Most Intriguing Investment Idea of the Day Thread

[ChpBstrd]

China has reached contrarian status - no one will touch it. No one even cares about it... that gets me interested.

I will be adding to my various fund holdings with large China exposure over the next year, most noteably UK:FCSS.

If you have the time and care, would you mind talking about why this OEIC (?) rather than an ETF like, say, FRCH.L https://www.justetf.com/uk/etf-profile.html?isin=IE00BHZRR147#overview which seems to be the lowest MER, broad, physical replication one available..?

Edit: note to self, Euro-listed ticker FLXC

Sure

- they're an Investment Trust, which I believe is probably the best structure for such companies to operate as, offering flexibility to run the fund as they see fit which aren't available to OEICs and ETFs.
- benchmark against MSCI China, which they have very well outperformed over the last 5 & 10yr periods. Clearly they have some skill in generating alpha. It's probably easier for them to generate alpha because...
- ...they're a special situation fund specializing in small cap value stocks, where mispricings can be greatest; they aren't afraid to be different to the index, so I'm happy to pay 1% if they can generate 3% or 4% or 5% alpha
- high conviction - currently deploying leverage as they are seeing lots of opportunities and deem the risk/reward to be attractive. There's a lot to be said for "conviction" investing, so long as risk management and governance are observed
- Currently on a modest 11% or so discount to NAV - although there's no guarnatee that will narrow, there is no reason why it shouldn't , so the way I see it I'm getting 6-7 years worth of annual fees for free vs a cheap ETF

The valuation proposition of China (and indeed many other markets) vs US:



vs 2009




not entirely sure of the source of the data but its doing the rounds on LinkedIn

When I look at this scatter plot, I see a lot of countries that are cheap for very good reasons (Hungary is a dictatorship, Turkyie has no central bank independence, and China stocks aren't really stocks they're units of a commune).

However, I also see Brazil (EWZ), Korea (EWY), Poland (EPOL), Austria (EWO), and Singapore (EWS) as extremely cheap markets with little downside. Much of Europe and emerging markets in the Americas are relatively cheap.

So my takeaway is this: No, it's not a choice between expensive US stocks versus cheap China stocks. There are plenty of inexpensive stocks in capitalistic countries all over the world. So why take the risks of investing in China?

[Financial.Velociraptor]

Alternative take - Since SVOL is hedged against extreme volatility events it makes an attractive short term play as a near dated Covered Call holding using a NTM strike.  Earn 16% on the underlying while juicing just shy of 2% a month in options premium.  A slow steady decline in price that keeps you from getting called away just before ex-div thus yields you a total return close to 30% a year.

Will be tracking this trade now.  Position size is 100 shares and 1 covered call (about 2200 bucks at risk).  I got 21.9789 pricing on the shares and 20 bucks premium on the call ($1.05 in commissions).  That's 16.36% on the underlying and 14.4% annualized on the call (before comm). Call it 30% approx cash on cash return. potentially.

CLOSED this trade at about breakeven.  Say 2 bucks STG after commissions. 

Finally getting my head around this.  It is NOT a short vol instrument at all.  It is actually LONG vol!!  A leveraged bet has been made on short term fixed income investments, most short term treasuries.  There are some investment grade corp bonds and some money market funds but three quarters of the exposure is cash equivalents.  This covers the interest on the underlying note.  A trivial options kicker is added by making a very small but highly leveraged bet on VIX futures.  They last reported a 0.1% exposure to 60 strike VIX calls.  The fund can also invest in VIX puts.  Basically, its a short term cash instrument with a Taleb style options barbell on VIX futures.  If (when) we have another event where the VIX goes up several hundred percent, they will make a large multiple of their bet on a sliver of their exposure.  Presumably after cashing out they would go long puts as mega spikes tend to sell back off just as fast as they went up as soon as the powers that be take an "Official Action" to contain the liquidity crisis.

It is no wonder the NAV of this instrument steadily declines.  It is paying out an unsustainable distribution and banking on black swans to top them back up.  I got out because I consider this toxic now that I sort of understand it.

More on VXX bear put spread trades if my open order ever clears market.

[vand]

China has reached contrarian status - no one will touch it. No one even cares about it... that gets me interested.

I will be adding to my various fund holdings with large China exposure over the next year, most noteably UK:FCSS.

If you have the time and care, would you mind talking about why this OEIC (?) rather than an ETF like, say, FRCH.L https://www.justetf.com/uk/etf-profile.html?isin=IE00BHZRR147#overview which seems to be the lowest MER, broad, physical replication one available..?

Edit: note to self, Euro-listed ticker FLXC

Sure

- they're an Investment Trust, which I believe is probably the best structure for such companies to operate as, offering flexibility to run the fund as they see fit which aren't available to OEICs and ETFs.
- benchmark against MSCI China, which they have very well outperformed over the last 5 & 10yr periods. Clearly they have some skill in generating alpha. It's probably easier for them to generate alpha because...
- ...they're a special situation fund specializing in small cap value stocks, where mispricings can be greatest; they aren't afraid to be different to the index, so I'm happy to pay 1% if they can generate 3% or 4% or 5% alpha
- high conviction - currently deploying leverage as they are seeing lots of opportunities and deem the risk/reward to be attractive. There's a lot to be said for "conviction" investing, so long as risk management and governance are observed
- Currently on a modest 11% or so discount to NAV - although there's no guarnatee that will narrow, there is no reason why it shouldn't , so the way I see it I'm getting 6-7 years worth of annual fees for free vs a cheap ETF

The valuation proposition of China (and indeed many other markets) vs US:



vs 2009




not entirely sure of the source of the data but its doing the rounds on LinkedIn

When I look at this scatter plot, I see a lot of countries that are cheap for very good reasons (Hungary is a dictatorship, Turkyie has no central bank independence, and China stocks aren't really stocks they're units of a commune).

However, I also see Brazil (EWZ), Korea (EWY), Poland (EPOL), Austria (EWO), and Singapore (EWS) as extremely cheap markets with little downside. Much of Europe and emerging markets in the Americas are relatively cheap.

So my takeaway is this: No, it's not a choice between expensive US stocks versus cheap China stocks. There are plenty of inexpensive stocks in capitalistic countries all over the world. So why take the risks of investing in China?

Yes, there plenty of cheap markets and China is certainly one of them.  In fact, most markets are reasonably priced, with several expensive ones of which US is one. 
Anyway, that's one of my ideas. the 10% gain on FCSS so far is a nice start. It'll live or die on its future performance, not on my reasoning.  I just thought the idea of this thread is to throw out some idea, not to revert back to "VTSAX is all you ever need"

[MustacheAndaHalf]

More on VXX bear put spread trades if my open order ever clears market.

The VIX spiked when Iran attacked Israel and at the first indications Israel was retaliating.  Tensions and the VIX both calmed down.  But that risk remains, which could derail VXX bear puts.  Do you see that as a major risk to your investment thesis?

[Financial.Velociraptor]

More on VXX bear put spread trades if my open order ever clears market.

The VIX spiked when Iran attacked Israel and at the first indications Israel was retaliating.  Tensions and the VIX both calmed down.  But that risk remains, which could derail VXX bear puts.  Do you see that as a major risk to your investment thesis?

YES.  But a calculated risk.  From time to time, I'm going to take a 50% or more haircut.  But most of the time, I'm going to make a "good" annualized return. 

----------

VXX bear put spreads.
JAN1 result (8,429)
FEB1 result (5,140)
MAR1 result (3,472)
APR1 result (4,943)
APR2 result 576
APR3 result 1,232
MAY result ?
TOTAL (20,176) - win rate 0.333

I tried to get into Friday expiry bear put spread with 14.5/15.5 strikes.  Market was wanting 95 cents or more.  This felt like picked up nickles in front of a steamroller compared to the 89-92 pricing I've gotten on front week ITM before.  I decided to go about 1.5% out of the money on the 17MAY2024 expiry (three weeks).  So far this year 90% of the three week periods would have been winners.  I'm currently at the 13/14 strikes and 74 cent pricing (a little over 75 cents after commissions).  With the underlying at 13.23, my look through profit is 420 already (on 10,359 at risk).  That's 4.1% or 78% annualized with potential for 35% or 670% annualized.  If I repeat this trade through year end. there should be another 10 iterations.

