA – New
  • SQQQ – Well, we just cashed in $86,750 on TQQQ so how can we put that to good use? The SQQQ Jan $25s are out of the money at $7.30 and we paid net $2 for the spread so how do we take advantage of that and reduce our Theta Decay so we're not the suckers paying the premium? It's a 3x ETF so a 10% drop in the Nas will give us a 30% pop to $34 and our short calls are $35 so that works. I think what would make me happy is rolling our 100 SQQQ $25 calls at $73,000 to 200 of the June 2021 $15 ($13.50)/30 ($8.50) bull call spreads for net $5 ($100,000), using some of the TQQQ money we just cashed. So we're taking net $59,750 off the table but we've moved our SQQQ protection to a $300,000 spread (was $100,000) that's $200,000 in the money so the only way we can lose on this hedge is if the Nasdaq goes higher – which is good for our longs.
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SDS – That one's at the money. SDS is only a 2x ETF so 10% down on /ES takes it 20% up to $19.50 so, like SQQQ, we may as we capture our $4.05 before it starts to decay. The 2022 $15s are $4.05 and the $10s are $6.20 so $2.15 to roll $5 into the money is a great idea but we just invested in SQQQ so we can pay for this one by rolling 300 2022 $15s at $121,500 to 200 2022 $10s at $124,000 and now we're $120,000 in the money at $16 and, when those short Jan calls expire, we can sell calls like the 2022 $20s for $3 and take half our money off the table and still have a $200,000 spread that's mostly in the money.

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CMG – Finally came down a bit but we still have to roll our 3 short Sept $1,050 calls at $56,160 to 5 short Jan $1,200 calls at $135 ($67,500) and we will sell 2 Jan $1,100 puts for $55 ($11,000) and then we'll see how earnings go.

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TSLA – Just have to be patient with this one but, officially, next time we're green on the short calls, we should put tight stops on 1/2 so we're not so volatile. We don't need this much hedging – we're well-covered above. By the way, notice the short Jan puts are a ridiculous $106,050 – if we do end up having to roll, that's free money we'll be able to use to offset the cost as we can't lose both ends.

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UNG - We lost ground on the pullback but let's take advantage and buy back the short $12 calls.

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Long-Term Portfolio Review (LTP): $1,039,240 is up 107.8% from our $500,000 start for the year and THAT is what we're protecting with our Short-Term Portfolio, which hedges our long positions – but also gets to make the fun bets when we're ahead. The LTP isn't allowed to have fun – it simply grinds out gains and, when we are nervous, like we were last month at $979,575, we begin to remove risk and get to more cash in our long portfolios.

Now we are down to just 4 naked short puts which, as our long-time Members well know, is very small for our LTP. It simply means we're not seeing enough bargains out there that are worth taking a chance on and it's a pretty negative market indicator. We cut half of them last week: IBM, JO, STZ, FCX and TIF and we also bought back puts in BRK.B, and killed VIAC and VLO entirely. All those positions were big winners – we just didn't want to risk our winnings.

Cash is up from $406,390 to $413,895 and risk is down and we also have tremendous hedges from the STP above so I don't feel a lot of pressure to reduce the remainng positions but let's see how they look. The Volatility Index (VIX) is very high – so we may be able to take some premium-selling advantage:

LTP4 Sept 18 2020
  • HMNY – Nice net $2 per share entry is our worst case.
  • KO – Net $38 potential entry – yes please!
  • MU – Net $25.50 potential entry – 50% off!
  • MYL – Net $11.50 potential entry – one can only hope…

So our short put strategy is pretty simple, we see stocks we'd REALLY like to own that are a bargain and we offer and even more ridiculously low price to buy them in the future in exchange for MONEY NOW! In this case, we collected $21,000 for promising to buy the above stocks at those insane discounts. This is a mainstay of our LTP strategy though we have far less than our usual dozen or so offers at the moment as we think the downside market risk is too steep to be complacent.

BRK.B – We bought back the short puts on those but we feel very confident the long spread will pay the full $30,000 and it's now only net $23,212 so $6,788 (29%) left to gain is not thrilling for 18 months but it doesn't suck and we don't have anyting better to do with the money and we don't think the position is very risky – so it stays. HOWEVER, while we are waiting, I also don't see why Berkshire would be hitting new highs and it IS at the top of the channel so how about we make another $5,000 (21.5%) selling 5 Jan $220 calls for $10.

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  • CAT – Way over our goal. Net $16 out of a potential $20. Same logic.
  • PAA – On track.
  • AVGO – Miles in the money. Net $83,550 out of a potential $120,000 has a long way to run. Good for a new trade almost.
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  • BRK.B – On track.
  • CSCO – On track

FL – On track.
GILD – On track
GM – On track.
IMAX – Just net $5,500 out of a potential $20,000 so great for a new trade.

