100%!
That was the winning percentage in our last Top Trade Review on Jan 27th so I don’t think we can top that but we’ll see how things went since then. The stocks we had picked into the end of 2022 were: TSLA, GOLD, BBAR, SIG, TTE, WY, SKT and META and, generally, they have done OK since then as well:
TTE is the only poor performer since Jan but they were our Top Trade Alert from October 6th, when they were down at $50.63 and that trade idea was:
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- Sell 15 TTE 2025 $45 puts for $7 ($10,500)
- Buy 25 TTE 2025 $40 calls for $15.50 ($38,750)
- Sell 25 TTE 2025 $55 calls for $9 ($22,500)
That was net $5,750 with $31,750 upside potential and, even with the pullback, we’re now at $2.35 ($3,525) on the short puts and $19.70/9.00 ($26,750) on the bull call spread for net $23,225, which is up $17,475 (304%) in 10 months and there’s still $14,275 (61.5%) left to gain if TTE can hold $55.
That’s our WORST performer! Aren’t options fantastic?!? Notice we gained on the $40s because they are in the money so, despite losing their premium, the reflect the gain in position while the short $55s have lost their premium despite the stock itself now being over the $55 target. It’s important to know which strikes to play and, fortunately, we’re pretty good at fundamental analysis – which makes our price targeting much more accurate.
Now, on to our 2023 trades:
Top Trade Alert – Jan 27 2023 – Sunpower (SPWR)
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- Sell 10 SPWR 2025 $20 puts for $7 ($7,000)
- Buy 20 SPWR 2025 $10 calls for $9.20 ($18,400)
- Sell 20 SPWR 2025 $20 calls for $4.85 ($9,700)
That’s net $1,700 on the $20,000 spread with $18,300 (1,076%) upside potential at $20. We’re aggressive on the short puts but $20 is not very far away. Revenue growth is around 20% and solar is booming and SPWR is small enough were a few big contracts will really move the needle.
Not off to a good start with this one. SPWR was down 50% from where we came in until it popped yesterday. We fully expect it to recover but the puts are now $10 ($10,000) and the spread is now $3.75/1.25 ($5,000) so -$5,000 is a loss of $6,700 (394%) but, had we bought 2,000 shares of SPWR we would have tied up $40,000 and we would have lost $20,000 – so options are still better than stocks by a long shot!
When 2026 options come out, this trade can be adjusted but, for a net $5,000 credit – I’d just double down from here!
Top Trade Alert – Feb 9 2023 – UNG
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- Buy 100 UNG 2025 $5 calls at $4.70 ($47,000)
- Sell 100 UNG 2025 $10 calls at $3.20 ($32,000)
- Sell 30 UNG 2025 $10 puts at $4.10 ($12,300)
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That is net $2,700 on the $50,000 spread and there’s $47,300 (1,751%) upside potential if UNG gets back over $10 into early 2025 – when more and more terminals will come online. Notice in the above chart, production since 2020 is only up 20%. That means it’s very likely that demand will exceed supply in 2025.
UNG is a bit lower than where we started but, due to the magic of premium decay, the puts are now $4.05 ($12,150) and the spread is $3.50/1.85 ($16,500) so net $4,350 is up $1,650 (61%), which isn’t great but it’s fantastic that we’re up at all after 6 months of flat performance.
Once again, selling premium is the key to success – it’s our house edge when playing the market because the only absolutely sure thing in the market is that ALL PREMIUM EXPIRES WORTHLESS! Using that to our advantage turns the odds in our favor on every single trade…
Top Trade Alert – Feb 23 2023 – Yeti Holdings (YETI)
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- Sell 10 YETI 2025 $35 puts at $7.50 ($7,500)
- Buy 20 YETI 2025 $30 calls at $14.20 ($28,400)
- Sell 20 YETI 2025 $45 calls for $ 9.50 ($19,000)
That’s net $1,900 on the $30,000 spread with $28,100 (1,473%) upside potential back at $45 and we’re $8 ($16,000) in the money to start.
Once again value investing pays off. We don’t care if people are panicking out of something – not when we KNOW what a good entry price is. Charts can only tell you what HAS happened, Fundamentals tell us what is likely to happen next!
YETI is our 2023 Trade of the Year from November, when it was $30 but $36 was a good chance to buy it again for those that missed out. Our new trade idea set the target at $45 and, so far, the short puts are down 50% to $3.75 ($3,750) while the bull call spread is now $17/8.75 ($16,500) for net $12,750, which is already up $10,850 (556%) but there is still $17,250 (135%) left to gain at $45!
