I bought a bull call spread on MDLZ.

music selection:  “The Sentinel” — Judas Priest

weigh-in:  192.2 (1.6)

Mondelez (MDLZ) is a snack and beverage giant.  Really sort of a boring company with low volatility.  It is also in a strong uptrend that shows no sign of abating.  I bought the 59.5/64.5 bull call spread with 20AUG2021 expiry today for 4.1383 per share (12 spreads), putting 4,966 in capital at risk over 26 days.  I have 1.85% downside protection in the trade.  Should that not be breached, I will earn the full profit of 1,034 in 25 more days.   That is good for 20.8% or 292% annualized.

In my HSA account, I sold everything, booking a 76% gain on basis (plus an untracked amount of distributions).  I have put all that in SPSB, a short term investment grade corporate bond fund.  The yield is paltry and might not even keep pace with inflation.  I’m basically just parking “cash” somewhere as an allocation towards Nasem Taleb’s “barbell” strategy.  I will hold cash and equivalents until the next 50% or greater market correction.  Upon confirming a 30 day uptrend, I will deploy the entire amount (about 13k) into UPRO.  Should make 6 times my money in 18 to 24 months if the Fed stays true to the new playbook.

All August expiring positions are in the money and I’m pacing 13,865 in profits for the month.  One September expiry position is in the red and the month is pacing 1,867 in profits.  I have one October expiring position that has 2.74% downside protection and is slated to earn 4,061 for the month.  I have a good till canceled stink bid on a December position as a fishhook that is unlikely to ever fill.

Devour your prey raptors!

Weekly Trade with yield up to 292%

Never miss another opportunity to devour prey!

5 thoughts on “Weekly Trade with yield up to 292%

  • July 27, 2021 at 6:30 pm
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    The next 50% correction could take years to materialize, and if it does it could be after a 50%+ run. Are you predicting an imminent rise in interest rates / inflation that will crash markets? The downside of being wrong would be failure to keep up with inflation. Why not use option-protected equity positions so you can win either way? That’s sort of a barbell too, but without the requirement to be right on the market timing.

    I’m just thinking we’re at the point in the recovery where we were in 2010-2011. Those were volatile times with healthy corrections, but what I remember most was the near-universal expectation that inflation was going to pop up any minute, and that another stock crash was right around the corner. In all fairness, those were volatile times with a few good sized corrections, but the advice to brace for hyperinflation and the next leg of the financial crisis was as wrong as it could possibly be. The markets eagerly climbed this wall of worry, and then climbed the next one when the Euro debt crisis came along and also proved to be a nothingburger. Meanwhile, the Fed kept missing their then-informal inflation targets as disinflationary undertow kicked in amid a steady expansion.

    Of course, crashes are unpredictable. There are currently bubbles in the bond and housing markets, and if the crypto market blew up it would spill over to stocks just like the bubble in dot-com stocks spilled over to industrial blue chips. But I would be equally afraid of missing the next several years of stimulus-fueled growth.

    Reply
    • July 27, 2021 at 10:55 pm
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      Chris,

      You make good points. The HSA money is not “pay the light bill money”. I’m content to let it miss out on a 50% gain to have cash equivalent. Should I get a 50% crash after a 50% run up AND deploy to UPRO, the return to the previous high is a 6x return. Like they say, you don’t have to sell within 20% of the top or buy within 20% of the bottom; there is plenty of money to be made in between.

      I think the market will continue to rally and that I will be “too soon” on my market time (but better than “too late!”) BUT, the P/S ratio recently passed the all time high during the dot-com boom. This time is different is a dangerous attitude. I fully understand the dot-com boom was on companies with no profits (or even no revenues!) and this the boom is on the back of best in history profitability. The market is clearly stretched with more risk than reward on the horizon.

      That said, the trend is my friend until it turns so I’m going to continue buying in the money bull call spreads.

      Like an old Finance prof of mine used to say “Daddy always said” (“daddy” was also a Ph.D. professor of Finance from West Texas) “You pays you monies, you takes yous chances.”

      Reply
      • July 28, 2021 at 2:23 pm
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        If the price/sales ratio is trailing 12 months, I would argue it is not relevant. I’d say the same for PE and other TTM metrics that include a brief period of pandemic lockdowns, a spike in unemployment, and a spike in consumers’ savings rates. 2020-21 was an aberration, and I suggest using 2019 numbers or 2Q2021 numbers to evaluate stocks. These will be closer to next year’s numbers than stats which include 2020.

        TL;DR: If hindsight is 2020, then 2020 is not foresight.

        Reply
        • July 28, 2021 at 3:53 pm
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          Chris,

          Well put. There are as many reasons the rally can continue as there are it could crash. For the HSA account, I prefer to sell “too soon” rather than risk being “too late”. In my main taxable account, I’m still long with in the money bull spreads. But I’m raising cash with profits rather than deploying it to passive dividends and interest, as per the meta-strategy.

          Reply
  • July 27, 2021 at 10:53 pm
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    50%? Wait, really?

    It’s a very interesting strategy… and nice to have a part of your portfolio running a different strategy than the rest… smoothing out the beta can be quite beneficial. And… if it turns out this money just sits in SPDR for the next 10 years, you’ll probably consider that a good thing!

    Reply

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