[ChpBstrd]

Asset: Citigroup Capital Series XIII trust preferred securities (C-N)
Price: $28.10
Rationale:
Summarized in this article: https://www.barrons.com/articles/citi-preferred-stock-dividend-7a338456?siteid=yhoof2

This variable-rate security is treated like a hot potato because it is callable and trading above par. The fear that this security could be called away at $25 is probably less founded amid today's conditions than ever before. If they haven't called the shares in the last 10+ years, C is not about to reduce their Tier 1 capital now to pay off something that has tax benefits to them. According to Barron's, Citigroup's CFO said in 2017 that they have no incentive to redeem C-N. If that was true in 2017, it's also true today. It's definitely not getting redeemed at a time when banks are getting squeezed for capital, recession is ahead, and pressure from a rising SOFR is expected to abate.

The lack of tax advantages for these dividends make it perfect for my Roth or traditional IRA. The shares are less valuable and the dividends are higher because of the non-qualified nature of the dividends. But I as a small individual investor have a workaround that the big price-setters don't have - just put it in an IRA. Earning 6.37% above SOFR from a security based on Citigroup's debt is worth a look. I picked up 300 this morning.

Victory lap:

I have owned 300 shares of C-N for 13 months now with a cost basis of 28.25/share. These are callable at $25 at any time, so I was at risk of a $975 (-11.5%) loss. Since buying at $8,475 on 3/30/23, I've received $1,117.28 across 5 interest payments into my traditional IRA. So now I've more than broken even on risk and get to hold this 10.21% yielding asset with essentially no downside.

I wish I'd gone all-in on these, as I was tempted to do. But I was afraid of losing that 11.5% and wondered if rising rates were changing the banks' reluctance to call these. Had I done so, I might be retiring on the cash flows right now. The downside risk would still remain, but having the entire downside already paid for by the interest could modify my calculus. Then the prospect of earning ~4% over my WR would help me justify inflation risk, because I could still net tens of thousands per year after expenses and plow that money into stocks.

It's still an intriguing investment - one that tempts me to dollar cost average more money into it over the years so that when the call comes, I'm only ever really down on that year's purchase in the grand scheme of things. If it gets down to $28 again, like it did last October, I'll be tempted to YOLO. This has worked for too long for it not to be systemically impossible for Citi to call.

[Financial.Velociraptor]

VXX bear put spreads.
JAN1 result (8,429)
FEB1 result (5,140)
MAR1 result (3,472)
APR1 result (4,943)
APR2 result 576
APR3 result 1,232
MAY1 result ?
MAY2 result ?
TOTAL (20,176) - win rate 0.333

So, I have two bear spreads open at the moment.  One was opened 3 weeks out and a second 4 weeks out when a stink bid filled.  I have about 10k at risk in the first and 2k at risk in the second.  Both are in the money. 

I've been looking at the equivalent of the "yield curve" for at the money bear put spreads in VXX.  Your theoretically return on risk shoots up quickly when moving from 1 week to 1 month, but basically doesn't budge going to 2 months till expiry.  However, given the nature of futures market and the probability that they will be in contango most of the time, the two month expiry is more certain to have underlying be "down" at time of expiry.  I'm now thinking that the sweet spot is about two months out.  When my 17may2024 spread expires (the three week), I'm going one month out to the next 'third friday' regular with 7,500 at risk.  When the 24may2024 expires (assuming in the money), I'll deploy another 7,500 to the second month regulars.  This should somewhat regularly yield 40% on cost every 8-9 weeks.  Occasional volitility events means taking 3k to 7.5k in losses and rolling.

The intent is to earn about 3,150 a month most months.  Of that, I will subtract first the 1,900 a month that goes to my checking for budgetary needs.  Of the residual, a quarter will go to cash (to backstop events where I invoke my 50% stop loss!) and a quarter will go to additional basis and provide compounding.  Half of the residual will go to fixed income, mostly PDI and JPS.   

Should my positions stay in the money, I'll be down about 15k on the year but with a 50% win rate.

[bluecollarmusician]

@ChpBstrd do you hold these in a sheltered account?


I just sold a large position before the current ex-dividend.  I did the same math as you when I bought it several years ago when interest rates were still very low, and it ended up being a very profitable trade, as it was a great thing to be holding and I watched those massive interest rates pile up.  But the concerns about buying over the call price are still there. 

I may repurchase in a tax sheltered account.  I was looking at them for income when I purchased, but because I have continued to work the extra- income was more hassle than it was worth...

[ChpBstrd]

@ChpBstrd do you hold these in a sheltered account?

I just sold a large position before the current ex-dividend.  I did the same math as you when I bought it several years ago when interest rates were still very low, and it ended up being a very profitable trade, as it was a great thing to be holding and I watched those massive interest rates pile up.  But the concerns about buying over the call price are still there. 

I may repurchase in a tax sheltered account.  I was looking at them for income when I purchased, but because I have continued to work the extra- income was more hassle than it was worth...

Yes, with those yields it's definitely a sheltered account asset. I keep it in a traditional IRA (rollover 401k).
Keeping it in a Roth would make the pain worse if C-N is ever called, so my rationale is that taking this risk with pre-tax money is less damaging than Roth money. The game plan is to break even on the callable price first, and then earn the high yield by holding until maturity in October 2040 or the call, whichever occurs first.

I see it as a nice income diversifier, because I think the least likely time when Citigroup would be willing to take a massive capital loss would be during a recession or financial crisis when their ratios are at risk or they are raising cash to buy discounted assets.

Thus I would expect this one to keep paying when all the other stocks are cutting dividends. Even if the SOFR component of the yield goes to zero, it'll still be nice to be earning >6.6%. That said, my $8700 position is not exactly paying the bills. It's a tradeoff of one risk for another. C-N is almost immune to market risk, but has high call risk. I can't quantify that risk, but I'm sure people at Citi are working every day to find a way to restructure these notes without taking the loss. Their 15 years of failure through various economic conditions is what I'm betting will continue. I'm also still very tempted to increase my wager.

[Scandium]

Asset: Healthcare Realty Trust (HR)
Price: $16.86
Rationale:
HR is an REIT of medical properties, which are not always direct competitors to regular office buildings because of the clustering of buildings on medical campuses, layouts, and utilities like oxygen pipes or wiring to support an MRI machine. Falling rates will be a positive for REITs in two ways - by lowering their cost of borrowing and by raising their multiples. I don't foresee a rising trend in vacancies in the not-cyclical healthcare sector, but bankrupt clients are a risk.

HR has a 7.3% yield that is covered by a 12.47 price to cash flow ratio (i.e. 8% cash flow yield). Price/book is 0.92. Debt/equity is 78% and debt/capital is 44%. Revenue is expected to grow 37% this year.

HR bought Healthcare Trust of America in July 2022, more than doubling their square footage. They paid former HTA shareholders a share of HR plus a $4.82 special dividend. This $4.82 dividend shows up in the record for HR shares and makes it look like they had a dividend cut in 2023! Actually, that dividend only applied to former HTA shareholders, but people taking a superficial look across one year will think it's a dividend trap / sinking fund cutting its payment. That's not the case. The regular dividend has been at least 30 cents per quarter since 3Q2016. For the last 4 quarters it was 31c.

The big news in this industry lately has been smaller competitor MPW falling on its face. MPW was concentrated 23% in one client, and that client has been skipping rent on a lease with 22 years remaining. Write-downs were announced today, and could get worse as MPW is now loaning their renter money. MPW dropped 30% on the news.

I view MPW's problems as a sign of mismanagement rather than sector-wide issues. They underdiversified, held the rent too damn high, and doubled down on a delinquent tenant. Arrangements with tenants in trouble are common in this industry, but MPW's divergence from its peers is something else. MPW is down 70% in the last year. With its relatively low leverage, HR could be scavenging their bones in a couple of years - though HR tends to prefer multi-tenant buildings with less risk than MPW took.

damn, HR with a 10 year return of -37%, that's impressive! Since 2005; negative 62%. That takes some work.

OK, looks like yahoo finance doesn't include effect of reinvested dividends? Portofolio visualizer should, which gives a 10-year return of 40.7%? CAGR of 3.5%. VS S&P at 12.3%

Call it selling at the bottom, but I got tired of the REITs a few years ago and sold most of them, both stocks and the ETF, after targeting ~4-5% of my portfolio in REIT for 10 years. They seemed to crash as much as stocks do, and go up much less. I liked them in theory, and I felt a bit like chasing performance, but felt better dumbing it into total market..

[bluecollarmusician]

I keep it in a traditional IRA (rollover 401k).
Keeping it in a Roth would make the pain worse if C-N is ever called, so my rationale is that taking this risk with pre-tax money is less damaging than Roth money.

@ChpBstrd Can you explain what you mean here? I am not sure I follow what you are saying...

