Spent a few hours in the week reviewing relative price performance in US travel sector (including hotels and airlines) and in European banks and in SE Asia. Used the pull back in alternate energy stocks to add in a few new positions.
Portfolio News
In a week where S&P 500 rose 0.61%, my pension portfolio dropped 0.28% with an 8.3% drop in De Grey Mining (DEG.AX) doing most of the damage (+0.09% without De Grey). Other drags were two copper explorers listed in Australia - strange that as copper prices are booming.
Big movers of the week were Kairos Minerals (KAI.AX) (+16%), Tilray (TLRY) (+12.8%), Jinko Solar (JKS) (+12.6%) and Ford Motor Company (F) (+9.9%). Of note were big moves in oil sector bankruptcy warrants I hold in Tidewater (TDW), Valaris (VAL) and Weatherford (WFRD). After a long bankruptcy process and a huge pandemic disruption Weatherford is making its way back to listing - this is good news as I can now buy a small parcel of warrants to create a marketable parcel
I read an article about one stock that has slipped beneath the radar since the March 2020 lows. The stock is Paladin Energy (PDN.AX) listed in Australia but holding uranium assets in Namibia and Malawi - both mines are on care and maintenance yet the share price has risen 1330% since those lows.
For comparison I have compared Paladin (bars) to Global X Uranium ETF (URA - blue line) and Cameco Corp (CCJ - light blue line)- there is a 6 times differential in performance. The good news in my portfolios is I am holding Paladin and the Uranium ETF - the call spread trade on Cameco hit maximum profit the week before.
Marijuana Moves
Marijuana stocks have come under pressure as Canadian lockdown makes it hard for customers to get to stores. Profitability is challenging. I do not know who the winners and losers will be as legalization moves ahead in US and MORES Act progresses access for US producers to financial services. That is why I diversify my holdings. This article gives a good top down view.
https://www.investors.com/news/marijuana-stocks-good-buy/
Crypto booms
Bitcoin price pushed higher by over 14% and drifted lower finishing the week 5.8% higher than the open.
Biggest movers in my portfolios were Polkadot (DOTUSD) up 46% at the peak finishing 22% higher for the week. Next best was Binance Coin (BNBUSD) up 40% at one stage.
Bought
ABN AMRO Bank N.V. (ABN.AS): Dutch Bank. ABN Amro is lagging the other banks in the European Banking index. I deployed some of the proceeds from stocks assigned last week in two portfolios. The bank has some troubles to work through - this feels a bit like investing a few years back in Deutsche Bank and Commerzbank where these funds came from.
ABN Chief Executive Officer Robert Swaak, who took over in April, is retreating from large parts of the investment banking business as he focuses on cost cutting and digitization. Even before the pandemic threw markets and economies into turmoil, the bank was facing higher costs to bolster client vetting amid an ongoing money-laundering probe in the Netherlands.
I wrote income trades with a combined premium of 1.97% - that makes up for the cut dividend.
Delta Air Lines, Inc (DAL): US Airlines. I wrote in TIB538 on the sale of American Airlines options that the chart was looking good to explore the sector more fully. I found an article listing a number of airline and related stocks and did a comparison chart from the March 2020 lows.
https://money.usnews.com/investing/stocks/airlines
The laggard is Delta Airlines (the bars) - it was random that I chose Delta as the base. I bought a parcel of stock and also a 50/57.5/45 call spread risk reversal. I decided to go closer in for the call spread buying a January 2022 50/57.5 call spread - with a net premium of $2.35 this offers a maximum profit potential of 219% for a price move of 20% from trade price of $47.985. I funded the call spread by selling a September 2021 strike 46 put option. That feels a bit tight with only 4.3% price protection. I am figuring that there is the whole summer post lockdown to see price holding at least at current levels and two summers for the call spread to play through
Let's look at the chart which shows the bought call (50) as a blue ray and the sold call (57.5) as a red ray and the sold put (46) as a dotted red ray with the expiry date the dotted green lines on the right margin.
I have drawn in price arrows from the left hand price move and cloned it across - each move is similar in size. This trade will need two of those moves in 18 months to win. The key level is the sold call (57.5) is below the January 2020 high. The sold put (46) level is below the bottom of the last consolidation which will offer good price support
Note: I remain invested in American Airlines (AAL) stock
VanEck Vectors Gaming ETF (BJK): US Gaming. I saw some Twitter posts about the rise in hotel bookings in US. That got me looking at relative prices for travel stocks like Hilton (HLT) and Marriott (MAR) and Expedia (EXPE). I added Wynn Resorts (WYNN) to the chart as Jim Cramer has this on his buy list. Wynn is outperforming the hotel groups and Expedia is way ahead.
As I have been investing in the VanEck Gaming ETF in preference to Wynn, I decided to increase my holding and average down my entry price a little. Dividend yield 0.40%.
