Freaky Fast Profits Portfolio (8/26/20)

Crazy, crazy day all around the US and the market today! The Freaky Fast was up another $205 today, or about 1.3% of our account value. Big gainers were ADBE, AKAM and SPOT. Together they accounted for about $230 in gains, so the rest of the portfolio didn’t really contribute. I said yesterday that I was going to take some profits if we were up, and I did (until later in the day, read on for that). I sold half of my ADBE at $531 (that would literally be 1 of my 2 shares. Tell me again that stock splits don’t matter. I had to sell half my position to take some profits. If ADBE split and was a $100 stock, I’d have 10 shares and could’ve sold like 20% instead.) But anyways, when your stock goes up 9% for no reason, you should probably ring the register a bit. I’ll probably buy the share back lower if I get the chance.

I also sold 1/3 of my LULU, we’re up about 12% on that one. Let’s see, I covered my ROKU short for a $70 loss. That trade was doing fine until ROKU received an upgrade this morning. As I said when I made the trade, it was a hedge and I’d happily lose money on it because that would mean the rest of my stuff would be higher.

Speaking of hedges, I put one on today. With the QQQs trading up 2%, I felt it was a good time to put something in place to potentially protect me on a big pullback sometime in the next month or so. So I bought the Oct 2 $267.50 QQQ put, and sold a Sep 4 $265 put against it, for a net outlay of $336. I selected those strikes based on where the 50-day moving average of the QQQ would be come next Friday (Sep 4). This is the P+L graph of it at expiration of my short call (Sep 4).

For about 2% of my account value I get a decent amount of protection on a fall back to the 50-day. If it moves anywhere towards that area, it will be profitable and I can then sell a Sep 11 put against it to bring in more money. Rinse and repeat, and in reality it would be pretty hard to lose more than say $160 or 1% of my account in this trade. And if that allows me to sleep at night and also allows me to hold onto my longs if they go under pressure, that’s worth every penny.

OK, so other than the Qs being up 2%, it was pretty much a normal day when I went to work. As I’m getting off of work, we learn that the Milwaukee Bucks and Orlando Magic were cancelling their game in protest of the events in Kenosha, Wisconsin. (I still remember my old high school, Janesville Craig, beating Kenosha Tremper on the way to a state championship in hoops. I expect better of you, Kenosha. Not much better, but better.)

Next thing you know, the NBA cancels all its games and schedules a meeting to vote on whether or not to cancel the season. My Favorite Stock, DKNG, falls on this news. Now, DraftKings leads the league in falling on things that won’t ever affect their business, one day, and powering higher the next. We’ve talked about this.

News flash. The NBA players will not cancel the season. How do I know this? Because I’m not a moron. If the NBA players were to cancel their season, it would affect their revenue, which would affect their salary cap. It would certainly lead to a lockout next year, where management would be determined to restore some order to the owner/player dynamic. Yes, these players have power. But once they cease to be players, they have zero power. And when you are locked out, you aren’t getting your $20 mil. And when you’re not playing, bringing in that big check, you’re not getting a Kardashian (or a Jenner, Devin Booker).

As the great philosopher Young MC once said, “So you got no money and you got no car, and you got no woman, and there you are.”

Also, they want to make an impact. The only way they stay relevant to 99% of America is by playing basketball and using the platform they have. Basketball will resume Friday. Buy DKNG. I bought much more at around $38 after hours. It is now the largest position I’ve ever had.

Then I go back to work, closing the place at my Freaky Fast establishment which shall remain unnamed, and I get home to learn that $ABT has been approved to mass produce and sell a Covid test.

Oh, hi there! We’ve got an ABT options position. What’s that trading at after hours? $115…. Sweet Jesus, why did I make that a spread? We’ve got the 105/110 call spread, which we paid $78 for. Unfortunately, our profits are capped at 110, but we’ll be able to sell that for about $430 tomorrow morning if it opens there. Nice profit.

OK, so we’ve got profits going into tomorrow. So then you think, what’s a cheap, quick Covid test going to cause that I can capitalize on right now? Because I likely won’t be awake when the market opens because I worked two shifts and I’m exhausted and drinking Michelob Ultra’s at midnight while writing this to try to help people I don’t even know.

Well, it makes the re-opening trade work, obviously. Planes, cruiseships, etc. But I can’t buy those right now. Oh, I can buy the SPY and the IWM, both of which have massively underperformed the QQQ during this, because people aren’t doing “people things”. Now, there’s a pathway to “people things” resuming. So I sold my QQQ shares that I taunted the delinquent Market Maker to sell me at a discount last night, and I went full margin to buy the IWM and the SPY. I’ve bought about 30% of my account value in those tonight, and we’ll see how much more the Market Maker will let me buy tonight. As he does every night, he’s trying to drag the market lower when nobody is trading, and I’m stopping him.

I think my conclusion makes sense. I have no idea what this means for the high-flying stocks, although I suspect it’s not great and I feel good that I have that hedge I added this morning. Most of them are great companies, but they are trading at huge multiples of their earnings per share, and the people with the big money will likely be moving from them to the more cyclical $SPY and $IWM stocks. Anyways, that’s all I have for tonight. Questions or comments are welcome below, as always.

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