[ChpBstrd]

Asset: Healthcare Realty Trust (HR)
Price: $16.86
Rationale:
HR is an REIT of medical properties, which are not always direct competitors to regular office buildings because of the clustering of buildings on medical campuses, layouts, and utilities like oxygen pipes or wiring to support an MRI machine. Falling rates will be a positive for REITs in two ways - by lowering their cost of borrowing and by raising their multiples. I don't foresee a rising trend in vacancies in the not-cyclical healthcare sector, but bankrupt clients are a risk.

HR has a 7.3% yield that is covered by a 12.47 price to cash flow ratio (i.e. 8% cash flow yield). Price/book is 0.92. Debt/equity is 78% and debt/capital is 44%. Revenue is expected to grow 37% this year.

HR bought Healthcare Trust of America in July 2022, more than doubling their square footage. They paid former HTA shareholders a share of HR plus a $4.82 special dividend. This $4.82 dividend shows up in the record for HR shares and makes it look like they had a dividend cut in 2023! Actually, that dividend only applied to former HTA shareholders, but people taking a superficial look across one year will think it's a dividend trap / sinking fund cutting its payment. That's not the case. The regular dividend has been at least 30 cents per quarter since 3Q2016. For the last 4 quarters it was 31c.

The big news in this industry lately has been smaller competitor MPW falling on its face. MPW was concentrated 23% in one client, and that client has been skipping rent on a lease with 22 years remaining. Write-downs were announced today, and could get worse as MPW is now loaning their renter money. MPW dropped 30% on the news.

I view MPW's problems as a sign of mismanagement rather than sector-wide issues. They underdiversified, held the rent too damn high, and doubled down on a delinquent tenant. Arrangements with tenants in trouble are common in this industry, but MPW's divergence from its peers is something else. MPW is down 70% in the last year. With its relatively low leverage, HR could be scavenging their bones in a couple of years - though HR tends to prefer multi-tenant buildings with less risk than MPW took.

damn, HR with a 10 year return of -37%, that's impressive! Since 2005; negative 62%. That takes some work.

OK, looks like yahoo finance doesn't include effect of reinvested dividends? Portofolio visualizer should, which gives a 10-year return of 40.7%? CAGR of 3.5%. VS S&P at 12.3%

Call it selling at the bottom, but I got tired of the REITs a few years ago and sold most of them, both stocks and the ETF, after targeting ~4-5% of my portfolio in REIT for 10 years. They seemed to crash as much as stocks do, and go up much less. I liked them in theory, and I felt a bit like chasing performance, but felt better dumbing it into total market..

Yea, I keep finding REITs intriguing but not buying them. It's a business that combines low margins with high leverage, and ideally you want the opposites. This was a lot more intriguing in January, back when we all had faith that inflation would continue plummeting and the Fed would cut rates back to near zero. Now the 5-year treasury yield is half a percent higher instead of lower, and that's a bad sign for real estate.

We could excuse HR's past performance as the come-down from years of reaching for yield during the ZIRP era. However, it's still a risky business priced like a low-yielding bond. MPW illustrates what can go wrong in this field. Investors' assumption that healthcare companies make good, reliable tenants may be false as we in the US continue to squeeze the healthcare sector. These are worth watching with a wary eye, but they'll struggle if rates stay higher for longer.

I keep it in a traditional IRA (rollover 401k).
Keeping it in a Roth would make the pain worse if C-N is ever called, so my rationale is that taking this risk with pre-tax money is less damaging than Roth money.

@ChpBstrd Can you explain what you mean here? I am not sure I follow what you are saying...

If I'm going to put something in an IRA that has a risk of sudden 15% loss, I would rather suffer that loss in a pre-tax account like a traditional/rollover IRA than in a post-tax account like a Roth. In neither case would I be able to deduct the loss from that current year's taxes, so that's a wash. What is not a wash is that the pre-tax dollars in my traditional IRA are worth less to me than the post-tax dollars in my Roth. I.e. I have to go to work for more hours to put $10,000 in a Roth than I have to earn to put $10,000 in a pre-tax IRA. Plus, I can put a lot more money per year into my 401k at work than I can toward my Roth IRA. For both of these reasons, I'm more protective / conservative with my Roth money than I am with my traditional IRA money. If I lose 15% in my traditional IRA, well, I'd have owed 15% taxes on it anyway.

This probably seems irrational in the long run, because the value of prepaid or deferred taxes net out in the end, assuming tax rates are the same. However my focus is on getting to FIRE ASAP, so I'd rather take risks with traditional IRA money. I'll also need the Roth money sooner, if I retire before age 59.5, so that's another case for taking less risk there.

[bluecollarmusician]

 What is not a wash is that the pre-tax dollars in my traditional IRA are worth less to me than the post-tax dollars in my Roth. I.e. I have to go to work for more hours to put $10,000 in a Roth than I have to earn to put $10,000 in a pre-tax IRA. Plus, I can put a lot more money per year into my 401k at work than I can toward my Roth IRA. For both of these reasons, I'm more protective / conservative with my Roth money than I am with my traditional IRA money. If I lose 15% in my traditional IRA, well, I'd have owed 15% taxes on it anyway.

This probably seems irrational in the long run, because the value of prepaid or deferred taxes net out in the end, assuming tax rates are the same. However my focus is on getting to FIRE ASAP, so I'd rather take risks with traditional IRA money. I'll also need the Roth money sooner, if I retire before age 59.5, so that's another case for taking less risk there.

Interesting take!  Thanks for sharing- I never had access to a 401K, so had not thought about the aspect that you can replenish it faster for the reasons you mentioned.  My Roth has been where all my "risky" investments have gone for decades now - since I wasn't going to access it for a long time and it was also where I hoped for the biggest returns for tax advantaged growth and distribution.

[Scandium]

We could excuse HR's past performance as the come-down from years of reaching for yield during the ZIRP era. However, it's still a risky business priced like a low-yielding bond. MPW illustrates what can go wrong in this field. Investors' assumption that healthcare companies make good, reliable tenants may be false as we in the US continue to squeeze the healthcare sector. These are worth watching with a wary eye, but they'll struggle if rates stay higher for longer.

I'm not even sure about that. Glancing at the 10 year chart HR has only really moved upwards a couple times, for 6-12 months, before staying flat or down the rest. Similar to the other REITs I owned, and SCHH. Currently I only have <$10k left in O and WPC, but the 5-6% yield is hardly exciting with treasuries at the same, and with the price way down. Even in the ZIRP times these things did way worse than the market, and provided little in terms of counter-moving diversification. I'm comfortable staying away from them.

[MustacheAndaHalf]

If I'm going to put something in an IRA that has a risk of sudden 15% loss, I would rather suffer that loss in a pre-tax account like a traditional/rollover IRA than in a post-tax account like a Roth.

Would that "risk of sudden 15% loss" be part of an investment decision that is more likely to be a gain?
For example, the stock market can drop 15%, but is more likely to gain 15% first.

[ChpBstrd]

If I'm going to put something in an IRA that has a risk of sudden 15% loss, I would rather suffer that loss in a pre-tax account like a traditional/rollover IRA than in a post-tax account like a Roth.

Would that "risk of sudden 15% loss" be part of an investment decision that is more likely to be a gain?
For example, the stock market can drop 15%, but is more likely to gain 15% first.

Interesting point. C-N probably has no real capital gains upside, so is very unlike a stock ETF in that way. But the point still stands.

Which account - traditional or Roth - would I prefer to have massive upside? Roth obviously. So if I could only own VOO in one account and C-N in the other, I would put VOO in the Roth and C-N in the trad. 

My real cognitive dissonance is that I think the shares being called is improbable, but I'm hedging that expectation by investing pretax dollars.

[MustacheAndaHalf]

I converted all of my remaining Traditional IRA assets to Roth in March 25 2020.  Turning that into a strategy might involve converting some assets whenever the market falls 25% from its high.

Personally I put extra bonds in Traditional, and extra stocks in Roth.  I expect higher growth from stocks, so not having to pay tax on higher growth makes sense to me.  There's also a matching in the type of taxes: bonds are taxed at ordinary income tax rates, just like withdrawals from Traditional IRAs.

[ChpBstrd]

I converted all of my remaining Traditional IRA assets to Roth in March 25 2020.  Turning that into a strategy might involve converting some assets whenever the market falls 25% from its high.

Personally I put extra bonds in Traditional, and extra stocks in Roth.  I expect higher growth from stocks, so not having to pay tax on higher growth makes sense to me.  There's also a matching in the type of taxes: bonds are taxed at ordinary income tax rates, just like withdrawals from Traditional IRAs.