More week needed on the travel sector - see below
Aurora Cannabis Inc (ACB.TO): Canadian Marijuana. Added a small parcel of shares for a 2.2% premium as it looks like my June expiry covered call will be assigned at $11.
Lyxor Core Morningstar UK UCITS ETF (LCUK.DE): United Kingdom Index. Read an article on BBC pointing to 20 year high in growth in UK manufacturing. Added a small holding in this ETF in one portfolio and scaled in in another. I chose this Euro based listing to hedge Pound exposure. Dividend yield 2.74%
Nokia Corporation (NOK): Network Equipment. Replaced stock assigned in one portfolio at 13.8% premium to assigned price. Covered call written at 3.8% premium recovers a slice of that. With Australia reassuring the restriction on use of Huawei and ZTE for 5G rollout, Nokia stands to gain from such restrictions becoming more global
Cronos Group Inc (CRON): Canadian Marijuana. Topping up a few marijuana stocks in preparation for possible assignments on June options expiry. I have strike 9 call option sold - was able to buy stock just under $9 - I can deliver these for a small profit if my covered call is assigned. Wrote covered call on new stock at 2.11% premium with 22% coverage.
Canopy Growth Corporation (WEED.TO): Canadian Marijuana. Opened a new position.
Cisco Systems, Inc (CSCO): Network Equipment. Jim Cramer added Cisco to the buy list. I added a small parcel of stock. Covered call premium was only 0.24% which suggests the market does not believe stock can move 4% in two weeks.
PayPal Holdings, Inc (PYPL): Payment Services. Jim Cramer idea to add more - doubled position size in one portfolio. My holding percentage is still lower than his.
Airbnb, Inc (ABNB): Travel Services. The discussion earlier in the week about hotel bookings got me looking a little more widely at travel. I found an article that compared Booking Holdings and Airbnb. The thought was the way Airbnb is focusing in on the homestay booking market and not trying to become a travel portal resonated with me. The pandemic is changing the way people travel - home stays are going to be a lot more popular than hotel stays - fewer people interactions. I know on our last road trip we did more home stays than hotel/motel stays.
I bought a small parcel of stock and a 150/200/135 call spread risk reversal. I bought a January 2022 150/200 call spread. With a net premium of $14.50 this offers a maximum profit potential of 245% on its own. I funded the call spread partially by selling an October 2021 135 strike put option. This brought net premium down to $3.47 which ratchets up maximum profit potential to 1341%.
Let's look at the chart which shows the bought call (150) as a blue ray and the sold call (200) as a red ray and the sold put (135) as a dotted red ray with the expiry date the dotted green lines on the right margin. Data goes back as far as the initial listing date.
I have drawn in a price scenario from the last run from the 2021 lows - a repeat of that size of run will see this trade win comfortably. Two things about he chart are a little uncomfortable.
- The sold put (135) is not below the last lows - but I would not mind buying 10 percent lower than current prices.
- Price has not yet made a higher low - I will not be surprised to see a pullback similar to what we saw on the last cycle up - such a pullback would be a better place to consider the trade.
Global X Lithium ETF (LIT): Lithium. Added a position in one portfolio as likely to be assigned in another.
Canadian Solar Inc (CSIQ): Solar Power. Added a position in one portfolio to beef up exposure.
iShares MSCI Indonesia ETF (EIDO): Indonesia Index. Received a trade idea for Indonesia based on a double bottom forming on a chart.
Normally I would not regard this as a double bottom as it is in the middle of a price move and not really at the bottom. However, I have been previously been invested in Indonesia on the back of population and GBDP growth rates in South East Asia and had exited on a covered call some time back.
I did a comparison chart on all the Asian economies excluding China. As it happens I chose Japan as the base - it and Indonesia are the two economies that have lagged in the recovery from the March 2020 lows. Indonesian GDP growth remains negative whereas all the others have gone positive. Add in a two year high for oil prices - that will flow through to the GDP growth for Indonesia.
Sold
No sales
Cryptocurrency
Cardano (ADABTC). Cardano price pushed higher against Bitcoin and then retreated. Onthe 2nd push higher I sold a small portion to round down to $500 holding in one account.
Income Trades
Across 2 portfolios wrote 15 Covered Calls (US 13 Canada 1 Europe 1) and 5 Naked Puts (Europe 3 US 1 Canada 1)
Currency Trades
Sold US Dollars to fund Canadian Dollar stocks purchased
Cautions: This is not financial advice. You need to consider your own financial position and take your own advice before you follow any of my ideas
Images: I own the rights to use and edit the Buy Sell image. News headlines come from Google Search. All other images are created using my various trading and charting platforms. They are all my own work
Tickers: I monitor my portfolios using Yahoo Finance. The ticker symbols used are Yahoo Finance tickers. Crypto tickers come from TradingView
Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices
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May 31-June 4, 2021
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