$10,000 Portfolio Update: Almost Half Way To A Double

by: SA Editor Rocco Pendola

To get yourself up to speed, see last Wednesday's update to the $10,000 portfolio: $10,000 Portfolio: Booking Profits, Taking Losses, Heading Into a Good Fog.

As of that article, the value of the portfolio I am looking to double by the end of the year stood at $13,918.

Prior to posting that update, I closed all of my positions (excluding option spreads) except for the 10 Best Buy (NYSE:BBY) March $22 calls. That left me with, at the time, $10,098 worth of cash. I am now counting the Apple (NASDAQ:AAPL) and Amazon.com (NASDAQ:AMZN) bull put spreads that will expire worthless this Friday as cash.

For the record, the three open spreads on AAPL have breakevens of $360.95, $357.70 and $344.84, respectively, while the breakeven on the lone AMZN spread is at $169.85. And to think that some folks questioned the merits of writing puts on high-flying stocks in this volatile environment. The premiums are beefy enough that it's as close to a sure-shot strategy to generate income that you'll find in today's market. And it beats the heck out of squeezing dividends from stocks that move like rocks. But, I digress ...

With some of the cash, I opened a long position in AAPL calls on Monday. The fortune of good timing smiled upon me:

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If I were merely trading that AAPL call position I would have gotten out of it today for a nice profit. But because I am looking to turn $10K into $20K on short order, I am going to bank on Apple's momentum keeping up. AAPL has turned in relatively strong performances, even on recent choppy or down days.

While the AAPL calls carry an on-paper profit of +$544 (position value: $5,944), the BBY calls sting with an on-paper loss of $-$780 (position value: $3,500). Seeking Alpha contributor Scott Krisiloff makes a nice bullish case for BBY here. While I do believe Best Buy serves as "Amazon's showroom" to some extent, I agree with Krisiloff's premise that they're the only game in town. And the moves Best Buy is making, such as shrinking square footage, will not produce rewards overnight.

As far as the position I hold goes, I expect a bounce if the market does alright tomorrow. It will be a game-time decision, but I might need to exit on a pop. I view BBY as I do Ford (NYSE:F). I might need to cut it loose from the $10,000 portfolio, but outside of this context, I remain long-term bullish on both stocks.

As of Tuesday's close, here's where things stand.

AAPL and BBY position value: $9,444. Cash: $4,698. Total account value: $14,142.

At the moment, I am sitting on a modest pile of cash. Once the spreads I have open expire worthless, I will write a couple more with October expirations. To make things interesting, I will look to make a bearish play or two via puts or an outright short.

On my radar in that regard: Research in Motion (RIMM), which reports earnings on the 15th of this month. Netflix (NASDAQ:NFLX) and Sirius XM (NASDAQ:SIRI) also deserve bearish looks as both stocks sport broken charts and considerable headwinds between now and the end of the year. I will expand on my line of thinking for shorting or buying puts on all three names Wednesday or Thursday. And, of course, I will let you know if I pull the trigger on anything as the $10,000 portfolio heads towards a double.

Disclosure: I am long F.