This is good thinking. Plus if you have a big growing pile of Roth assets alongside your trad assets, you manage your withdraws from both to limbo under tax brackets.

[ChpBstrd]

Asset: 6 $VIX bull call spreads expiring 5/22/2024 at 12.00 and 12.50
Price: $0.43 per unit * 600 units = $258
Rationale:
CPI is reported tomorrow, and after a relatively high PPI reading and fast rising commodities in April I think there's a good chance we receive bad news.

I couldn't help myself but to buy these tiny VIX spreads with my Roth account's spare change. If tomorrow's CPI report is bad news we will almost certainly see VIX hanging above 13. If it is good news, there's a chance VIX could keep falling. It doesn't tend to hang out below my breakeven of 12.43 for too long, so if that occurs I might roll out to the May 29 expiration date, eventually winning the game through patience. If I win I earn the family a takeout order from our local Mexican restaurant and brag about my 14% returns in 8 days.

[Financial.Velociraptor]

VXX bear put spreads.
JAN1 result (8,429)
FEB1 result (5,140)
MAR1 result (3,472)
APR1 result (4,943)
APR2 result 576
APR3 result 1,232
MAY1 result 3,641
MAY2 result ?
TOTAL (16,535) - win rate 0.429

May2 expires 24MAY2024 and appears safely in the money.  Should return 1,287 (out of 2,013 at risk).  I'll send 1,900 in cash from brokerage to checking on Monday.  I'll also buy up to 1,009 of PDI in main trading account at brokerage.  Additionally 7,500 in basis will be applied to the 21JUN2024 expiry 11/12 strikes bear put spread.  The underlying closed at 11.38 so this is not a particularly aggressive position.   When May2 closes I'll put 7,500 in basis on the July expiry bear put spread (at the money).  Each expiry thereafter will be rolled as close to 8 weeks out as I can get it.  One third of profits will be added to the basis, and one third will be used to purchase PDI.  Remaining third will be a CASH position.

[ChpBstrd]

Asset: 6 $VIX bull call spreads expiring 5/22/2024 at 12.00 and 12.50
Price: $0.43 per unit * 600 units = $258
Rationale:
CPI is reported tomorrow, and after a relatively high PPI reading and fast rising commodities in April I think there's a good chance we receive bad news.

I couldn't help myself but to buy these tiny VIX spreads with my Roth account's spare change. If tomorrow's CPI report is bad news we will almost certainly see VIX hanging above 13. If it is good news, there's a chance VIX could keep falling. It doesn't tend to hang out below my breakeven of 12.43 for too long, so if that occurs I might roll out to the May 29 expiration date, eventually winning the game through patience. If I win I earn the family a takeout order from our local Mexican restaurant and brag about my 14% returns in 8 days.

I exited this position for a 7 cent per share ($42) loss. The bad-CPI hypothesis didn't happen, and VIX continues to fall. Better to take the small loss than hold out hope something bad happens by Wednesday. There are no major economic announcements, Jerome Powell is out with COVID, and it's all too possible we have a quiet week. So let's see if I'm wrong twice and VIX skyrockets!

[uniwelder]

May2 expires 24MAY2024 and appears safely in the money.  Should return 1,287 (out of 2,013 at risk).  I'll send 1,900 in cash from brokerage to checking on Monday.  I'll also buy up to 1,009 of PDI in main trading account at brokerage.  Additionally 7,500 in basis will be applied to the 21JUN2024 expiry 11/12 strikes bear put spread.  The underlying closed at 11.38 so this is not a particularly aggressive position.   When May2 closes I'll put 7,500 in basis on the July expiry bear put spread (at the money).  Each expiry thereafter will be rolled as close to 8 weeks out as I can get it.  One third of profits will be added to the basis, and one third will be used to purchase PDI.  Remaining third will be a CASH position.

I've seen PDI mentioned before in this thread, maybe from Financial Velociraptor or could have been someone else.  I bought some, but keep wondering how the dividend stays so high and worry about what's up.  Here's something I ran across while looking for an answer--- https://www.reddit.com/r/bonds/comments/1bf77rr/pdi_the_great_dividend_illusion/ and if you don't want to click a link, copied/pasted below.  I don't understand, so I was hoping someone else could make sense of it.  Is PDI looking safe at this point or is there any value to what is written below?

"After my last post about PDI, I was as confused as a chameleon in a bag of Skittles. How the devil does this CEF yield such a high rate without returning any capital? So, like Sherlock Holmes on a caffeine high, I went sleuthing. Turns out, it's a masterclass in financial wizardry that would make Houdini proud.

What they've doing in the past couple of years is essentially giving the stockholders an annual dilution of 15-20%, but it's all in the name of that sweet, sweet dividend yield. Let's take a stroll down memory lane to 2023, when this fund managed to squeeze a net income of about $164M from a whopping asset portfolio of $4.5B. The bond eggheads at PIMCO, with their leverages and shiny instruments, wrung out a 3.5% return on investment for the year. But hey, every bond fund had its knickers in a twist in 2022-23, so let's not be too harsh. Interestingly, they aren't into long-term relationships, I mean, durations. Their portfolio's current duration is only a 3-year fling. So they shouldn’t have had as many sleepless nights as TLT or other long-haulers in that period.

Now, you'd think after a rough year, they'd grow up and cut dividends, right? Oh, how naive! Instead, they decided to print new shares like they were going out of fashion - up to $1B in 2022 and another $2B in 2023. The prospectus casually mentioned they'd use the proceeds for investments, but they left a little loophole - "except to the extent proceeds are held in cash to pay dividends". So, in the fiscal year of 2023, they sold $750M (including DRIP) and paid out $803M in dividends. Remember, they raked in only $164M that year from investments ($330M if you're feeling generous and ignore unrealized losses). What they essentially did was pass the parcel of $630M from new stockholders to existing ones and diluted the NAV by 17%, increasing the shares outstanding from 226M to a whopping 265M. Ponzi scheme, anyone? In the subsequent half-year through to the end of 2023, they executed an additional dilution of 7.5%, while continuing to distribute dividends exceeding their earnings, even when factoring in unrealized gains. Their current UNII shows a dividend coverage ratio of only 36%! Much more dilution is in order this year.

To put things into context, rewinding to 2020, they had an income of $220M from a portfolio of just $1.6B - a neat 13.75% with 68M shares playing the field. Now, to return to those golden days, they need to conjure about $800M from their current portfolio of 4.6B, that's nearly 17.4%. And any further dilution just moves the goalpost further away. Leverage does not help since the yield curve is inverted. So, stockholders, hold onto your hats!

Anyways, I don't have a position in PDI. It just helps me sleep better to know that I understand the source of those yields and there is no brilliant financial innovation behind it."

[ChpBstrd]

May2 expires 24MAY2024 and appears safely in the money.  Should return 1,287 (out of 2,013 at risk).  I'll send 1,900 in cash from brokerage to checking on Monday.  I'll also buy up to 1,009 of PDI in main trading account at brokerage.  Additionally 7,500 in basis will be applied to the 21JUN2024 expiry 11/12 strikes bear put spread.  The underlying closed at 11.38 so this is not a particularly aggressive position.   When May2 closes I'll put 7,500 in basis on the July expiry bear put spread (at the money).  Each expiry thereafter will be rolled as close to 8 weeks out as I can get it.  One third of profits will be added to the basis, and one third will be used to purchase PDI.  Remaining third will be a CASH position.

I've seen PDI mentioned before in this thread, maybe from Financial Velociraptor or could have been someone else.  I bought some, but keep wondering how the dividend stays so high and worry about what's up.  Here's something I ran across while looking for an answer--- https://www.reddit.com/r/bonds/comments/1bf77rr/pdi_the_great_dividend_illusion/ and if you don't want to click a link, copied/pasted below.  I don't understand, so I was hoping someone else could make sense of it.  Is PDI looking safe at this point or is there any value to what is written below?

"After my last post about PDI, I was as confused as a chameleon in a bag of Skittles. How the devil does this CEF yield such a high rate without returning any capital? So, like Sherlock Holmes on a caffeine high, I went sleuthing. Turns out, it's a masterclass in financial wizardry that would make Houdini proud.

