Weekly Recap: August 6th 2021
Posting this a couple days late, but here's a recap of last week in the market for us.
Despite getting off to a rough start, this past week we finished up with a $1,652 (1.13%) return, which outpaced the S&P 500 by 0.24%. All in all it was a really successful week for us. Our total YTD returns are up to 71.09% which is still crushing the S&P 500 return of 18.34%. It was a great way to start off the month of August and we've put together a really nice string of winning weeks. See below for the full detail:
As we alluded to above, the week got off to a really rough start when CRSR missed on its earnings report. After previously only owning 1500 shares, we doubled our position in this stock by selling 15 27.5p to take advantage of the inflated earnings premiums. To play defense on this drop we immediately rolled down our 32.5c to 27.5c for a $0.65 credit. This cut down on our upside but helped drop our breakeven price further which is the smart play when a stock makes a sharp move against us. CRSR looks like it'll work out alright in the end, but definitely a little annoying when your largest position is on a consistent downtrend.
The big story on the week for us was the trades that we made during the week. The trades that we made during the week pulled in a $1,672 profit. Little bit of shameless self promotion here but those trades are all alerted during the week in our premium discord alert channel, which you can sign up for through our website.
With earnings season in full swing we put a few earnings trades into action with CGC (+$435), UBER (+$220), and FSLY. CGC and UBER went exactly as we would normally expect and while they moved against us, we were able to hit max profit on both since our strategy afforded us a huge downside cushion. FSLY was really the only dud out of the group. After a 25% drop post-earnings we were in a little hot water with that trade as we sold 35p and 40p. We played defense by rolling down the 40p to 35p and accepting that we would take a loss, but it would help ensure that this trade would be small loss rather than a huge one. FSLY eventually finished above 35 so we were able to get out with a loss of $610 overall on the position.
FSLY went on to actually finish above $40 and the $610 loss we took would have been a $920 gain had we literally done nothing. And while that's frustrating to look back on, we did what we had to do. Just because something made you less than the alternative doesn't mean it was a dumb move. Limiting losses and not gambling on rebounds helps accomplish our goal of fiercely conserving our capital and letting us live to trade another day. If I had to do it again though I would have decrease the position size on FSLY. The potential max gain of $920 far outweighed the $435 and $220 max gains I had set up for CGC and UBER respectively. We're playing a numbers game and making sure you properly size and diversify your positions will ensure that you come out on top more often that not.
Coolest Trade of the Week: So as to avoid a huge wall of text I figured I'd add a little section here where we talk about the coolest trade we entered into during the week. The runaway winner has to be our HOOD trade, where we used our IV reversion strategy to make $750 on HOOD in less than a day with very little stress. On HOOD's initial spike up towards the $70 mark, implied volatility was through the roof. As some of you who have been following us know, huge spikes like this can do some funny things to put premiums. So while HOOD was trading in the 60's, we were actually able to sell a 20p expiring Aug. 20 for a whopping $0.20 of premium. This means we had a $19.80 breakeven price on a stock that was in the $60's and had never traded below $30. A really, really high percentage setup. Of course the plan here wasn't to hold until expiry, but rather to wait for implied volatility to fall back down which is typically inevitable. After the drop in IV the HOOD 20p had dropped to $0.05 and we were able to exit the position for a really nice profit.
Looking forward: We are still aiming to be incredibly conservative with our positions as I'm patiently awaiting a bigger pullback in the market to start really loading back up on bullish positions via CSP's. It can get a little annoying to sit on your hands so I'll probably target some trades that behave relatively independently of the overall market (Earnings, IV reversion). And while I consider what I'm doing "conservative" currently, the results honestly have been really nice so far as we've strung together 3 consecutive profitable weeks in a row with relatively low maintenance and low stress:
For a look at our analysis for the upcoming week in the stock market, check out our YouTube channel for the 2+ hour long stock market ideas live stream.