Top Trade Alerts are trade ideas I feel have an excellent chance of success. Usually they are news-driven – trades on stocks I expect to make a move in the near future – not just a simple value play. Nonetheless, we set them up as long-term value trades as we don't need to make short-term bets to get great short-term results. However, we do need a few months so we're not going to look at the most recent trade ideas.
Since January of 2020 there have been over 60 Top Trade Ideas, not quite one per week. The secret to the success of our Top Trade Alerts, which historically have an 70%+ win rate, is that we DON'T just pick trades because we feel we have to. We try to pick one a week but some weeks we pick 3 and some we pick none. Forcing trades to fulfill arbitrary expectations is the downfall of many market newsletters.
We don't make our Top Trade Alerts complicated (and you can sign up here to get them fresh), they are generally "set and forget" trades for the less active traders, who just want to build a good portfolio one trade at a time. We won't get this review done all at once but let's start getting through our trades starting in Jan of 2020 – as it will be interesting to see how we rode out the crash and recovery.
In the interest of space, I'm just going to reprint the actual trade and the chart, not the commentary, which you can see by following the links. We're going to assume no adjustments were made and just see how the positions performed.
I guess it would be a good Butterfly candidate but it stays down too long so we generally just play it bullish into April. March earnings are not likely to be exciting but, for the Earnings Portfolio, let's play HRB like this:
- Sell 5 HRB 2022 $22 puts for $3.50 ($1,750)
- Buy 15 HRB July $20 calls for $4.10 ($6,150)
- Sell 15 HRB July $24 calls for $1.60 ($2,400)
That's net $2,000 on the $6,000 spread so $4,000 of upside potential at just $24 is a nice, conservative way to make 200% – though you have to wait a while on the put side.
Here we put $2,000 to work and on July 17th of 2020, the stock was at $14.11 due to the Covid crash, so the $20/24 spread expired worthless. It looks like the short puts are in good shape, now $1.40 ($700) but, even if they do expire worthless, this position is a $2,000 loss.
In the Webinar, we wanted to add IMAX to the STP, which is going to be the LTP so really, this is for the LTP:
- Buy 50 IMAX June $17 calls for $4 ($20,000)
- Sell 50 IMAX June $20 calls for $1.90 ($9,500)
- Sell 50 IMAX June $20 puts for $1.30 ($6,500)
That's net $4,000 on the $15,000 spread so $11,000 (275%) upside potential if IMAX is over $20 on June 19th. The risk is being assigned 5,000 IMAX at $20 ($100,000) but, realistically, maybe they are down 20% to $16 and the loss (if not rolled or stopped) is $4 x 5,000 or $20,000 – that's the true risk. ToS says $8,494 in ordinary margin is required – pretty efficient.
You can see why we got away from short-term trades! IMAX expired in June at $12.20 so the $17/20 spread went worthless and we were assigned 5,000 shares of stock for $20 ($100,000), plus the $4,000 we put into the trade was net $104,000. Fortunately, it came back nicely and is now $21.53 so $107,650 is up $3,650 – not thrilling but it beats losing and, again, this is if you played it passively – which we don't.
For the Long-Term Portfolio (LTP), let's:
- Sell 10 MIDD Dec $110 puts for $10.70 ($10,700)
- Buy 10 MIDD Dec $100 calls for $19 ($19,000)
- Sell 10 MIDD Dec $120 calls for $9 ($9,000)
That's a net $700 credit on the $20,000 spread that's $10,000 in the money at the moment. Upside potential is $20,700 (2,957%) in less than a year and our worst case is owning 1,000 shares of MILL at $110, but then we can sell the next year's $100 calls for $20 and drop our net to $90 so not much downside there.
That was a close one, we got that nice pop on November earnings and the options expired on Dec 18th at $131.86 so we collected the full $20,000 on the spread and the short puts expired worthless for the full $20,700 profit.
Notice we have a tax firm, a movie company and a restaurant supply company. Diversification is the key to surviving market corrections.
How about VIAC? $37.22 is $23Bn and they should make around $3.3Bn this year and more next year. In fact, that's a good one for the LTP:
- Sell 10 VIAC 2022 $32.50 puts for $4 ($4,000)
- Buy 30 VIAC 2022 $35 calls for $7 ($21,000)
- Sell 30 VIAC 2022 $42.50 calls for $4 ($12,000)
That's net $5,000 on the $22,500 spread so the upside potential is $17,500 at $42.50 and the risk is owning 1,000 shares of VIAC for net $37.50 (about where it is now). This is a first round, of course, we hope it gets cheaper and we can sell more puts and add more longs or widen the spread but, if it doesn't – we'll take the $22,500 as we should end up with at least 20 positions in the LTP (plus 20 naked short puts) – even in a "normal market" (we had more like 40 long positions in the last LTP.
Still in progress and this became one of our favorite stocks when they went on sale. At the moment, the $35/42.50 spread is net $4 ($12,000) and the short puts are $1.90 ($1,900) for net $10,100, which is up $5,100 (102%) so far but another 100% left to gain by January at just $42.50, so it's still good for a new spread.
