TIB: Today I Bought (and Sold) - An Investors Journal #191 - US Retail, German Banks, Offshore Oil, Bitcoin

Walmart gets a surprise hit after solid results and some weak guidance. Was it really that bad? Bitcoin has a down day after doing its 5 highs on a 1 hour chart. Crypto bot needs a name - produces great results on day 2

Bought

Walmart (WMT): US Retail. Walmart announced results which were below analyst estimates with respect to eCommerce revenues guidance. The share price was smashed down by 12% in two days. I am always keen to explore over-reaction to these news events. Digging into the numbers store on store sales increased by 2 percent = inline with inflation. That accounts for 96% of revenues. The remaining 4% are eCommerce revenues which grew 40% in the quarter
but the guidance was for 23% growth next quarter. That was not what the market wanted to hear.

https://www.cnbc.com/video/2018/02/21/expert-says-walmart-stock-is-a-bargain-now.html

Now I have a different take on how Walmart can compete with Amazon. Walmart has the most widespread distribution and store network of any retailer (offline or online ) in the USA. They can easily out compete Amazon's service promise by setting up a delivery model or pick up model from the nearest Walmart. A little birdie tells me that this is the plan.

What is the best way to invest? Stock closed at $91.52 per share. 12 month high was $108.39. Buy the stock and price goes back to the old high = a 20% gain plus the 2% dividend yield. Implied volatility on options spiked with a January 2020 one strike out-the-money (95) call option selling for a 14% premium to strike price. Buy one of those and price has to move 18% to make breakeven in just under 2 years. I looked at bull call spreads (note: before market open) to make implied volatility work for me some of the time.

I bought a 95/115 January 2020 bull call spread [Means: Bought strike 95 call options and sold strike 115 call options with the same expiry] for a net premium of $7.20 which gives me breakeven at $102.20 which is an 11% move away from current price - i.e., less than the price fell in two days of trading. Maximum profit is 177% if price reaches $115 on or before expiry. This might be a stretch as the previous high in 2017 was $108.39

I did mention that I set the trade up before market open. The same spread is now available for $5.80 and one could get a 92.5/115 spread for $6.93 = a wider spread for less than I paid. 92.5/110 looks tidy at $5.93.

I did do a step back using buy:sell charts of Walmart compared to the Retail Sector - using SPDR Retail ETF (XRT - an equal weighted ETF). The signs were there in early January of a change in sentiment. I am invested in retail - this trade is all about an over-reaction

Gulfmark Offshore (GLF): Another nibble (bigger than last time) at my low ball standing order for the 100 strike call warrants.

Sold

Commerzbank AG (CBK.DE): German Bank. Price has been holding comfortably over €12 for some weeks. I closed out 2019 strike 12 call options for a 62.5% profit since October 2015. I continue to hold Commerzbank in this account through 2018 and 2021 options. I will replace this trade with a December 2022 out-the-money contract if the premiums work right.

I did receive a margin change notice from my broker - each time one of those comes along it is prudent to raise cash.

A nice side benefit of the way my broker is managing my account after a regulatory change is the Euro balances are transferred across to US Dollars immediately. The Euro has strengthened 11% since October 2015 - feels like free money going this way.

Income Trades

Two more income trades hit their bids overnight.

JetBlue Airways (JBLU): US Airline. Sold March 2018 strike 21 calls for 1.23% premium (1.22% to purchase price). Closing price $20.30 (lower than last month). Price needs to move another 3.4% to reach the sold strike (tighter than last month). Should price pass the sold strike I book a 3% capital gain. Income to date is 3.55%

Van Eck Vectors Brazil Small Caps ETF (BRF): Brazil Index. Sold March 2018 strike 26 calls for 0.82% premium (1.21% to purchase price). Closing price $24.38 (new trade). Price needs to move another 6.6% to reach the sold strike (new trade). Should price pass the sold strike I book a 57% capital gain. The options chain shows that I am alone in this trade - some option buyer is feeling happy to have me as his liquidity provider.

Cryptocurency

Bitcoin (BTCUSD): Price range for the day was $1019 (9.0% of the high) on a mostly down day. I noted yesterday that price had made its sequence of 5 higher highs on a one hour chart and then corrected. With that fine insight, I am not sure why I tried to trade in Bitmex as if price was going to go up. I did wait until price made a 0.786 retracement on the Fibonacci on a one hour chart. I was very proud of my new trade at that level when price moved ahead = TEXTBOOK

I was somewaht disappointed to find this morning that price ignored that retracement level and gave away more.

Overall I closed one contract for $63 per contract profit (0.6%) and remain exposed to 4 contracts all of which are under water.

CryptoBots My outsourced crypto bot site is under maintenance. They had warned that they would be doing work. This is never a good space for a network marketing business as it often presages when the operators run away with the money. In this case the trading capital is kept in an exchange account in my name = capital is safe => and I can look and see if any trades have happened. With several problem children there will be no new trades until those are traded out.

My new trading bot needed a kick in the pants to restart it. It went on to close out 26 trades for the day with an average profit of 1.53%. That is a pretty handy result on a day when Bitcoin basically dropped 10%. Generally altcoins drop more. This robot deals with problem children in a different way by allowing one to dollar cost average (DCA) on coins that drop beyond a user specified percentage. It runs a trailing algorithm when price drops below the DCA threshold and so far the robot has closed 3 DCA trades which were doubled up once each.

Currency Trades

Forex Robot did not close any trades and is trading at a negative equity level of 9.04% (lower than prior day's 9.8%).

Outsourced MAM account I run an outsourced forex trading account with Actions to Wealth. They closed out 3 trades for 0.12% loss for the day.

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. CNBC image is credited below the image. 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 Trading: get 6 months free trades with Bitmex for leveraged crypto trading. http://mymark.mx/Bitmex

February 21, 2018