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Forward-Looking Friday – Are We Hedged Enough?

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That’s a gain of $95,674 since our February Review for our paired Long & Short-Term Portfolios.  Our LTP is predominantly bullish and the STP is where we keep our hedges – as they tend to need adjusting more often – as you are about to see.  Interestingly, despite the rally, the Short-Term Portfolio gained $40,000 – mostly due to our very well-timed short play on Tesla (TSLA), which we just cashed in last week.  One of the reasons we cashed it in is we now have $97,098 in cash to deploy so it’s a great time to add to our hedges:

  • TZA – They reverse-split on us and this is our new position.  They should be $64 short calls (because they were $8s) but TZA only goes to $60.  It’s a 3x ETF so if the Russell drops 20%, TZA should gain about 60% to $48 – so that’s our actual target and, since $60 would be almost a 40% drop and we don’t expect that, it means we can afford to sell more short calls if it comes up.  June $45s are $3 and that means we can double down on the $32 calls at $5.15 ($12,875) and sell 25 of the $45s for $3 ($7,500) and we have spent just net $5,375 to add $32,500 in additional protection.

  • TQQQ – Despite the dip, our Jan $100 put is showing a loss so far. Those are now $29.65 so the first thing we do is look to see if we can improve them and the Jan $120 puts are $43 and we won’t pay $13 for $20 and the $110 puts are $36 so $6 for $10 is not much better.   We also won’t pay $14.53 to buy back the short $70 puts, that are $20 out of the money so the best way to improve this position is to SELL 7 (1/3) of the April $80 puts for $5 to lower our basis by $3,500 and those can’t go in the money unless our spread is $40,000 in the money and it’s net $20,000 now – so hard to lose and we’re BEING THE HOUSE! 

  • CMG – The

Provided courtesy of Phil’s Stock World.

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