Freaky Fast Profits Portfolio (8/17/20)

Later on in this post, I’ll walk through our MCD trade and how I set up our far out of the money options plays that have been so successful, but we can’t talk about today without first talking NVDA. On Friday I wrote that a move to $500 or so by Wednesday would be very nice. Well, it’s only Monday, but we can confirm that yes, it was nice. NVDA’s 6.7% move meant $499 to our $500/525 August call spread. We’re now up about $800 on what was just over a $200 initial trade, in less than a month. We’ll be out tomorrow or Wednesday before the earnings announcement. Say it again, Adam.

Next up was a $182 gain in our DPZ $430 horizontal call spread. That good day took us from a near $100 loser and put us very nicely, shall we say….

Home Depot was good for another $141 gain today, before we cashed the register on that horizontal call spread. Purchased for $147 beginning September 5, we collected a cool $595 in less than two weeks. That’s how you build up the quads.

That’s all the really big winners today, but we did have some good stock profits as well. VIPS finished up 6.1%, TMHC added 4%, 3.7% for NET and 3.3% for CHGG.

In other transactions, I sold 1/4 of my LULU (meaning literally 1 of my 4 shares) for simple profit-taking reasons. We’re only up about 5% on that trade so far, but it was actually a little larger than I like want my stock positions to be with the current account value.

We bought a Sept $105/110 call spread in ABT for $78. That will triple or quadruple on a move to the $107-110 area within the next month. We’ll probably go all or nothing on it, although there is a chance we could save about half the loss if it immediately fell a couple percent. I really don’t want to be in it below $98. That’s a nice, short stop for anyone who wants to buy the stock instead. Here’s the P+L graph on our trade.

We also bought a MCD December $240 call. Yes, I’m aware that $240 is a pretty long ways away for a slower-moving stock like MCD, but this is the exact same thing we did with NVDA. I analyzed the chart, picked out a far-out target on it (not my first target, but my 2nd target) and bought a call option at that price (in this case the $240). See below, my two targets are the dotted-lines to the right of the red arrows.

Now here’s the kicker. We buy the $240 call far enough out in time that it is coming after McDonald’s next earnings report. Their next one is in late October, so we bought the December $240 call. You pay some premium for an option that includes an earnings date, but if you get anywhere near that target, it will be more than worth it. Think about what people are willing to pay for our NVDA call with an earnings report coming, $1400 for something that would be worthless on Friday if NVDA doesn’t go up any higher. McDonald’s is not the huge grower NVDA is, but if we move towards that price, the earnings report will be a store of value for the option we bought.

Next, when MCD moves to my first price target (around $217) we will sell a $240 or $250 call against the call we own. We will sell a call that expires BEFORE earnings date. This will bring in premium for us as we make the slow slog higher that MCD would likely make if this trade works out. We will essentially be paid to hold our position. This is exactly what we did in NVDA. Not only do we have a nearly $700 gain on the current position, we also brought in an extra $93 from a call we sold that expired last week.

If MCD fails to perform and hits our stop before hitting our first target, we sell and take our losses and look for the next one. Simple.

Let’s see, what else did we do today? Oh yeah, we bought a smaller-sized position in ARNC, the aluminum company, at $22.82 per share. I added to my NET position, buying a few more shares when whatever Najerian was on the Halftime Report said there was unusual call-buying activity in them. NET has been very good to us this year.

Oh, I also started the day by selling out of a few of the QQQs I own. Not because I don’t think it is likely to go higher, but because there are much better things to do with your money than put it in indexes. For those who don’t follow on StockTwits (smartplays13), I like to mess with the Market Makers late at night when they try to drag the market down lower so they can steal people’s stocks when their stops hit first thing in the morning. Nobody is trading late most nights. Sometimes I’m the only one. So I’ll goad them into selling me a share way lower than they want to actually be selling. And then I’ll taunt them about how reprehensible they are, and sometimes I’ll have bought 4 or 5 shares way cheaper than the market closed at by the time we’re done. Most of the time lately, after I prove that I’m willing to buy more than a share, they stop trying to take the market down until I go to bed. Anyways, that’s why I often have some random shares of the indexes sitting around.

Outlook remains bullish, but who knows, it could be another Turnaround Tuesday. Lately the market has sold off every Tuesday immediately after 1pm EST. Do with that what you will, or nothing at all.

That was long. Great day! Questions or comments are welcome.