Well that was a whirlwind of a quarter, for both the stock market and for myself, as I started a full time remote job. I’ve been busy raising the girls and working, so didn’t get to post here since the end of the first quarter, so I figured I would post an update. Also – definitely not trying to time the market, but I have been feeling the market is toppy as the nasdaq 100 was up a mind blowing 44% YTD at the end of the second quarter, so I have been adding some hedges I wanted to update about.
So first of all – second half (and a bit) performance:
The nasdaq100 overtook me some time in June, has calmed down a bit in August, but overall I’m happy with the performance comparison. Coming into 2023 I definitely wasn’t expecting 30%+ year performance on the index, and I’m happy my positions have kept up. Its also nice to see that as the nasdaq has now erased most of June-July gains, my portfolio is actually up a tiny bit since June, and hasn’t pulled back as much as the nq100.
I did a fair bit of trading over the last quarter, but initializing “placeholder” positions in companies I want to keep an eye on, but also adjusting previous positions. This is how it looks today:
I wont review it all, just a couple of notes:
Just like I like selling deep OTM puts, 2+ years out, as probability is highly on my side of making that money, as a hedge I started selling deep OTM calls on some of the short puts I own. Of course the best way to lose all your money is be selling naked calls, but I only do it on megacap companies, where the probability of doubling from a valuation of 1T+ is quite low. And I sell very conservative goals. And these positions are sprinkled throughout my portfolio on almost all the megacaps I own, aapl, amzn, avgo, goog, msft, nvda, to name a few. And these positions are part of the reason my porfolio started lagging the nasdaq on the way up in June, and why it went down less since the end of July highs. The advantage of selling (a few, conservative) short calls when you already sold puts on a give company is that it requires no additional margin. Since the short calls and short puts cant go in the money together, one of them is definitely going to expire worthless, they share the same margin req. In addition, when you sold for example on AMZN 30 short puts, selling 2 short calls give you plenty of room to double down (and double down, and double down) on the short calls, rolling up and out, while the margin req still stays the same. So just with AMZN as an example, I sold 30x 100 puts and 2x 195$ (it was the highest strike) calls, all 2.5 years out. So if over the next 2 years AMZN goes up to 200$, first of all my short 100$ puts will have made a lot of money (and my short 195 calls will have lost some on paper, depending how long it takes for amzn to get to 195), and also both will have decayed a lot in time. So I can roll the 2x short 195 calls out to 4x short 250 (or whatever strike) calls out in the future some more, and wait for those to expire, while still using the same margin req of the remaining 26 short puts. The danger is obviously if AMZN goes straight up to 200$ in the coming months lets say, before significant time decays, in which case I will need to roll up and double, but still, because AMZN already has a 1.3T (!) market cap at 135$, 200$ is a 2T (!!), and the difference between 1.3T and 2T isnt the same as 1.3B to 2B. The T numbers are so big that it suddently gets a lot harder to grow.
Other than sprinkled short calls, I have some sqqq and VIX hedges, which haven’t been working out for me (duh, the nasdaq is up 40% for the year), and honestly they never seem to work out for me, its just potential money down the drain, but I can’t help but do a bit. Well see how they work out, and I also offset the sqqq positions by selling puts.
So for example, the 5x 20-35$ sqqq call spread cost 1000$ (potential gain of 6500$ with sqqq >35) which I offset by selling 5x F puts (1000$ credit, margin req of 2500$), so essentially the hedge was “free”, and the hedge will cover the 2500$ margin req of the F puts, plus drop another 4k$ in my account if both were to go completely in the money. The other sqqq position I “offset” by selling to AAPL puts (7500$ margin req on a 10k$ potential sqqq position, the idea being that if AAPL goes below 150$ I would want to take advantage of that buying opportunity, and I could drop that 10k$ from the hedge directly into an AAPL position, which AAPL @ 150 I could sell some puts and buy a BCS there and historically that would be a good price to get in.
Other than that a short call spread on some stocks with high valuations (CMG), again with a goal of trying to “lock in some profits” while the market is up here, but not try to time the market, as time IN the market is far more important to me that TIMING the market, especially when your strategy is basically just selling time premium. And a covered call position in MTCH (got assigned from short puts I sold a while ago), where I also sold some more short puts to lower my cost basis.
As a last note – lets check in on potential from here:
Portfolio market value is -77k$ – 36k$ stock position in MTCH – =113k, so if ALL my short positions expire worthless thats my potential profit, so ~20% over the next 1.5-2.5 years from where I am today. Obviously its unlikely every. single. one. of my positions will go the way I want, but considering my margin req is currently under 50%, it leaves me plenty of room to double down on positions which don’t immediately go “my way”.
And thats really all there is to do for now, wait for the 100k$ of time premium to decay, adjusting when necessary.
Hab Technology 