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  • INTC – We are aggressively long on INTC and I'm fine with that. '
  • LABU – A mile over our target at net $26,050 out of a potential $50,000 so good for a new trade with almost 100% upside but our net entry was a $13,000 credit, so we'll make $63,000 (480%) if LABU can manage to hold $35. If you wait PATIENTLY for good stocks (or ETFs) to become cheap – you can make some very nice trades – and work and worry a lot less!
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  • M – Very aggressively long.
  • MIDD – It's a $90,000 spread at net $39,100 so it pays another $50,900 if MIDD holds $75 into Dec. That's 130% you can make in 3 months as a new trade!
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  • MJ – The bull call spread is on track but we may have been too aggressive with the short puts.
  • MMM – On track.
  • MO – On track.
LTP3 Sept 18 2020
  • RH – 100 miles in the money and it's an $80,000 potential trade at net $67,925 so no reason to kill it with 17.7% left to make. It only matters if we have a better use for the cash, which we don't right now.
  • SKT – Signs of life at the $6 line. Nothing to do here but be patient.
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  • SPG – On track.
  • SPWR – "Hey Phil, why didn't you tell me about SPWR???"
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  • T – See, we still buy stuff. Even cheaper now.
  • TXT – On track.
  • WBA – We got aggressive and they finally seem to have found a bottom. Still good for a new trade.
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Earnings Portfolio Review: $191,733 is up 91.7% for the year and it's up $9,186 (9.2%) since our 8/17 review and we've done nothing all month but leave it alone to make those gains. It's a very well-balanced set with good growth potential so no reason to mess around with something that's working so nicely, is there?

EP Sept 18 2020

HRB – Left over put leg from the trade we took off the table. Certainly not worried about owning 1,000 shares at net $9 so no reason not to leave it there.

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WBA – Newish entry, even better now so let's add a bull call spread like 25 2023 $30 ($10)/$40 ($6) bull call spreads for net $4 ($10,000) and we'll see how things go.

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IRBT – This was our original Stock of the Century back in 1999 when it was below $10 and then it hit $100 and we were done (and they spun off their military division, which was our favorite part) but then they won us back with all their cool consumer stuff but they were too expensive until this crash – so we jumped back in after PATIENTLY waiting 3 years for a chance. We bought back the short-term short calls and short puts and that leaves us with a bull call spread that can double up or we can add short puts again on a sell-off.

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SQQQ – We just added this new hedge to replace the old one. So far, so good.

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ACB – They never really got it together but it's a small play so let's give them some time. It won't take much of a positive spin from ACB to get them back to $20.

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GILD – Nice, newish trade we added and still a good entry.

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HBI - Our co-stock of the year in 2018 (with LB) is now a solid performer we're happy to own.

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INTC – Another newer addition to the portfolio and even cheaper than our entry at the moment so still good for a new trade.

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M – This is a tough call during a crisis. We have such a good entry and I consider it to be such a great value. I can't pull the plug on this one nor can I see covering it so it stays.

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Butterfly Portfolio Review: $372,941 is up $60,482 (19.3%) for the month and, once again, the power of doing nothing is demonstrated! As I had said last month "we'd be up a lot more if our short AAPL calls weren't killing us at the moment" and that moment has now passed and all is well again.

Butterfly Sept 18 2020

AAPL – It's still hurting us as the premiums on the June 2022 $100 calls is ridiculous as they are at the money at $24.70. The bottom line is that, at 0ver $100, the spread is worth $400,000 and it's currently net $227,200 not counting the short puts so it's good for a gain of $172,800 (76%) if AAPL can hold $100 into June 2022. That's more than enough gains for this whole portfolio for the next two years! Good for a new trade!

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AMZN – What a lot of legs! Thankfully they pulled back a bit but we're in very good shape as it's a $180,000 spread that's net -$10.965 and the short $3,000 calls are 100% premium and, of course, we will roll them if we have to.

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DIS – This one is on track and the short puts will expire worthless and we'll have to roll the short Sept $115 calls at $14 to the short Jan $120 calls at $14.70 as I still want the downside protection. I don't want to sell puts at the moment as we're dangerously close to breaking under this channel (and I think we'll be back on lockdown soon).

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F – On track.

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KO – Went from being very flat at $55 to being very flat at $50 - a perfect butterfly play! This is just the kind of chart you want to use for this kind of investing (selling short-term puts and calls for income). We sold the short Sept puts and calls for $4.35 and we have to pay back $3.35 so we make $500 this quarter and that's bonus money against our long gains. We can sell the Jan $50 calls ($3) and puts ($2.70) as $50 is a good target.

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MDLZ – Also perfect but doesn't look like it as they've fully recovered but now they can flatline for 2 years. We sold the $52.50 puts and they will expire worthless for a $3,750 profit and now we can sell 15 Jan $55 calls for $3.75 and no puts in case we have a sell-off.

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MJ – We sold $4,000 worth of premium in July and we have to pay it all back, unfortunately but we'll try again with the sale of 20 Jan $12 calls for $1 ($2,000) and 20 Jan $11 puts for $1.40 ($2,800)

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WHR – We repositioned our bull call spread, cashing in the original. I think it's too scry to sell more calls or puts against so we'll just see how this channel resolves itself for now.

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