TIB: Today I Bought (and Sold) - An Investors Journal #341 - Health Care, China, Real Estate, Ethereum.
Markets may have bounced but nothing feels rosy. Watch what comes tonight after Apple revised guidance hits the markets. Trade action is in US Healthcare and US Real Estate and China.
Portfolio News
Market Selloff Asian markets sold off on weak China PMI data. Note: Japan closed
US started out following Asian markets down and then caught a rebound in financials and in energy as the oil price rose. The Maverick Maven was on the Tweet box again saying the December selloff was a glitch - some glitch is all I can say. Maybe he would be a whole lot better off focusing his efforts on doing the work to get the trade deal done and the border issue resolved - rather than spouting off about it.
Apple released new guidance after the market closed.
Their guidance was for appreciably lower revenues than previously guided predicated on a big decline in sales in China. The trade war is not a glitch - it is very real and it is affecting the whole global economy and is going to accelerate the next recession. That is not a glitch - that is the harsh reality of the fundamentals. There are only two ways out of this - get a trade deal done and/or China does another big stimulus splurge.
One market that says clearly this is not a glitch are interest rate markets.
US 10 year yield drops below 2.7%. Euribor December 2020 futures have risen 20 basis points in the last week = nearly the size of one rate cut.
Japan 10 Year Government Bonds have moved even more.
Bought
CVS Health Corporation (CVS): US Health Care. Averaged down my entry price on the small holding in CVS following Jim Cramer adding in his portfolios. His view is the market is undervaluing the impact of the Aetna Health merger. This merger transforms CVS from a retail pharmaceutical business to a more fully fledged health care business.
Shorts
iShares China Large-Cap ETF (FXI): China Index. I have been holding a January 2019 38/30 bear put spread since May 2017 as a hedge against a collapse in China - an idea from my investing coach. For a long time the trade has been seriously wrong - the chart shows the bought put (38) only.
Price has been close to the $38 level twice in the last quarter, once in October and this week. With two weeks and a bit to expiry it is time for trade management
- Leave the trade to run to expiry in the hope that price closes below $38 and get assigned and go short the stock
- Sell the strike 38 put to preserve some premium. This would leave the sold 30 put to run to expiry and run the risk of price collapsing to 30 and being assigned at $30
- Buy more time and roll out or down at the same strike or one strike lower.
I decided to roll down to one strike lower and one month further out (37.5) for a small additional premium. It did help that strikes are listed in 50 cent decrements. This still leaves the January 30 put options in place - my instinct is price will not drop as far as that in two weeks unless the US-China trade talks do not progress
This trade recovers 17% of the net premium - i.e., 83% loss since May 2017 and incurs an additional 27% of that net premium.
Income Trades
One more trade completed.
Direxion Daily MSCI Real Est Bear 3X ETF (DRV): US Real Estate. Sold January 2019 strike 12 calls for 5.02% premium (5.98% to purchase price). Closing price $10.95 (higher than last month). Price needs to move another 5.0% to reach the sold strike (easier than last month). Should price pass the sold strike I book a 31% capital gain. Income to date amounts to 10% of purchase cost.
The table I presented yesterday had a calculation error in the % to close column - that is now corrected. The new numbers show how much higher implied volatility has become with premiums ranging between 0.97% and 5.02% - my target is 1%.
Cryptocurency
Bitcoin (BTCUSD): Price range for the day was $148 (3.9% of the low). After making train tracks the day before, price continued to push to the top of the trading range on a quiet day. It is hard to guess what will happen next - maybe a break above the range. The encouraging part is we have now had two higher lows since December 15 lows.
Ethereum (ETHUSD): Price range for the day was $19 (13.7% of the low). As expected price pushed to test the previous high of $160. Trade is still in something of a "no mans land" and will most likely pause to take breath and test back lower before having a go at the next level up.
Closed two trades in IG Markets account for $13 (10%) and $16 (12.5%) per contract profit to release funds to manage margin.
CryptoBots
Outsourced Bot No closed trades. (222 closed trades). Problem children remains at 19 coins. (>10% down) - DASH (-71%), ETH (-62%), ZEC (-71%), AE (-42%), LTC (-49%), BTS (-67%), ICX (-86%), ADA (-71%), PPT (-85%), DGD (-84%), GAS (-88%), SNT (-66%), STRAT (-66%), NEO (-85%), ETC (-62%), QTUM (-77%), BTG (-72%), XMR (-51%), OMG (-76%).
Coins moved in a tight band, mostly up. STRAT dropped 2 and XMR gained 3. GAS (-88%) remains the worst coin. LTC (-49%) improved a level
Profit Trailer Bot No closed trades.
Dollar Cost Average (DCA) list extends to 6 coins with TRX moving on. As always happens when ETH has a strong day all coins trading against ETH do worse.
Pending list remains at 10 coins with all coins worse.
PT Defender continues defending 9 coins with no changes.
New Trading Bot Trading out using Crypto Prophecy. XLM DCA trade closed in 8 hours for 1.35% profit. Trades remain open on XLM, VET, SC and FUEL.
Currency Trades
Forex Robot did not close any trades and is trading at a negative equity level of 0.9% (lower than prior day's 2.0%).
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
Charts: http://mymark.mx/TradingView - this is a free charting package. I have a Pro subscription to get access to real time forex prices
Crypto Prophecy provides a useful tool to identify oversold and overbought coins - https://mymark.mx/CryptoProphecy
January 2, 2019
The implications of an Apple miss will cause ripple effects across the semis as well which could lead weakness across tech. The transportation stocks are also hurting as well which can be correlated so will be interesting to see how they reverse this.
Posted using Partiko iOS
The ramifications of what really is going on in China has some way to play out. Unintended Consequences is my new theme going forward - if we can think them through a little further we can stay ahead of the maverick actions (and words)
I like the MSCI real estate 3X play, I just wish the leverage ETFs didn't reset everyday.
The key to the leveraged ETF's is to use them for a short timeframe only. I am paying the price for not fully understanding that in TMV
The challenge is to find ways to leverage the short termism by matching to short term options plays. Big wins when it comes right. Writing covered calls against them is one such technique - price moves and get assigned is not a problem.