Day 37: Recovery

Finally! Some reprieve.

Today’s Positions

  • Canopy Growth Corp. (CGC): 40 shares @ $23.38 (6.37%)
  • YETI Holdings, Inc. (YETI): 10 shares @ $28.28 (5.76%)
  • Tailored Brands, Inc. (TLRD): 120 shares @ $4.39 (0.00%)

Overall account is up over $71 today to finish out with a balance of $1,760.

Both Canopy and Yeti had fantastic days today. Hoping those continue to trend positive! TLRD was down for most of the day but finished up flat so I’ll take it.

OptionAlpha Paper Trades

I have just about wrapped up the Intermediate series of videos on OptionAlpha.com (which is free by the way, and I cannot recommend the quality of the content highly enough). I’ll likely take a look at the final two videos tonight.

The main thing I took away from the videos I watched last night was how to make sure you are getting the right price once you find a potential trade. The key formula to calculate your target pricing before placing a trade is to ensure that the width of the strikes, times the probability of being profitable, is equal to or less than the credit received for the trade.

Example: $5 wide strikes X 30% ITM = $1.50 is the minimum credit you should be targeting.

In an effort to continue learning the key things to consider for various types of trades, I placed two options trades last night in the paper account that filled shortly after the market opened this morning.

SELL -1 VERTICAL ADS 100 15 NOV 19 110/105 PUT @ .80 LMT

I opened a bull put spread in Alliance Data Systems Corporation, by selling a $110 put with a Nov 15th expiration, and buying a $105 put with the same expiration. I took in an $80 credit. It teetered between positive and negative P&L throughout the day today but finished the day right about even (-$0.02). In this trade I’m essentially betting the stock will stay above $110 until mid-November.

Now, as I just mentioned above, for a vertical spread with $5 wide strikes, I should multiply the $5 width by the probability of finishing in-the-money (ITM) at expiration to determine the minimum credit I should accept for the trade. On this trade, the $110 strike has a 25.83% chance of being ITM. So, $5 * .2583 = $1.29. This is not enough credit to be profitable if I placed this same trade many times. This trade is also too big of a risk for my $2,000 account ($420 max loss is 21% of my account — way beyond the 2 to 5% limit of OptionAlpha’s strategy).

But, I haven’t placed any put spreads yet and its only paper money so I figured why not go for it, learn a lesson, and then wipe it off the account.

SELL -1 VERTICAL CMG 100 15 NOV 19 900/905 CALL @ 103 LMT

The other trade I placed was a call credit spread in Chipotle. This is a bearish position in Chipotle that bets CMG’s stock price will stay below $900 until mid-November. The credit/max profit is $103 and the max risk is $397.

This trade is also two large for my account (again, $397 / $2000 = 19.85%, much more than the maximum allowed risk of 5% per trade). But, the pricing calculation was spot on: $5 wide strikes X 18.34% probability ITM = $0.917 minimum credit needed to be profitable. When you multiply that times 100 (for the number of contracts in the trade), you can see that my credit of $103 is greater than the target of $91.70, so it should be a profitable trade if I were to place the same trade over and over again.

Overall profit on the day for all positions was $7.04. But, the first two positions I opened are sitting near max profit (TLRD and ADPT), so it looks like it’s time to learn how to close those out.

Day 36: Bloodbath

What a brutal week so far!

Monday started off with a $35 drop in the ol’ account by 7:00 a.m. PDT, and finished the day down $43. Tuesday started off positive with a quick $25 gain, but turned abysmal and ended up dropping $81.

Today was more of the same. This morning started off with an almost $75 drop, though we recovered most of those losses throughout the day and finished down $4.12. At the end of the day today, account value is sitting at $1,689.