For the LTP, we can simply play them not to go lower with this spread:
- Sell 10 DFS 2022 $70 puts for $8 ($8,000)
- Buy 20 DFS 2022 $60 calls for $18.50 ($37,000)
- Sell 20 DFS 2022 $75 calls for $11 ($22,000)
That's net $7,000 on the $30,000 spread that's in the money to start. All DFS has to do is hold $75 and we make $23,000 (328%) and, if they recover back to the $80s, we can even sell some short calls for income while we wait.
We're miles in the money on this one and the $60/75 spread is now net $14.50 ($29,000) and the short puts are $1.25 ($1,250) so net $27,750 for a $20,050 profit and we can "only" make $2,250 more (11%) in the next 6 months and you KNOW we can do better than that so no point in keeping this one open.
So we had a very good start to the year with net $47,500 in profits with 4 out of 5 trades coming up winners – despite the very, very bad Covid correction ahead. By mid-February, I was becoming very concerned about Covid and we didn't pick another Top Trade until the 12th, but then we added a hedge as well:
SKT is $13.35 and you can sell the 2022 $13 calls for $1.80 and the 2022 $13 puts for $3.10 so that's net $8.45/10.725 if assigned so either you own 2x the shares at $10.725 (and then sell more puts and calls to lower the basis) or you get called away at $13 with a $4.55 profit (53.8%) and they pay a $1.43 dividend while you wait, which is 17% of $8.45 and would increase the overall profit by $2.51 (you missed the first payment) so $7.06 profit potential is 83.5% at $13!
Let's add 2,000 to the LTP!
Although SKT is at $18.48, we have limited ourselves to getting called away at $13 for $26,000 from our $16,900 entry so $9,100 in profits and $716 + $356 + $356 ($1,428) in dividends (they skipped a few during the crash and then lowered them) for a total of $10,528 gained.
As to the hedges, they were an SDS Sept $23/30 spread at $1.10 and SDS topped out at $44 in March with this spread hitting well over $5 but I'm not going to count that for or against but hedges are absolutely trades you take off when they get near your goals – we would not have ridden them out. The same goes for the SSD Sept $80/85 spread at $3, which expired at $96.65 for a winner at $5. If you read the entire post, the SSD was an offset to the cost of SDS though, in the end, they both paid off.
Our Members know how much I love SPWR – it's in all of our Portfolios. We're miles in the money on this one and expect the full $22,000 gain so I'm not even going to bother doing the current math. As to the Futures shorts. On Thursday the 13th, I said:
I'm going short on /NQ (2) at 9,615 and 2 /RTY at 1,690 and I'll add 2 more if they go higher but also looking for 2 more short /ES at 3,380 – these are for the weekend, but so was yesterday but then they make $10K so screw that!
As you can see, we were well-timed with our market short calls. Ultimately the Nasdaq (/NQ) fell below 7,000 for a $52,000 per contract gain (and similar for the others) but, as above, we're not going to count those as it was players choice when to take advantage of the shorts. We just like to point out these opportunities for our Members when we can.
This one is right on target with 6 months to go. At the moment, the $40 calls are $12.25 ($25,000) and the short $55s are $2.85 ($2,850) and the $45 puts are $2 ($2,000) for net $20,150 profit so far and at $55 we should hit $30,000 so a nice 50% to go over the next 6 months still.
I guess I would not sell puts but I would take the SIX 2022 $15 ($8.50)/$22.50 ($5.50) bull call spread at $3 and, if they go lower, THEN you could sell the $10 puts (now $2.50) and roll the $15s to the $10s. Let's do 40 of those in the LTP and see how it goes.Boy did we underestimate that reccovery! but we took it off the table ages ago (we also did sell those puts for more profits).
Boy did we underestimate that reccovery! This spread will make the full $18,000 but we took it off the table ages ago (we also did sell those puts for more profits).
Have to sell 5 AAPL 2022 $230 puts for $30 ($15,000) in the LTP. Very happy to DD if they go lower and, of course, build a bullish spread around them if they don't.
More free money as AAPL split 4:1 on August 28th so we ended up with 20 2022 $57.50 puts which are now just 0.50 ($1,00) for a $14,000 gain so far.
Damn, I forgot the reason we don't play MTN is because they don't have long-term options but they do have December and we can sell 10 MTN Dec $100 puts for $11 ($11,000) in the LTP because people don't understand that the 2019-2020 ski season ends in April anyway – not as bad as it sounds.
I'd love to also buy the $140 ($48.50)/$180 ($28.50) bull call spread for $20 but we are collecting money ($150,000 in two weeks) for the LTP, not spending it unless necessary (roll downs).
The short December puts expired worthless for the full $11,000 and boy did we get a cheap entry on the bull spread but I'm not going to count that as we didn't follow up in Top Trades (it was in our Premium Member Chat).
