Because readers have responded well to some of the portfolios I have published in the past, particularly the $10,000 portfolio, I have decided to open the door on what will be another on-going series of trades you can follow along with.
Unlike the $10,000 portfolio, which I set out to double, I attach no specific goals to this set of holdings. Obviously, I want it to appreciate, but other than that, the only parameter I put on the portfolio is that it must consist of long-shot trades.
Of course, my definition of "long shot" might differ from yours. I use a rather loose description. Examples of long-shot trades include going long deep out-of-the-money options or taking a flyer on a low-priced stock that I don't consider a psychological trap. And I do those two very things with the first two trades in the Long Shot Portfolio.
While I do not make all of the trades I write about in my personal accounts, I do make some of them. I always disclose my actual holdings at the bottom of every article as a disclosure. In this case, however, I put both trades on in the past several days in an IRA account.
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That's a screen shot from my Interactive Brokers (IBKR) account showing a long position in Ford (F) January 2013 $20 call options, 10 contracts at a cost of $27.84 each, a current market price of $0.39, a market value of $385 and an unrealized profit/loss of $106.57.
My Seeking Alpha article history on F reflects my bullishness toward the stock. Of course, Ford reports earnings Wednesday before the open. While the numbers always matter, I think investors will focus on whether or not (or, more aptly, when) the company will reinstate its dividend. This should further the recent strength we've seen in F in the near- to mid-term.
While I call the trade a long shot because of the $20 strike on the call, it's also a longish-term play for me. I expect to hold this position into the middle of 2012, at the very least, barring something unforeseen, such as a meteoric rise toward and/or past $20 or an unfortunate implosion that sticks.
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I discussed this trade in a recent Seeking Alpha article on covered calls. I tend to be quite selective with sub-$5.00 stocks. As I have noted, the litany of articles touting "5 Stocks Under $5 That Could Double" does a disservice to investors. That said, this is a long-shot portfolio and Sprint (S) stands as a relative long shot.
Talk about the company needing to raise capital was overblown. It certainly does not hurt to have Apple's (AAPL) iPhone 4s running on the Sprint network. And, as a hallmark of a long-shot play, I would not be shocked to see somebody come along and take Sprint out for a nice premium.
But, this trade, as noted in the above-referenced article, is as much about the strategy as anything else. I feel good about taking a chance on a 900-share position in this stock and writing covered calls to generate income along the way. If Sprint gets bought out, good for me. If the company turns things around, better for me, 1, 3, 5 or 10 years down the road.
Later this week or next, I will add to the Long Shot Portfolio. At this point, I have two very aggressive trades I will look to put on that, if on the money, could provide considerable returns in 2012. Feel free to follow me from my Seeking Alpha profile page or from the upper-left hand side of this article. By following Seeking Alpha authors, you receive alerts each time we publish a new article.