Our Trade of the Year picks are made around Thanksgiving and they represent the trade I feel is most likely to have a successful 300% gain on an options spread. YETI is our 13th consecutive winning Trade of the Year – our first was BAC back in 2010…
Top Trade Alert – Feb 24 2023 – Sunpower (SPWR)
This report has all of our reasons for liking SPWR if you’d like to see the research…
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- Sell 30 SPWR 2025 $20 puts for $7.85 ($23,550)
- Buy 75 SPWR 2025 $10 calls for $7.20 ($54,000)
- Sell 75 SPWR 2025 $25 calls for $2.50 ($18,750)
That’s net $11,700 on the $112,500 spread so we have $100,800 (861%) of upside potential (and we are $32,000 in the money to start!) and our worst case is owning 3,000 shares of our Stock of the Decade for net $23.90 ($71,700) but let’s say they are at $7 (down 50%), then we buy 6,000 more for $7 ($42,000) and then we have 9,000 shares for $113,700 and that’s $12.60/share. If you don’t mind owning 9,000 shares of SPWR for $12.60 – then why not?
We thought $14 was a good bottom but we were wrong but I still love this spread. Now the puts are $10 ($30,000) and the spread is net $3.75/.80 ($22,125) for -$7,879 and a loss of $19,575 (167%) so far. That means, if you take this spread now, you get a $19,575 credit on the $1112,500 spread – I like that a lot!
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- Sell 20 SPWR 2025 $20 puts for $7.85 ($15,700)
- Buy 40 SPWR 2025 $10 calls for $7.20 ($28,800)
- Sell 40 SPWR 2025 $25 calls for $2.50 ($10,000)
This is just net $3,100 on the $60,000 spread with $56,900 (1,835%) upside potential and now we’re only in for net $21.55 if we get assigned 2,000 shares and, in the smaller portfolio, we’d be more likely to roll out of trouble but we still don’t mind owning them if push comes to shove.
Essentially the same spread for a smaller portfolio. Puts are $20,000 and the spread is $11,800 so we have net -$8,200 for a loss of $11,300 (364%) but there are 18 months to go and I wouldn’t even change the put target as I still think we’ll get there.
Top Trade Alert – March 8 2023 – Cisco Systems (CSCO)
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- Sell 10 CSCO 2025 $50 puts for $5.90 ($5,900)
- Buy 20 CSCO 2025 $45 calls for $9.30 ($18,600)
- Sell 20 CSCO 2025 $60 calls for $2.85 ($5,700)
That’s net $7,000 on the $30,000 spread with $23,000 (328%) upside potential and, of course, we’d love for them to drop 20% so we can DD but I doubt that will happen so we’ll probably have to be content with the $23,000 gain.
It’s been a rocky road but we’re getting there! The puts are now $4.30 ($4,300) and the bull call spread is $9.90/2.50 ($14,800) for a net $7,800 gain (111%) and another 100% potential upside!
Top Trade Alert – March 21 2023 – New York Community Bank (NYCB)
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- Buy 3,000 shares of NYCB for $9 ($27,000)
- Sell 20 NYCB 2025 $7 calls for $2.80 ($5,600)
- Sell 20 NYCB 2025 $10 puts for $2.50 ($5,000)
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That’s net $16,400 on the $21,000 spread (1/3 uncovered) and we’re obligated to buy 2,000 more at $10 ($20,000) which would be net $36,400 on 5,000 or $7.28/share as a worst case. Our dividends will be $2,040/yr so the upside potential at $10 would be $14,000 for 2,000 shares, $10,000 for $1,000 shares and $3,570 in dividends (we missed one) for $27,570 and a $11,170 (68.1%) profit – not bad for our first two years!
All the banks dropped hard but NYCB picked up the assets of Signature Bank for pennies on the Dollar and the Fed/FDIC was bailing out all the losses, so this seemed like a no-brainer.
The stock is now at $11.71 ($35,130) and the $7 calls are $4.85 ($9,700) and the $10 put are $1 ($2,000) for net $23,430, which is up $7,030 (43%) plus the $510 dividend on May 5th is up $7,540 (46%), which is more than we planned to make but it’s a dividend play and $2,040/yr is 12.4% on our $16,400 and we’ll also sell more short calls and short puts over time – so it’s nice to stick with if you need the steady income
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- Sell 50 NYCB 2025 $10 puts for $2.50 ($12,500)
- Buy 200 NYCB 2025 $7 calls for $2.80 ($56,000)
- Sell 200 NYCB 2025 $10 calls for $1.35 ($27,000)
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That’s net $16,500 on the $60,000 spread with $43,500 upside potential at $10.