Today’s Positions

  • Canopy Growth Corp. (CGC): 40 shares @ $21.88 (0.69%)
  • YETI Holdings, Inc. (YETI): 10 shares @ $26.74 (0.11%)
  • Tailored Brands, Inc. (TLRD): 120 shares @ $4.39 (-2.01%)

There have been quite a few articles out recently about Canopy Growth Corp and the direction various traders believe the stock is heading. One interesting article posted earlier this week on Seeking Alpha was definitely not a fan of Canopy’s aggressive M&A activity and the company’s overpaying for the acquisitions.

Another author over on Motley Fool also dove into the supply and demand within the Canadian market. The analysis is that while CGC has positioned themselves as the largest producer in Canada, there will soon be a race to the bottom on prices as supply outstrips demand, leading to significant write-downs in goodwill that CGC is currently carrying.

I’m not a seller yet. Though it is definitely painful to see the losses continue to stack up in that position.

OptionAlpha Paper Trades

I decided I wanted to try my hand at a more complex trade in my OptionAlpha paper trading account with TD Ameritrade.

I saw AEM (Agnico Eagle Mines Ltd) had an extremely high implied volatility (IV Rank around 70, and IV Percentile around 88%). But, its technical charts were showing it was not significantly trending near a buy or sell signal. So, I decided to open up an Iron Condor with a high strike of $60 and a low strike of $50.

So in this options trade, all of the legs expire on October 18th. I’m selling the $60 Call, and buying the $65 Call, as well as selling the $50 Put, and buying the $45 Put. This has a max profit of $52, a maximum risk of $448, and an initial credit of $48.

It is really too large of risk for my account size, but since we trading paper money and I trying to learn these more complex trades I figured… why not?!

I opened the trade on Monday near market open, and so far it hasn’t moved much. At the moment it is a sitting at a overall profit of $5.09.

My other paper trades (call credit spreads on ADPT and TLRD) are also sitting about where they were — ADPT up $119 and TLRD up just shy of $20.

No More Fees!

Speaking of TD Ameritrade, yesterday morning Schwab announced they were getting rid of trading fees on stocks, ETFs, and options in US and Canadian markets (lining up Robinhood directly in its crosshairs). Stock prices for pretty much every broker fell hard on the news.

By the end of the day, I had an email in my inbox (at 9:40 p.m. PDT) that TD Ameritrade was following suit. They have also dropped fees to $0 on US stocks, US and Canadian ETFs, and option trades (except for a $0.65 contract fee with no assignment or exercise fees).

So that’s great news for my small account! One of the things I quickly realized in paper trading $2,000 is that the $5 to $7 fees per trade was going to eat my account alive. Big win!

Day 33: The TLRD Comeback

After poking back up over $1,800 on Wednesday, Thursday saw an immediate dive down to $1,730 before finishing the day around $1,760. Ouch!

Thankfully, Friday was merciful and showed some big upswings, briefly touching back over $1,800 before finishing the day at $1,768 (and after hours close ended up at $1,776).

Today’s Positions

  • Canopy Growth Corp. (CGC): 40 shares @ $23.83 (-0.91%)
  • YETI Holdings, Inc. (YETI): 10 shares @ $28.10 (-1.16%)
  • Tailored Brands, Inc. (TLRD): 120 shares @ $4.32 (7.73%)

Tailored Brands was by far the most interesting position towards the end of the week. On Thursday, TLRD dipped down below $4 per share for the majority of the day. As I discussed in my past few posts, the temptation really grew to sell out of YETI and move those funds into TLRD to lower my average price per share. But, I sat on my hands out of fear that TLRD would continue even lower.

Thankfully, it started turning around towards the end of the day Thursday, and continued higher on Friday finishing up over 7% at $4.32. I kicked myself for missing out on the 7% gains that I could have had on those funds tied up in YETI. But, I was thankful for the gains on those 120 shares that I have accrued over the past few weeks.

Taking a glance at my total returns on open positions, things are not looking pretty. All positions are currently sitting at a loss.

  • Canopy Growth Corp. (CGC): -$527.18
  • YETI Holdings, Inc. (YETI): -$20.28
  • Tailored Brands, Inc. (TLRD): -$44.32

Looks like I’ve got some work to do if I’m going to turn things around double up this fun money account!