What they've doing in the past couple of years is essentially giving the stockholders an annual dilution of 15-20%, but it's all in the name of that sweet, sweet dividend yield. Let's take a stroll down memory lane to 2023, when this fund managed to squeeze a net income of about $164M from a whopping asset portfolio of $4.5B. The bond eggheads at PIMCO, with their leverages and shiny instruments, wrung out a 3.5% return on investment for the year. But hey, every bond fund had its knickers in a twist in 2022-23, so let's not be too harsh. Interestingly, they aren't into long-term relationships, I mean, durations. Their portfolio's current duration is only a 3-year fling. So they shouldn’t have had as many sleepless nights as TLT or other long-haulers in that period.

Now, you'd think after a rough year, they'd grow up and cut dividends, right? Oh, how naive! Instead, they decided to print new shares like they were going out of fashion - up to $1B in 2022 and another $2B in 2023. The prospectus casually mentioned they'd use the proceeds for investments, but they left a little loophole - "except to the extent proceeds are held in cash to pay dividends". So, in the fiscal year of 2023, they sold $750M (including DRIP) and paid out $803M in dividends. Remember, they raked in only $164M that year from investments ($330M if you're feeling generous and ignore unrealized losses). What they essentially did was pass the parcel of $630M from new stockholders to existing ones and diluted the NAV by 17%, increasing the shares outstanding from 226M to a whopping 265M. Ponzi scheme, anyone? In the subsequent half-year through to the end of 2023, they executed an additional dilution of 7.5%, while continuing to distribute dividends exceeding their earnings, even when factoring in unrealized gains. Their current UNII shows a dividend coverage ratio of only 36%! Much more dilution is in order this year.

To put things into context, rewinding to 2020, they had an income of $220M from a portfolio of just $1.6B - a neat 13.75% with 68M shares playing the field. Now, to return to those golden days, they need to conjure about $800M from their current portfolio of 4.6B, that's nearly 17.4%. And any further dilution just moves the goalpost further away. Leverage does not help since the yield curve is inverted. So, stockholders, hold onto your hats!

Anyways, I don't have a position in PDI. It just helps me sleep better to know that I understand the source of those yields and there is no brilliant financial innovation behind it."

I've seen several fly-by-night high-yield investments over the years, and yes each time it comes down to dilution, increasing leverage to fund the dividend, or simply exhausting a pool of assets while charging a fee for doing so. Then of course there are the high-paying companies that are managing the decline of a business, selling their seed corn so to speak, and falling behind on growth. In each case, the payouts will come to an end sooner than investors seem to think. The issue is that many retail investors' research stops at the dividend yield, and don't go digging into financials as far as the reddit poster above. This creates an opportunity for management to capture retail investors' money, pay themselves a fat salary with it, and simply return their capital to them via various balance sheet maneuvers, all while doing nothing particularly illegal. At least some CEFs fall into this category. IDK why I would invest into anything where some of the dividend is return of capital.

[Financial.Velociraptor]

VXX bear put spreads.
JAN1 result (8,429)
FEB1 result (5,140)
MAR1 result (3,472)
APR1 result (4,943)
APR2 result 576
APR3 result 1,232
MAY1 result 3,641
MAY2 result 1,287 (2,000 basis)
TOTAL (15,248) - win rate 0.50

I'm tardy updating this.  Family drama then friends in town from Ohio...  I have two positions open with roughly 7,500 basis.  21JUN24 expiry 11/12 strike BPS and 19JUL24 10/11 strike BPS.  First is below the breakeven point with 15 days left.  Second is completely out of the money with 43 days left.

[blue_green_sparks]

I decided to watch a few minutes of the 'Roaring Kitty' livestream. Gamestop is definitely not the most Intriguing Investment Idea of the day. The big pump had no dump nor any real thesis except for to give the management team more time to come up with a new plan.

[Financial.Velociraptor]

I decided to watch a few minutes of the 'Roaring Kitty' livestream. Gamestop is definitely not the most Intriguing Investment Idea of the day. The big pump had no dump nor any real thesis except for to give the management team more time to come up with a new plan.

I think its a dumpster fire.  The meme stock mania is allowing them to raise cash via some justifiable dilution.  With enough cash, anything is possible?  I kinda wonder why they don't liquidate existing assets and do a full pivot into something that scales better.  Kinda of a backdoor SPAC approach.

[Financial.Velociraptor]

Also.  GME, except for the cash, it toxic waste.  AMC, the other meme darling, is approaching profitability and is dirt cheap.   Klarman/Graham/Dodd "Margin of Safety".  At what point is a marginal business so cheap it can't be ignored?

[Financial.Velociraptor]

I've seen PDI mentioned before in this thread, maybe from Financial Velociraptor or could have been someone else.  I bought some, but keep wondering how the dividend stays so high and worry about what's up.  Here's something I ran across while looking for an answer--- https://www.reddit.com/r/bonds/comments/1bf77rr/pdi_the_great_dividend_illusion/ and if you don't want to click a link, copied/pasted below.  I don't understand, so I was hoping someone else could make sense of it.  Is PDI looking safe at this point or is there any value to what is written below?

"After my last post about PDI, I was as confused as a chameleon in a bag of Skittles. How the devil does this CEF yield such a high rate without returning any capital? So, like Sherlock Holmes on a caffeine high, I went sleuthing. Turns out, it's a masterclass in financial wizardry that would make Houdini proud.

What they've doing in the past couple of years is essentially giving the stockholders an annual dilution of 15-20%, but it's all in the name of that sweet, sweet dividend yield. Let's take a stroll down memory lane to 2023, when this fund managed to squeeze a net income of about $164M from a whopping asset portfolio of $4.5B. The bond eggheads at PIMCO, with their leverages and shiny instruments, wrung out a 3.5% return on investment for the year. But hey, every bond fund had its knickers in a twist in 2022-23, so let's not be too harsh. Interestingly, they aren't into long-term relationships, I mean, durations. Their portfolio's current duration is only a 3-year fling. So they shouldn’t have had as many sleepless nights as TLT or other long-haulers in that period.

Now, you'd think after a rough year, they'd grow up and cut dividends, right? Oh, how naive! Instead, they decided to print new shares like they were going out of fashion - up to $1B in 2022 and another $2B in 2023. The prospectus casually mentioned they'd use the proceeds for investments, but they left a little loophole - "except to the extent proceeds are held in cash to pay dividends". So, in the fiscal year of 2023, they sold $750M (including DRIP) and paid out $803M in dividends. Remember, they raked in only $164M that year from investments ($330M if you're feeling generous and ignore unrealized losses). What they essentially did was pass the parcel of $630M from new stockholders to existing ones and diluted the NAV by 17%, increasing the shares outstanding from 226M to a whopping 265M. Ponzi scheme, anyone? In the subsequent half-year through to the end of 2023, they executed an additional dilution of 7.5%, while continuing to distribute dividends exceeding their earnings, even when factoring in unrealized gains. Their current UNII shows a dividend coverage ratio of only 36%! Much more dilution is in order this year.

To put things into context, rewinding to 2020, they had an income of $220M from a portfolio of just $1.6B - a neat 13.75% with 68M shares playing the field. Now, to return to those golden days, they need to conjure about $800M from their current portfolio of 4.6B, that's nearly 17.4%. And any further dilution just moves the goalpost further away. Leverage does not help since the yield curve is inverted. So, stockholders, hold onto your hats!

Anyways, I don't have a position in PDI. It just helps me sleep better to know that I understand the source of those yields and there is no brilliant financial innovation behind it."

I've been quite busy with an elderly father who fell and hit his head.  Dad's noodles are sort of scrambled right now and he needs help with even simple tasks.  Want to back up and respond to this while he is being looked after by Church friends at and after Sunday Mass.

The points made above seem damning.  I'd like dispel that.  The nominal yield does appear "eye popping".  This is sort of misleading.  Before the Fed declared war on inflation and raised the FFR faster than ever before in history, the headline yield was around 9-10%.  If you back out the 40% leverage, that is a pedestrian yield for an actively managed bond fund that has access to the entire world and not just the United States to find safe yield.  The average coupon is currently right around 8%.  Again, totally reasonable.  Given when the bonds were purchased, it is reasonable to expect many bargains were found priced below par.  A total leverage adjusted yield on NAV of 15% for a global bond fund that is allowed to go outside the yellow lines of dollar denominated US bonds with investment grade ratings from major rating agencies is perfectly reasonable in my opinion in the current global rate environment.