Puts are down to $5,000 and the spread is now in the money at $4.85/2.50 ($47,000) for net $42,000 and that’s up $25,500 (154%) already and you can clearly see why we hardly ever buy stocks when there are options available.
Top Trade Alert – April 6 2023 – Generac Holdings (GNRC)
You can sell the GNRC 2024 $100 puts for $25 – that’s a really good price. In fact, let’s sell 10 of those for $25,000 in the STP
We never did the rest of the trade because we closed out our old portfolios in May. We expected a quick gain, which is why we sold the Jan puts, which are now $3.30 ($3,300) and up $21,700 (86.8%) in just 3 months!
Top Trade Alert – April 24 – 2023 – Coca Cola (KO)
KO pays a $1.84 dividend, which is about 3% of $64 but we can do better by NOT buying the stock and taking the following spread:
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- Sell 5 KO 2025 $60 puts for $3.75 ($1,875)
- Buy 15 KO 2025 $60 calls for $9 ($13,500)
- Sell 10 KO 2025 $72.50 calls for $2.80 ($2,800)
- Sell 10 KO July $65 calls for $1.45 ($1,450)
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That net $7,375 on the $18,750 spread that’s $6,000 in the money to start. The upside potential is $11,375 (154%) at $72.50 or higher and, if KO doesn’t leap higher (not likely) then we can collect $1,450 per quarter for 6 quarters while we wait and that’s $8,700 – more than we paid for the spread!
Our timing was off here but it’s a great time to get into this trade. The puts are now $4 ($2,000) and the spread is now $7.35/1.05 ($9,975) and the short calls are going to expire worthless tomorrow for net $7,975 and a small profit of $600 (8%) despite the stock dropping 10% on us. As noted originally, the goal is to make money selling the short-term calls while we wait – but not at the very bottom of the range – so we would wait to sell more short calls for now but the Nov $62.50 calls are $1.05 and the $60 calls are $2.25 so that’s about what we’d hope to get on a bounce, using 127 of our remaining 554 days.
PhilStockWorld Top Trade Alert – May 10, 2023 – BioNTech (BNTX)
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- Sell 5 BNTX Dec 2025 $100 puts for $21 ($10,500)
- Buy 10 BNTX Dec 2025 $80 calls for $42 ($42,000)
- Sell 10 BNTX Dec 2025 $130 calls for $22 ($22,000)
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That’s net $11,500 on the $50,000 spread so we have $38,500 (334%) upside potential at $120 in about 2.5 years (954 days). We care about the days because, if BNTX goes higher, we may sell some short calls for income like the Sept $115s, which are $6 so 5 of those would fetch $3,000 using 128 of 954 days.
The logic to doing that is we can put a stop at $5,000 and risk $2,000 but the only way we’d stop out is if BNTX made a nice move higher, which benefits our longs. We have 7 opportunities to make sales like that and if only 4 of them are successful we make $12,000 less let’s say $4,000 in losses and that’s net $8,000 – which pays for most of the spread.
From the sale of the puts, we have an obligation to buy 500 shares of BNTX for $100 ($50,000) but, in a Portfolio Margin account, the net margin of the spread is only $2,669.34 – so we’re not tying up a lot of margin to make the trade.
We ended up selling the July $110 calls in our Long-Term Portfolio and they should expire worthless but, in the base spread, the $100 puts are now $17 ($8,500) and the spread is now $47/24 ($23,000) for net $14,500 – up $3,000 (26%) but perfectly on track to the full $50,000 (plus what you make selling short calls) – so there is still $35,600 (245%) of upside potential on a spread that looks a lot less risky now.
Top Trade Alert – May 16 2023 – SoFi Technologies
Again, there’s a reason we cashed out into the uncertainty of the banking crisis. We will certainly be adding SOFI back in – as it’s tragically undervalued at $4.50. As a new trade, I would go with:
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- Sell 20 SOFI 2025 $5.50 puts for $2 ($4,000)
- Buy 50 SOFI 2025 $3 calls for $2.45 ($12,250)
- Sell 30 SOFI 2025 $5 calls for $1.60 ($4,800)
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That’s a net $3,450 on the $10,000 spread that’s $7,500 in the money to start. It’s 40% uncovered so we have room to sell more short calls and roll lower (or longer) or we can sell short-term calls for income if SOFI improves. At the moment, 20 July $5s can be sold for 0.35 ($700) using 67 of our 613 days.