Day 31: $1800 Again

Had a pretty good day on all three stocks, driving my account value back above $1,800 right at the end of the day.

Today’s Positions

  • Canopy Growth Corp. (CGC): 40 shares @ $24.69 (2.83%)
  • YETI Holdings, Inc. (YETI): 10 shares @ $29.60 (0.24%)
  • Tailored Brands, Inc. (TLRD): 120 shares @ $4.25 (2.41%)

As I double check the technicals on all three stocks, I’m convinced to continue holding on to all three positions. Though definitely still kicking around the idea of selling off Yeti to move that money into Tailored Brands.

I just have a feeling that YETI is closer to the high end of its range for now. And that TLRD has more room to run. I’ll have to keep thinking on it.

OptionAlpha Paper Trades

ADPT’s share price continued to sink today, down another $2.42 to $34.96. This brought me another $43.73 today raising my overall P/L on the trade to $101.20.

I need to figure out how to close out these two trades, and also test the waters with some more trades (like a few iron condors, and a few bull put spreads) before feeling confident enough to deposit $2,000 and start my journey in earnest.

It is somewhat ironic at the moment though, I’m buying stocks fairly blind and hoping they go up in value. Which is essentially what OptionAlpha teaches you not to do because it is just a 50/50 gamble.

But, until I feel confident enough to start trading the OptionAlpha strategies with my own real money, I’ll keep holding these few stocks that I own and hoping that they go on a tear to raise my account balance back above $2,000.

Day 30: Crushed

I’ve made a few additions to my position in TLRD over the past few days, adding 20 shares on Friday, September 20th at $4.19, and 20 more shares on Monday, September 23rd at $4.25. This has brought my average cost per share to $4.69.

Today’s Positions

  • Canopy Growth Corp. (CGC): 40 shares @ $24.01 (-6.21%)
  • YETI Holdings, Inc. (YETI): 10 shares @ $29.53 (-1.34%)
  • Tailored Brands, Inc. (TLRD): 120 shares @ $4.15 (-1.66%)

I’ve been heavily contemplating selling off YETI and taking that ~$300 and dropping it into TLRD. That would continue to drop my average price per share, hopefully giving a ton of runway for profit when the price begins to recover.

But let’s talk about the elephant in the room, CGC. Canopy Growth has been on a huge downswing since its peak at the end of April. It’s still above the most recent low, when it was down around $23.50 at the end of August. But today’s drop of over 6% cost me another $55 (on paper, of course). Down over 14% for the week.

It feels like my average cost of $37.20 is getting a bit far out of reach. Similar to my comments on selling YETI and buying TLRD, I’ve also thought that I could lower my average cost in CGC a bit by moving that money from YETI to CGC instead. Either way, I’d like to hold out a bit longer on selling YETI, so I guess we’ll wait and see where CGC and TLRD are at when I’m ready to pull the trigger.

Overall portfolio value at the end of the day today is $1,762.

OptionAlpha Paper Trades

I’m amazing at paper trades! Well, at least two call credit spreads that I’ve opened following the OptionAlpha strategies are going well.

SELL -1 VERTICAL ADPT 18 OCT 19 40/50 CALL @ 1.20

On my Adaptive Biotechnologies trade, I made just over $40 today with the stock dropping down to $37.38. This brought my total P/L on the trade to +$57.47.

SELL -1 VERTICAL TLRD 18 OCT 19 8/9 CALL @ 0.20

On my Tailored Brands trade, with the stock price plummeting down to around $4 per share my call credit spread is sitting near max profit at +$19.90.

Day 27: $2,000! And Then…

It started out such a good week!

I finally cracked $2,000 on Monday morning so I had screenshot.

Shortly after the market opened, Canopy Growth ran up to $28.58. Around the same time, Yeti also inched its way up to $30.18.