The fund has diluted shareholders a few times.  I consider this a feature and not a bug.  The fund routinely sells for a steep premium to NAV.  When PIMCO issues new shares when they are worth more than 10% than the underlying holdings and invests those proceeds at market, I am enriched by the action.  I sincerely with they would "dilute me" more frequently.  This is the inverse of retiring shares when they can be bought off the market at a price below the intrinsic value of the business.  Yes, they made an allowance to use the proceeds to pay distributions.  However, you can see the distribution history at https://www.cefconnect.com/fund/PDI broken down into Income, STGC, LTGC, and ROC components.  You will note the fund has NEVER paid a return of capital distribution.  They have taken steps to manage the distribution if necessary but the coupons have always covered the distribution.  Any bonds that mature in the current environment can be reinvested at higher coupons.  I expect that yield might actually increase organically and without ROC.

When I first got turned onto PDI, I was a little put off by the potential for currency exchange risk.  I got comfortable by examining Pimco's history of managing mind bogglingly large amounts of capital in foreign bond markets.  They clearly have the expertise and the scale to effectively hedge in the currency futures markets.  I've grown comfortable with this risk.

There are lots of CEFs with huge yields that are toxic waste.  Pimco has been the most trusted name in fixed income for decades.  They are the biggest and best and have a reputation for integrity and customer first approach.  I trust them to manage this CEF ethically.

That said, I'm pivoting.  I like to buy PDI when the premium to NAV is around 5% or less (it only rarely trades at a discount, (usually when the FI markets are in hair on fire panic mode).  The current premium of around 15% is a little rich for my blood.  I'll be making my next fixed income purchase as shares of JPC.  This is a preferred shares CEF.  Yield is a little under 11%, which is reasonably close to PDI, but the fund trades at a 7% discount to NAV.  Similar to PDI, the fund has a long history of Income Only distributions with no return of capital paid.  And it is a "bargain" while PDI is "pricey".  If the discount/premiums were the same, I'd prefer PDI to JPC for fixed income investing as bonds are higher on the legal protection schema than preferreds.  And also because preferreds tend to have a high concentration in Financial, Insurance, and Real Estate sector.  That is, the diversification is weak. 

[ChpBstrd]

Asset: QQQ collar options with 14% downside and 19.5% upside, expiring 6/20/25, put at 409.78 and call at 569.78
Price: executed at about $-0.27 per share net for the 2 options
Rationale:
I've been mostly in QQQ for the past several weeks, selling $50/day worth of 0 DTE covered calls for a few cents each on most days. I've done quite well - up $35,000 over the month, and I think QQQ will continue rising. However, when CAPE>35 that is a sign to cover your downside because the valuation risk is extreme. Precedents include 1929, 1998-2001, and 2021. When VIX hit 11.95 today I knew it was time. Still, it was hard to change strategies after doing so well.

If the Nasdaq has another +20% to run over the next 12 months, I'll gladly take most of it. But it's good to know I cannot lose more than -14% in this environment - about 6 months of gain in my case. From here I can safely root for another rally year or for something like a big and sudden -30% or -40% bear market. I'll be happy with most outcomes except a -14% correction, lol, and I will have the courage to stay invested in the tech-heavy Nasdaq for another year. My expected return is +19.5%.

I might roll up in strike prices and/or out in expiration dates several months from now, preferably on another low-VIX day when I get more downside protection than upside limitation as an even trade. The 5.5% upside/downside tilt I obtained is doing pretty good.

Possible regrets? Maybe I should have hedged a longer timeframe. If a valuation collapse is what I'm hedging against, then I should be aware that these sorts of things take 2-4 years to work themselves out, but I'm only hedged for one. Unfortunately, the pricing edge wears off at extreme durations. Also, the AI bubble could have another couple of years to play out with late-1990s style gains that I partially miss out on. That's OK. I'll take safer-than-stocks 19.5% gains 8 days a week.

[Financial.Velociraptor]

VXX bear put spreads.
JAN1 result (8,429)
FEB1 result (5,140)
MAR1 result (3,472)
APR1 result (4,943)
APR2 result 576
APR3 result 1,232
MAY1 result 3,641
MAY2 result 1,287 (2,000 basis)
JUN1 result (714)
TOTAL (15,962) - win rate 0.444

I closed my JUN expiry spread early yesterday as it was threatened and moving the wrong direction.  Also, have been v.busy with Dad (MRI revealed 3 strokes) and didn't know if I would find time today to close before expiry.  Booked a small loss.  Rolled 7,500 or so basis down and out to AUG.  JUL and AUG are now both at 10/11 strikes and both capable of up to 85% return.  Will send my monthly cash withdrawal this afternoon.  No fixed income purchase as there is no profit to allocation this month.

[vand]

Could be better days ahead for the REIT sector..

[chasesfish]

Also.  GME, except for the cash, it toxic waste.  AMC, the other meme darling, is approaching profitability and is dirt cheap.   Klarman/Graham/Dodd "Margin of Safety".  At what point is a marginal business so cheap it can't be ignored?

I'm convinced the better play on AMC is to just buy their biggest landlord, $EPR.

The REIT itself is in good shape, but has seen it's value devestated due to the overhang of Regal (bankruptcy now resolved) and AMC as it's largest tenants.   Theatres are now below 50% of their portfolio.  You have a box office that'll come in below 2022 and 2023 mostly due to the overhang from last year's strike hurting releases.

Upside if AMC continues to avoid bankruptcy.

[Financial.Velociraptor]

VXX bear put spreads.
JAN1 result (8,429)
FEB1 result (5,140)
MAR1 result (3,472)
APR1 result (4,943)
APR2 result 576
APR3 result 1,232
MAY1 result 3,641
MAY2 result 1,287
JUN1 result (714)
JUL1 result 2,679
TOTAL (13,283) - win rate 0.500

This Friday's expiry had the underlying between the strikes today and I decided to close early while I was above my monthly budget of 1,900 (ok 2,200 but my secondary taxable brokerage kicks off 300 monthly so I only withdraw 1,900 from main taxable).  I rolled to September and got 75 cent pricing but only 67 spreads cleared.  Will try again tomorrow to get another 47 or so at similar pricing.  I decided since I've needed to close early three times in a row that I'll stop swinging deep by taking both strikes out of money and use strikes that split the money.  Will pay half a much at  max payout while still risking 50% but the outcome is far more certain and would have went to expiry the last three trades instead of needing to be rolled. 

I bought 26 shares of JPC at 7.61 each with a portion of the trading profits above my budget.  That pays 1.73 monthly.  Doesn't really move the needle but I figure even trivial amounts reduce the need for trading profits to reach 1,900.  In May I bought 42 shares of PDI at 19.19.  Those shares kick off 9.26/mo.  So total passive income driven by the strategy is now 10.99/mo.  When it gets to 1,900, I'll go with much longer dated expiries deep OTM.

[lcmac32]

NVDIA weekly covered calls at $140 strike.
AAPL call strike $200 bought in Feb. with Dec. 2024 expiration (so still holding that one, but no help to current thread as it was done a while back)
BITX - BTC 2x leverage.  (just bought; will update when cashed out or monthly until then)

[lcmac32]

I bought 26 shares of JPC at 7.61 each with a portion of the trading profits above my budget.  That pays 1.73 monthly.  Doesn't really move the needle but I figure even trivial amounts reduce the need for trading profits to reach 1,900.  In May I bought 42 shares of PDI at 19.19.  Those shares kick off 9.26/mo.  So total passive income driven by the strategy is now 10.99/mo.  When it gets to 1,900, I'll go with much longer dated expiries deep OTM.

I need to start looking at the dividends I generate.  I am still quite in accumulation mode, but like the idea of creating a nice dividend portfolio as well.  What are JPC and PDI?  (JCPenny and PIMCO?).

[Financial.Velociraptor]

I bought 26 shares of JPC at 7.61 each with a portion of the trading profits above my budget.  That pays 1.73 monthly.  Doesn't really move the needle but I figure even trivial amounts reduce the need for trading profits to reach 1,900.  In May I bought 42 shares of PDI at 19.19.  Those shares kick off 9.26/mo.  So total passive income driven by the strategy is now 10.99/mo.  When it gets to 1,900, I'll go with much longer dated expiries deep OTM.

I need to start looking at the dividends I generate.  I am still quite in accumulation mode, but like the idea of creating a nice dividend portfolio as well.  What are JPC and PDI?  (JCPenny and PIMCO?).

PDI is a closed end fund run by PIMCO.  PIMCO is a lot like Vanguard but for bonds.  They have been the best in the bond business for decades.  It is a collection of global short to medium duration bonds with higher yields than generally available in US without taking on crazy default risk.  I uses modest leverage to juice returns

JPC is a Nuveen product, also in CEF format, that is invested in a (modestly leveraged) basket of preferred securities. 