Now THAT is good timing! This was the first trade we put in our new Income Portfolio. The $5.50 puts were aggressive and now 0.93 ($1,860) and the spread is DEEP in the money at $6.65/5.25 ($17,500) for net $15,640, which is up $12,190 (353%) in just two months – not bad! We’re miles over goal so I’d take the $17,500 off the table and leave the short puts to rot away.
Top Trade Alert – June 1, 2023 – International Paper (IP)
So sure, if they stabilize down here – I certainly think they’ll be worth a toss in the LTP but let’s add them to our Butterfly Portfolio because, at worst, we should be able to do a nice income play:
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- Sell 10 IP 2025 $27.50 puts for $3.50 ($3,500)
- Buy 20 IP 2025 $30 calls for $3.50 ($7,000)
- Sell 10 IP 2025 $40 calls for $1 ($1,000)
That’s net $2,500 on the $20,000 spread so there’s $17,500 (700%) upside potential in the base play alone and we can sell short-term calls (NOT YET!), like 10 Oct $30s for $1.60 ($1,600), which is 64% using 141 of the 596 days we have to sell so, on that basis alone it’s a nice spread – whether or not the stock improves.
Of course our worst-case is owning 1,000 shares for $27,500 plus whatever we may lose on the spread. In a PM account the puts cost just net $1,949 so it’s margin-efficient as well.
How do we make such amazing timing calls? On June 1st, the chart looked like crap but it’s VALUE that drives our decisions, not charts. IP was on our Watch List because we thought it had merit at $35 so dropping almost 20% to $29 gave us a reason to do a thorough analysis (see the Alert) and we decided nothing had really changed other than investor sentiment and that comes and goes – so we bought what the masses were selling – very simple!
Now the puts are $2.40 ($2,400) and the spread is $4.75/1.10 ($8,400) for net $6,000 and that’s up $3,600 (144%) in 6 weeks but $14,000 (233%) left to gain if IP hits our $40 goal in 18 months means 144% is simply “on track”.
Top Trade Alert – June 6 2023 – Lovesac (LOVE)
In the LTP, I want to take a bullish bet on earnings tomorrow with:
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- Buy 20 LOVE Jan $20 calls for $8 ($16,000)
- Sell 10 LOVE Jan $30 calls for $3.50 ($3,500)
- Sell 10 LOVE Jan $25 puts for $5 ($5,000)
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That’s net $7,500 on the $20,000 spread but it’s only half-covered so we hope to do better. With a $25,000 put obligation were only using half an allocation block so we don’t mind doubling down and rolling the calls lower if they miss. If things go well and they pop back over $30, our plan will be to sell another set of higher calls for hopefully $4,000 so we cut our cash outlay down to $3,500 on the $20,000+ spread but, for now, we’ll call it a simple $13,500 (180%) upside potential but that’s only 227 days away – fast money!
Another one I couldn’t believe was still so cheap. Analysts are lazy and they see “furniture” and decide to lump LOVE in with the rest. We were not ambitious with our target but already the puts are down to $3 ($3,000) and the spread is now $10.40/4.60 ($16,200) for net $13,200, which is up $5,700 (76%) for the month and still $6,800+ (51%) left to gain at $30 with 10 longs uncovered.
Top Trade Alert – June 8, 2023 – Barrick Gold (GOLD)
Given that, I don’t mind accumulating a little. We KNOW we’ll buy GOLD at $15 so the easiest thing to do is set up a trade that documents that for the LTP:
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- Sell 15 GOLD 2025 $17 puts for $2.35 ($3,525)
- Buy 25 GOLD 2025 $15 calls for $4.10 ($10,250)
- Sell 15 GOLD 2025 $22 calls for $1.50 ($2,250)
- Sell 10 GOLD Sept $17 calls for $1.25 ($1,250)
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That’s net $3,225 on the $17,500 spread (it’s assumed we can roll the Septembers along if we have to) so we have $14,275 (442%) upside potential and we’ve used 99 out of 589 selling the Sept calls. If we have 3 successful sales, our net cost will be $0.
We were a bit early with our bottom call and that’s a tricky thing about value investing – we don’t know WHEN other traders will wise up and agree with us! Still, if we do our job right, we’re buying the stock at a price we’ll eventually get back to – even if it keeps going down at first.
