July 31, 2020 

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The Week's Biggest Winner & Loser

General Electric (GE)

A record drop in GDP led all industrials lower, and there's no lower industrial than General Electric (GE) which dropped -11.52% this week to land as Biggest Loser.

Portfolio Allocation

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Current Position Performance

Super-Speculative Basket

What is the Super-Speculative Basket?

The Super Speculative Basket ("Super-Spec") is made up of a handful of stocks so incredibly volatile that I'm uncomfortable giving any of them full allocations in my portfolio, instead dividing a single allocation among all of them.

Currently, my Super-Spec stocks are as follows: the Airlines ETF (JETS), Carnival Cruise Lines (CCL), and Virgin Galactic (SPCE). They are listed as a single allocation in the portfolio breakdown chart each week. 

This Week’s Moves

Put Spread Aug 31 324-321 (SPY): *New Position*

When the markets continued to shrug off the virtual tsunami of bad news facing them into Wednesday's Fed meeting, I also noticed the VIX (the Volatility Index or "Fear Gauge") had dropped more than -3% that day. The higher the VIX, the more the market expects volatility or significant price action. With the VIX low, options pricing also drops.

Given the potential of negative catalysts on the horizon and the low cost of options, it was time to put on some insurance. I bought the 324-320 put spreads on the SPY (the S&P 500 trading vehicle) expiring on August 31 for $1.39 (after fees), betting that the S&P 500 will drop to or below $320 by August 31.

I bought the 324 puts for $7.71 and sold the 320 puts for $6.33, giving the put spreads an overall cost of $1.39. If the SPY drops below $320 by August 31, I have a maximum potential profit of $2.62, nearly tripling the cost of the trade at ~288%.

For those new to options: Option contracts are sold in quantities of 100. One option contract represents 100 shares of stock, so the price of this trade of $1.39 is actually $139.00 per put spread purchased.

Current Status

Cost: $1.39
Current Value: $1.21
Profit/Loss: -12.95% 

Pinterest (PINS): Profit-Taking

Pinterest (PINS) shares popped nearly +40% before settling on Friday thanks to a spectacular Q2 earnings report showing outstanding user growth and advertising revenue generation. The pop flew through one of my price targets with an order filling at $33.00. 

The sale locked in +153.46% in profits on some of the shares I bought back on March 12 for $13.02 and also took even more profits out of the position. My next buy target is $17.55 and my next sell target is around $37, Pinterest's all-time high.

PINS closed the week at $34.29, up +3.76% from where I sold Friday.