Both are fixed income plays, not dividend stocks at all.

[MustacheAndaHalf]

Biden replacement trade: short Bitcoin (more practically, short $MSTR)
Bitcoin: $66,600   MSTR: $1779

Biden's SEC chair has fought crypto in court, while Trump has his own NFTs.  Owing to recent events, Trump's chances of election have increased while Biden's fell.  The price of Bitcoin reacted by surging.

If Biden exits the race, his replacement will have better odds of defeating Trump.  That chance of Trump not winning should also be reflected in the price of Bitcoin.  If Bitcoin falls rapidly below $60,000 over the next two months, that would be a time to exit the trade.

Investor beware: I no longer make active investments, so I'm not investing in this.

[lcmac32]

Biden replacement trade: short Bitcoin (more practically, short $MSTR)
Bitcoin: $66,600   MSTR: $1779

Biden's SEC chair has fought crypto in court, while Trump has his own NFTs.  Owing to recent events, Trump's chances of election have increased while Biden's fell.  The price of Bitcoin reacted by surging.

If Biden exits the race, his replacement will have better odds of defeating Trump.  That chance of Trump not winning should also be reflected in the price of Bitcoin.  If Bitcoin falls rapidly below $60,000 over the next two months, that would be a time to exit the trade.

Investor beware: I no longer make active investments, so I'm not investing in this.

I really like this analysis.  Unfortunately, it makes more sense than my current BITX position.  My only consolation is that I still believe BTC has longer term potential.  I am selling the heck out of covered calls on this position to bolster my short term confidence in this position.

[ChpBstrd]

Asset: QQQ collar options with 14% downside and 19.5% upside, expiring 6/20/25, put at 409.78 and call at 569.78
Price: executed at about $-0.27 per share net for the 2 options
Rationale:
...

This is working out OK for me, and I sleep well at night despite the recent drop in the Nasdaq. Yes, I've suffered some minor damage, but I hedged near the top and now have the option to profitably go unhedged. As of now my short calls and long puts have made up for $8,850 of what I would have lost otherwise. Think I'll stay in. With this strategy, early exit is for times when VIX>25.

Biden replacement trade: short Bitcoin (more practically, short $MSTR)
Bitcoin: $66,600   MSTR: $1779

Biden's SEC chair has fought crypto in court, while Trump has his own NFTs.  Owing to recent events, Trump's chances of election have increased while Biden's fell.  The price of Bitcoin reacted by surging.

If Biden exits the race, his replacement will have better odds of defeating Trump.  That chance of Trump not winning should also be reflected in the price of Bitcoin.  If Bitcoin falls rapidly below $60,000 over the next two months, that would be a time to exit the trade.

Investor beware: I no longer make active investments, so I'm not investing in this.

MSTR is down 8.8% in 3 days. This idea had an accurate prediction and an accurately predicted effect. The effect started a day after the news broke though, so was maybe it has more to do with disappointing earnings.

A Trump win is still in the forecast though, so maybe the play now is to go long.

[Phazed]

I consider myself an active trader (not a day trader though). This is a general thought, not a specific stock.

One of the metrics I look at is the 52 week range for things. When an instrument gets over 90% of its 52 week range, I look hard at selling (at least some of) my position. If it goes up, I keep selling off more. I'll often drop in a GTB order at the 40% point after the first sale, looking to buy back in between 40 and 10%.

This works super well in commodity-based stocks. It's less than ideal in super long bull market like we have now.  But it's only one thing to look at and I have found it helpful so I pass it along.

So right now, I'm moving more and more to cash/cash money funds/T bills and short term CDs.

[MustacheAndaHalf]

Biden replacement trade: short Bitcoin (more practically, short $MSTR)
Bitcoin: $66,600   MSTR: $1779

Biden's SEC chair has fought crypto in court, while Trump has his own NFTs.  Owing to recent events, Trump's chances of election have increased while Biden's fell.  The price of Bitcoin reacted by surging.

If Biden exits the race, his replacement will have better odds of defeating Trump.  That chance of Trump not winning should also be reflected in the price of Bitcoin.  If Bitcoin falls rapidly below $60,000 over the next two months, that would be a time to exit the trade.

Investor beware: I no longer make active investments, so I'm not investing in this.

MSTR is down 8.8% in 3 days. This idea had an accurate prediction and an accurately predicted effect. The effect started a day after the news broke though, so was maybe it has more to do with disappointing earnings.

A Trump win is still in the forecast though, so maybe the play now is to go long.

I assumed Biden and Harris have similar views on Bitcoin, which is probably not the case, based on their home states.  I'd favor exiting the trade now.  There's a separate question of how much the markets could fall owing to recent earnings problems, and there's the complexity of a Fed meeting.

[ChpBstrd]

Asset: EDV Vanguard Extended Duration Treasury Index Fund
Price: $76.83
Rationale:
Between now and September, two things are likely to happen. First, the Sahm Rule will probably be triggered, indicating an imminent recession. Second, the Fed will probably begin cutting their overnight interest rate.

Some authors are making the case for locking in bond yields before the next rate cut series - or recession - starts. EDV with a 0.06% ER and 4.58% SEC yield looks compelling in this light.

I hit a homer last November/December with long-duration bonds, as expectations for imminent rate cuts and recession triggered a rush into bonds, and today's setup looks similar with futures markets indicating a 100% chance of a rate cut in September, and much higher unemployment. However I'm skeptical today because the yield curve between the FFR and long-duration bonds is so much more negative than it was last fall. Plus, trading long duration is a very dangerous game to play. I only made money  last winter because I sold right at the top at the last minute before a January reversal occurred that would have wiped out my gains.



So EDV is now a bet on one of the following outcomes:
1) A recession during which bond demand skyrockets and rates are cut dramatically, OR
2) A faster series of rate cuts and flattening of the yield curve from the short side.

In the first scenario, EDV is useful for offsetting stock losses. In the second, EDV would probably do fine just as your stock portfolio did fine. These make it intriguing.

The big downside would look something like signs that inflation is a persistent problem. E.g. if July and August PCE readings look like the first quarter, and suddenly September rate cuts look less than 100% likely. Such developments would hit EDV and stocks hard.

So I'm not taking this bet but I find it intriguing as a recession play.

[Financial.Velociraptor]

My bearish play on VXX looks to be seriously underwater.  I was on the road on Friday and didn't get to close the positions when passing my stop loss.  This AM, vol is spiking something fierce.  VXX to be up more than 100% in two trading days.  Expect front month, expiry in two weeks to be a total loss.  Is it worth holding the second month in hopes of a quick reversion to mean and partial recovery? 

[ChpBstrd]

My bearish play on VXX looks to be seriously underwater.  I was on the road on Friday and didn't get to close the positions when passing my stop loss.  This AM, vol is spiking something fierce.  VXX to be up more than 100% in two trading days.  Expect front month, expiry in two weeks to be a total loss.  Is it worth holding the second month in hopes of a quick reversion to mean and partial recovery?

Honestly, I might pick a different play. 2 months of zero or negative CPI readings plus a sudden drop in durable goods orders plus a bad unemployment report is a setup that looks very recessionary, especially when paired with an inverted yield curve, recession-level leading economic indicators, and a triggered Sahm Rule. The NFCI is about the only recession indicator that remains bullish, and that's probably a fluke of the inverted yield curves.

Not sure exactly what I'd trade right now if I was trading for fun. ITM covered calls on TLT comes to mind, as do bearish spreads on overpriced meme stocks - all very short term, like 2-4 days to milk the vol while it lasts. I might also consider bear spreads on financials.

Long term I'm watching financials as a recovery play. If we do get a recession, they will hit bottom when delinquencies peak. Quality preferreds might be yielding 7.5%-9% by then. Short term, I wish I'd been more intrigued by EDV last week!

[Financial.Velociraptor]

My bearish play on VXX looks to be seriously underwater.  I was on the road on Friday and didn't get to close the positions when passing my stop loss.  This AM, vol is spiking something fierce.  VXX to be up more than 100% in two trading days.  Expect front month, expiry in two weeks to be a total loss.  Is it worth holding the second month in hopes of a quick reversion to mean and partial recovery?

Honestly, I might pick a different play. 2 months of zero or negative CPI readings plus a sudden drop in durable goods orders plus a bad unemployment report is a setup that looks very recessionary, especially when paired with an inverted yield curve, recession-level leading economic indicators, and a triggered Sahm Rule. The NFCI is about the only recession indicator that remains bullish, and that's probably a fluke of the inverted yield curves.