In this case, we didn’t expect a quick move back up so we sold the short Sept calls, which are now $1.27 ($1,270) but the puts are down to $2.15 ($3,225) and the spread is now $4.45/1.70 ($8,575) so net $4,080 is up $855 (26%) thanks to…. That’s right – PREMIUM DECAY! See, you are becoming an expert in how to make money with options!
There is still $13,420 (328%) upside potential PLUS any short-term sales revenue so this is still FANTASTIC as a new trade – you only missed the first $855…
Top Trade Alert – June 20th, 2023 – Lennar (LEN)
In the LTP, let’s add LEN as follows:
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- Sell 5 LEN Dec 2025 $90 puts for $9 ($4,500)
- Buy 10 LEN Dec 2025 $100 calls for $40 ($40,000)
- Sell 10 LEN Dec 2025 $120 calls for $30 ($30,000)
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That’s net $5,500 on the $20,000 spread with $14,500 (263%) upside potential if LEN can simply hold $120 for 30 months.
A builder – MADNESS!!! But no, we saw a couple of better-than-expected earnings reports from Builders and LEN was on our watch list with DHI and we decided on LEN as it also filled a diversity space in our portfolio.
The short puts are now $8.30 ($4,150) and the bull call spread is $45/35 ($10,000) for net $5,850 so only up $350 (6%) for the month, so still good for a new trade.
Top Trade Alert – June 27 2023 – Walgreens (WBA)
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- In our Short-Term Portfolio (STP), we like to make short put bets to offset our hedges so let’s sell 10 WBA 2025 $30 puts for $5 ($5,000) and, if it fails, we can always move the stock to the Long-Term Portfolio (LTP) and turn it into a play.
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Timing once again. It’s a stock on our Watch List, people started panicking so we checked the Fundamentals and decided they were still there so we began buying while others were selling – not at all complicated!
The $30 puts are now $4.10 so up $900 (18%) in two weeks – we’ll call that “on track“.
In the Income Portfolio, let’s add the following:
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- Sell 15 WBA 2025 $27.50 puts for $3.65 ($5,475)
- Buy 20 WBA 2025 $27.50 calls for $4.20 ($8,400)
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That’s net $2,925 on the uncovered calls which were $7 ($14,000) last week so massive upside potential (we intend to cover on the bounce) and the worst-case is we own 1,500 shares at net $29.45 – a bit over the current price. Then we can sell calls to reduce that basis.
This was very aggressive and it paid off with the puts now $3 ($4,500) and the calls at $5.20 ($10,400) for net $5,900 – up $2,975 (102%) in two weeks – pretty good!
Top Trade Alert – June 27, 2023 – Paramount (PARA)
Anyway, they do, in fact make $500M but have made over $1Bn in the past and $700M in cost cuts ($30Bn in sales) should do the trick. I’m not going to do a big write-up as I’ve been banging the table on them since $20 and here we are at $15 – buying them again for the LTP:
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- Sell 10 PARA 2025 $20 puts for $5.85 ($5,850)
- Buy 25 PARA 2025 $15 calls for $4.65 ($11,625)
- Sell 25 PARA 2025 $22.50 calls for $2.20 ($5,500)
That’s net $275 on the $18,750 spread that’s $2,500 in the money with $18,475 (6,718%) upside potential at $22.50 and, if they do get bought, instant profits! If not, we’re fine if they drift along and we’ll roll the puts along or whatever. If they go lower – still a good value stock to sell calls against.
Worst case is owning 1,000 shares at $20 ($20,275) – not going to kill us so a very easy add to our $500,000 LTP.
We’re getting a bit of a move higher and now the puts are $5.45 ($5,450) and the spread is $5/3 ($5,000) for net -$240 so we’re down $515 (187%) despite the stock making progress. That’s just the vagaries of option pricing so I like them better now than two weeks ago!
So far, we haven’t made any Top Trades for July as we think the market is pretty toppy and the idea of Top Trade Alerts is to have a very high winning percentage and the profits will take care of themselves. In the first 6 months of the year we have 14 winning trades and 4 losing trade for a 77.7% winning percentage and that’s not too shabby.
The net gain on the positions is $65,278 so far but a lot of them are very new and I like the losers as well so I think it’s a very strong group going into the 2nd half of 2022.
Congratulations to all of you who followed along with our Top Trade Alerts!