Again, we're not counting the shorts as they are quick trades and hard to say when someone got out. In fact, we were only hedgeing to set up our buys as we were starting to get bullish (read post for my logic). As I said at the time:
Still, unless we are heading into a real Zombie Apocalypse, where humanity is wiped out and replaced by a mindless hoard with no interest in food, fashion or fun – we will survive – even if surviving means locking ourselves in a bubble and shopping via Amazon drones with our Universal Basic Incomes.
Even THAT would still have our GDP around $12Tn, down 40% from where it was but certainly not $0 – that's why a sell-off past these levels is silly and can't last – and that's the worst possible case – the actual case is probably quite a bit better than that – we just have to get through the next few months.
Locking ourselves in a bubble and shopping via Amazon drones with our Universal Basic Incomes is exactly what we did for the rest of 2020!
TEVA/Pat – They lost $18.5Bn in 2017 and 2018 and this year maybe they make $3.5Bn and you can buy the whole company for $8Bn at $7.50 so worth a gamble but I think I'd play just a bull call spread like the 2022 $4 ($4.50)/$10 ($2.35) bull call spread at $2.15 as that pays almost 200% at $10 so why takes risks to be greedy?
Sometimes a trade idea from Member Chat is so good I just post it right to the Top Trades. TEVA had a heck of a ride but it summarizes to "on track" at the moment. The $4/10 spread is net $475 ($4,750) for a $2,600 profit but the potential is $6,000 so still good to hold.
For our Long-Term Portfolio:
- Sell 5 VAC October $30 puts for $8 ($4,000)
- Buy 10 VAC Nov $40 calls for $18 ($18,000)
- Sell 10 VAC Nov $75 calls for $8 ($8,000)
That's net $6,000 on the $35,000 spread that's $8,000 in the money to start so the upside potential at $75 is $29,000 (483%) and your worst case is being assigned 500 shares of VAC at $30 ($15,000) plus the $6,000 spent on the spread would be $21,000 or $42 per share – still 15% below the current price. That's your WORST CASE!
That closed at the full $35,000 for a $29,000 profit.
Oil/Tangled – Though it decays, USO is a reasonable way to play oil and the Jan $2 ($3.10)/$5 ($1.25) bull call spread is $1.85 and you can sell 5 VLO 2022 $25 puts for $7 ($3,500) to pay for 20 of the spreads ($3,700) for net $200 on the $6,000 spread so $5,800 (2,900%) upside potential and VLO is a vital industry and that still gives you 30% downside protection.
USO reverse split 1 for 8 on April 29th so 20 $2/5 spreads became 2.5 $16/40 spreads and USO was back over $55 in Jan so the full $6,000 and the VLO puts will go worthless for a net $5,800 profit.
Three in one day! We were also buying like crazy for all our Member Portfolios, things were too cheap to pass up. As I said above, there are times to buy and times not to buy. We bought nothing in early Feb but jumped right back in in March, once the market stopped falling.
Hedge Fund/Tangled – If we have enough interest, of course people can switch but the regular hedge fund is very likely to double up or better if we recover – I'm proposing a more conservative fund for people like me, who are having to help their parents whose monthly incomes no longer cover expenses from their standard retirement accounts. It's a lot easier for me to put $250,000 into the following spread than give my Mom $30,000 a year to subsidize her expenses:
- Buy 500 T 2022 $23 calls for $7.75 ($387,500)
- Sell 500 T 2022 $30 calls at $3.60 ($180,000)
- Sell 100 T 2022 $23 puts for $3 ($30,000)
- Sell 100 T June $30 puts for $2.30 ($23,000)
- Sell 50 T June $23 puts for $1 ($5,000)
So that's net $149,500 out of pocket and my worst case is owning 10,000 shares of T for $23 ($230,000 – not counting the short-term puts) and I've got a $350,000 spread that's spitting out $28,000 in "dividends" for the Q so it should well cover the $7,500 my Mom needs while still a lovely investment for me that will hopefully pay 200% in 2 years.
This one is at the money and it's complicated so I'll set out the current balances. T was at $30.69 on June 19th so the puts expired worthless:
- 500 T 2022 $23 calls are now $5.85 ($292,500)
- 500 short T 2022 $30 calls are now 0.95 ($47,500)
- 100 short T 2022 $23 puts for 0.50 ($5,000)
That's net $240,000 for a net $90,500 profit so far and another $52,500 coming if T can hold $30 into this January. As I said, this is a brilliant retirement strategy for people looking to make a good income off their holdings.
So that's another 10 trade ideas in February and March for another $223,587 in profits so far. No losers in Feb/Mar so we're 14 for 15 (93.3%) winners for the quarter for a total of $271,087 in profits on our trade ideas to date. Notice we were playing cautiously into the dip as we were worried early on about the virus – hedging as of Feb 12th – but then we called the bottom and made much more aggressive trades on the way up.
We'll do more reviews and see how the rest of 2020 played out and, of course, we look for new Top Trade Ideas every day at PSW – come join us in our Live Member Chat Room!