Not sure exactly what I'd trade right now if I was trading for fun. ITM covered calls on TLT comes to mind, as do bearish spreads on overpriced meme stocks - all very short term, like 2-4 days to milk the vol while it lasts. I might also consider bear spreads on financials.

Long term I'm watching financials as a recovery play. If we do get a recession, they will hit bottom when delinquencies peak. Quality preferreds might be yielding 7.5%-9% by then. Short term, I wish I'd been more intrigued by EDV last week!

I considered, strongly, what you had to say here.  Ultimately, doubled down.  Thesis is when ^VIX suddenly doubles in a few day period, it is usually back to where it was before the news event that triggered it within a week.  Substantial progress towards that today is "normal".  I don't think I have enough time on the Aug expiry to recover much, if anything.  Put in a limit order for 10 cents on the dollar of my basis and it didn't clear.  Tomorrow, I'll put in a similar ask and cut it in half after lunch.  Every penny I can squeak out is 141 dollars back in my pocket.  But the 7,500 or so is mostly lost.  I'm still monitoring the Sep expiry.  I think there is enough time if the normal one week to reversion pattern holds.  Should be able to get at least half back??

Put 7,619 in basis on 60/62 strike bps for the Oct expiry.  Should be an easy win but only for 2,781 in profit (over 30% in three months though.)  Trying not to get greedy.  My big play was 31,460 in basis on the Jan expiry and 40/45 strikes.  I have 164 days for this to fall 43.7%.  But about 33% decay is basically baked in by end of month on reversion to mean.  Full profit, is 29,040, substantially  more than my annual budget and enough to put even full losses for aug/sep plus cummulative losses back into the green. 

I'm considering not having anything on the Nov expiry until after the election.  A contested outcome could cause a mega spike in ^VIX.  And a tie is not that far fetched this time.

[Financial.Velociraptor]

Five day chart

[ChpBstrd]

VIX has collapsed to 22.3 now that people realize Monday was just a yen carry trade unwind, so maybe you'll be OK.

A few years ago I decided that bear spreads on VIX, entered during spikes, must be some kind of infinite money glitch. First I was disappointed by the pricing. Second, the ONE TIME I attempt it we get a double spike and I still lose all my money. Good times playing the game against the concept of efficient markets.

[Financial.Velociraptor]

August expiry continues to look like a total loss of 7,614.  I have a limit order at 3 cents.  With commission being about 1.4 cents to close two legs per spread, i'm not interested in an ask of 2 cents.  Will try again tomorrow but so far the bid on offer is negative 1 cent.  I don't expect to recover anything here.  Sept expiry is improving but still deep underwater.  Will probably exit if I can break even.

[ChpBstrd]

Asset: A portfolio of preferred stocks with relatively low exposure to banks
Price: Yields around 7.5% on average
Rationale:
Maybe I'm cheating by my own rules here by describing a whole portfolio, but here goes. I can identify a good sized portfolio of preferred stocks from mostly profitable or positive cash-flow companies, mostly outside the finance sector, with yields in the 7.5% range. Why is that intriguing to me in particular? Because my household spending rate is about $60k and I have $820k of assets in a variety of brokerage accounts (taxable, roth, traditional) plus $236k locked up in a 401k.

If we could earn an average 7.5% in dividends from my brokerage accounts, my household could pull in $61,500 in dividends spread across taxable and tax-free accounts. That would exceed my household's spend rate, let me retire with a high 6% WR, and still leave my $236k in 401k money to be invested in stocks to outrun inflation and portfolio depletion in the long term. If the 401k money earns just 5% per year that would amount to $11,800 per year of this type of growth, almost 20% of my spend rate per year.

My forecast for inflation is low in the near term, and with rate cuts these preferreds could do well. Tax optimization is doable because 37% of our $1.06M in total brokerage assets are in Roth IRAs and another 11% are in taxable.

I've periodically engaged in this "what if" exercise with preferreds. Back testing shows I could have retired in any of the past 4 years had I pursued the strategy, and ended up close to where I am today. The preferred portfolio I would select would include:

Name (industry)                                  Yield
AL/PRA (aircraft leasing)                      9.11%
TRTN/PRA (infrastructure, containers)   8.26%
RJL/PRA (upscale hotel REIT)               7.81%
SB/PRC (shipping)                               7.72%
LBRDP (internet service provider)         7.71%
GMRE/PRA (medical REIT)                    7.59%
ET/PRI (pipelines MLP)                         7.59%
MAA/PRI (multifamily REIT)                  7.56%
CHSCO (agriculture coop)                     7.52%
GS/PRA (mega-bank)                             7.35%
LXP/PRC (industrial REIT)                      7.14%
LANDP (agriculture REIT)                       7.14%
SHO/PRI (hotel REIT)                            7.04%
NSA/PRA (storage REIT)                        6.73%
UMH/PRD (multifamily REIT)                  6.66%
T/PRA (telecom)                                   5.92%

Probably I would weight my portfolio toward the center of this distribution to obtain a weighted average 7.5% yield.

Key risks include the cost of marketplace insurance, dividend cuts during recessions, bankruptcy risks in a concentrated portfolio, call risk, inability to hedge with options, and interest rate risk. Upsides include lower interest rates that will benefit many of these companies, and the tailwinds of past inflation on prices or leases. The major complication is that I'd have to do traditional-to-Roth conversions each year roughly equal to the dividends received in the traditional IRAs, in order to not exhaust my taxable and Roth accounts and end up with only traditional IRA assets, a situation that would force me to pay higher taxes later.

It's a pretty wild gambit, but absolutely intriguing.

[vand]

Asset: A portfolio of preferred stocks with relatively low exposure to banks
Price: Yields around 7.5% on average
Rationale:
Maybe I'm cheating by my own rules here by describing a whole portfolio, but here goes. I can identify a good sized portfolio of preferred stocks from mostly profitable or positive cash-flow companies, mostly outside the finance sector, with yields in the 7.5% range. Why is that intriguing to me in particular? Because my household spending rate is about $60k and I have $820k of assets in a variety of brokerage accounts (taxable, roth, traditional) plus $236k locked up in a 401k.

If we could earn an average 7.5% in dividends from my brokerage accounts, my household could pull in $61,500 in dividends spread across taxable and tax-free accounts. That would exceed my household's spend rate, let me retire with a high 6% WR, and still leave my $236k in 401k money to be invested in stocks to outrun inflation and portfolio depletion in the long term. If the 401k money earns just 5% per year that would amount to $11,800 per year of this type of growth, almost 20% of my spend rate per year.

My forecast for inflation is low in the near term, and with rate cuts these preferreds could do well. Tax optimization is doable because 37% of our $1.06M in total brokerage assets are in Roth IRAs and another 11% are in taxable.

I've periodically engaged in this "what if" exercise with preferreds. Back testing shows I could have retired in any of the past 4 years had I pursued the strategy, and ended up close to where I am today. The preferred portfolio I would select would include:

Name (industry)                                  Yield
AL/PRA (aircraft leasing)                      9.11%
TRTN/PRA (infrastructure, containers)   8.26%
RJL/PRA (upscale hotel REIT)               7.81%
SB/PRC (shipping)                               7.72%
LBRDP (internet service provider)         7.71%
GMRE/PRA (medical REIT)                    7.59%
ET/PRI (pipelines MLP)                         7.59%
MAA/PRI (multifamily REIT)                  7.56%
CHSCO (agriculture coop)                     7.52%
GS/PRA (mega-bank)                             7.35%
LXP/PRC (industrial REIT)                      7.14%
LANDP (agriculture REIT)                       7.14%
SHO/PRI (hotel REIT)                            7.04%
NSA/PRA (storage REIT)                        6.73%
UMH/PRD (multifamily REIT)                  6.66%
T/PRA (telecom)                                   5.92%

Probably I would weight my portfolio toward the center of this distribution to obtain a weighted average 7.5% yield.

Key risks include the cost of marketplace insurance, dividend cuts during recessions, bankruptcy risks in a concentrated portfolio, call risk, inability to hedge with options, and interest rate risk. Upsides include lower interest rates that will benefit many of these companies, and the tailwinds of past inflation on prices or leases. The major complication is that I'd have to do traditional-to-Roth conversions each year roughly equal to the dividends received in the traditional IRAs, in order to not exhaust my taxable and Roth accounts and end up with only traditional IRA assets, a situation that would force me to pay higher taxes later.

It's a pretty wild gambit, but absolutely intriguing.

Miine current yields north of 8%... maybe we need a heretic "Hight Yield Porfolio" thread...:D