Microsoft and Tailored Brands both largely held around even early in the week. But it was such a nice feeling to barely reach above $2,000 on the ol’ account balance.

As the day progressed, I saw TLRD was trending further lower so I picked up another 20 shares at $4.81 per share. This trend has continued throughout the week. I added an additional 20 shares on Tuesday at $4.56.

Seeing Tailored Brands sitting at $4.34 per share right now is making me strongly consider adding more to my position to further lower my average. Right now, I’m sitting with an average of $4.92 per share.

Tuesday afternoon I decided to also finally sell my one share of Microsoft. I ended up getting $137.03 for it, which was unfortunate timing considering it ran up to $141 and up over $142 in the following days. Not a significant difference in the end. Including the dividend, I made a whopping $1.10 on the trade.

Not sure what I was really expecting on Microsoft. I definitely think it is an amazing company and a solid long term hold. But in this account with an aggressive bend, I don’t think it’s the right fit.

Today’s Positions

  • Canopy Growth Corp. (CGC): 40 shares @ $26.42 (-8.51%)
  • YETI Holdings, Inc. (YETI): 10 shares @ $28.85 (0.21%)
  • Tailored Brands, Inc. (TLRD): 80 shares @ $4.31 (-4.41%)

Up until today, things had been fairly flat for the week. But wow, that was a huge drop off this afternoon. CGC dropped over 8% today and TLRD is down almost 4.5%. This has brought my account value down to $1,867.

I still have $177 sitting in cash. Like I mentioned before, I’m debating on adding more to position in TLRD, but also considering picking up some shares of Sportsman’s Warehouse (SPWH) now that it has dropped down to $4.46.

OptionAlpha Paper Trades

Checking into my vertical spreads in ADPT and TLRD, they are both sitting in the green! Overall profit on ADPT is currently at $14.49 and TLRD is sitting at $19.91 (almost max profit on the trade).

Day 23: Doubling Down

Good day today! Finished the day up $32.59, and also contributed my $100 for this month, so at the end of the day my account value is up to $1,966.

Today’s Positions

  • Canopy Growth Corp. (CGC): 40 shares @ $27.46 (3.51%)
  • YETI Holdings, Inc. (YETI): 10 shares @ $30.00 (-2.28%)
  • Microsoft Corp. (MSFT): 1 share @ $137.32 (-0.15%)
  • Tailored Brands, Inc. (TLRD): 40 shares @ $5.10 (1.39%)

I added to my position in Tailored Brands today. It tested $5 shortly after open this morning and again at the end of the day just prior to close. So, I added 20 shares about 20 minutes before close at $5.03 per share. My average cost per share is now $5.17.

My gains today came from Canopy Growth. Up just over 3.5% today brought my current losses on CGC back under $400, so that’s nice.

OptionAlpha Paper Trades

The bear vertical spread I opened in ADPT did really well today, but is also further confirming that I have no idea what I’m doing yet. I expected to profit when the underlying stock stayed flat or dropped. Instead, today’d P/L on the position shows +$32.91, but the stock is up 8.65% on the day.

The 50 strike 18 OCT 19 call leg that I bought appears to have gone up by $122.25 today, and the 45 strike 18 OCT 19 call leg that I sold appears to be down $89.34 today. I’m still in the red overall on the vertical spread, down $5.28.

The TLRD call credit spread I opened up Wednesday morning was pretty much flat today, losing 32 cents. Overall P/L is still +$18.63.

I still have much more to learn on how things work with these spreads. Have to spend more time studying, but that’s why we’re paper trading!

Day 22: New Suits, Anyone?

I took advantage of the huge dip overnight in Tailored Brands (down over 25% from yesterday’s close), and today bought in for 20 shares at $5.30 per share.

