I hold no illusions of grandeur on days like today. The $10,000 portfolio that I have set out to double by the end of the year looks golden, as of noon, eastern time, Monday (8/29) with a formidable market rally in full swing.
To track the trajectory of the $10,000 portfolio, see the following articles as well as my Seeking Alpha StockTalks and Instablog:
The $10,000 Portfolio: A Double By the End of the Year
Doubling the $10,000 Portfolio By the End of the Year
Doubling the $10,000 Portfolio: Getting Aggressive With Best Buy
Admittedly, it's a bit like shooting fish in a barrel. Everything's up. But that does not mean that there have not been some sound calls made as I move closer to my goal of a double.
For example, the strategy of using bull put spreads has worked wonders. As time decay works its magic, I have no doubt that the open September expiration spreads on Apple (NASDAQ:AAPL) and Amazon.com (NASDAQ:AMZN) will expire worthless, allowing me to keep the entire credit generated from those trades.
Between credits on the AAPL and AMZN bull put spreads, the credit received on a closed-out Netflix (NASDAQ:NFLX) bear call spread and the profit banked on a NFLX put, I have $2,773 in banked profits/spread credits in the account.
Here's how the open positions in the portfolio look (prices current, as of noon, Eastern time, Monday, 8/29/2011):
- Ford (NYSE:F) March '12 $16 calls (cost basis: $0.22). Current price: $0.16. Profit/Loss: - $600.
- AMZN January '12 $225 calls (cost basis: $11.48). Current price: $12.30. Profit/Loss: + $164.
- Best Buy (NYSE:BBY) March '12 $22 calls (cost basis: $4.28). Current price: $4.85. Profit/Loss: +570.
- BBY October $26 calls (cost basis: $1.31). Current price: $1.31. Profit/Loss: Even.
Taken together, the open trades show on-paper profits of $134. Combine that number with banked profits and the credits and the value of the $10,000 portfolio stands at $12,907. That's up from $11,847 at last Wednesday's close.
With the exception of F, my strategy during the market turmoil was to go with the companies that have (A) the strongest stories going forward and (B) showed the strongest potential, chart-wise, for breakouts on renewed strength in the broader market.
A glimpse at the charts of AAPL, AMZN and BBY shows the efficacy of such a strategy.
Click to enlarge charts
Click to enlarge
Of course, lots could change this week (heck, lots could change before this article even hits the wire). Therefore I intend to publish another update when the market closes this Friday.
At that point, I should have a better idea of how I intend to proceed. At this point, I hope to ride the presumed continued strength of AMZN and BBY and, once the September spreads expire, write more bull put spreads on the market's strongest names. I would also like to find a weak name to short or buy puts on, just to keep things interesting.
Disclosure: I am long F.
Additional disclosure: I may open and close positions in any of the stocks mentioned in this article, most likely using options, at any time.