Today’s Positions

  • Canopy Growth Corp. (CGC): 40 shares @ $26.62 (-2.85%)
  • YETI Holdings, Inc. (YETI): 10 shares @ $30.64 (1.12%)
  • Microsoft Corp. (MSFT): 1 share @ $137.52 (1.03%)
  • Tailored Brands, Inc. (TLRD): 20 shares @ $5.02 (-5.28%)

It seems like Tailored Brands might have tested a bottom between $5.20 and $5.30 throughout the morning, so I thought buying in at $5.30 might not be too bad of a move. I still have some cash in my account, so I have room to average down. It finished the day at $5.02 so we’ll see if it continues to dip closer to its 52-week low of $4.21 on August 20, 2019.

Canopy Growth sank today ending the day down 2.85%. Pot stocks have been rough in 2019, and Aurora Cannabis missing its own Q4 revenue guidance as well as missing analyst’s estimates likely pulled the whole industry down a bit. Aurora is down almost 10% today.

Overall, my account is down $34.72 on the day, finishing at $1835.

OptionAlpha Paper Trades

In my test account for OptionAlpha strategies, the two positions I opened this week both had a positive day.

My call credit spread in TLRD is up $7.56 on the day, $18.96 overall. And my call credit spread on ADPT eked higher today with a gain of $4.27 (but still down $38.19 overall).

Day 21: Flat

SPY flirted with $300 all day, finally breaking through in the last ten minutes.

My account largely traded flat all day, starting the day down $10, then up $20, then down $15, finishing the day down $0.77. Today’s end of day account value is sitting at $1,868.

Today’s Positions

  • Canopy Growth Corp. (CGC): 40 shares @ $27.40 (-0.11%)
  • YETI Holdings, Inc. (YETI): 10 shares @ $30.30 (0.53%)
  • Microsoft Corp. (MSFT): 1 share @ $136.12 (0.03%)

The biggest thing to note today is that with today’s gain of $1.60, my shares of Yeti finally broke even. We’re up $0.72!

The REAL big note, however, is not in the positions I have open, but in the stocks I’ve been watching (and in the new position I opened in my paper trade account).

Tailored Brands

I’ve been watching Tailored Brands since hearing about it in an interview with Michael Burry on September 3rd. TLRD posted Q2 earnings after hours today and saw their stock price absolutely tank! It fell off a cliff, bouncing off a bottom over 30% below their regular hours closing price. That drop took only 10 minutes. Ouch!

What’s funny, is that I saw TLRD had super high implied volatility when I was poking around in my paper trade account in ThinkorSwim.

The chart at the bottom shows their IV Rank is over 95%. And that is one of the big indicators that OptionAlpha looks for to find overpriced options.

With the rest of TLRD’s technical indicators appearing near the “sell” range, I thought, why not open up a call credit spread? So that’s exactly what I did.

If you aren’t familiar, this is a bear position in which I am a selling a call option with strike price (of $8) that is closer to the current stock price (which is around $7), and buying a call option (at $9) that is further from the current stock price. Both options have the same expiration date (October 18th), creating the vertical call spread. This is also known as a call credit spread, since you are receiving a credit for opening the position, instead of paying to open the position.

I’m betting that the stock is either going to remain flat or fall over the next month. The max risk is right in my target range ($80 is 4% of my $2,000 paper trading account).

When I opened the position, TLRD was trading right around $7. When it finished the day at $7.17, I was a little bit negative on the trade. But as I said before, 10 minutes after market close Tailored Brands posted Q2 earnings and the stock tanked to $4.97. It bounced back up and is currently sitting between $5.00 and $5.50.

I’m still not sure I understand exactly how these vertical spreads work, but I believe my initial profit is $18 when I opened the position ($20 credit for the vertical spread minus $2 in fees). In looking at my profit and loss for the day on this trade, it looks like it is sitting around $10 profit.

What I’m not sure about, is if this is in addition to the $18 credit I received for opening the trade. Or, if the P/L Open of $10 is indicating that the trade is currently sitting at $10 profit of the $18 max potential profit. I’ll have to do some more research and figure that out. Fun times!

And feel free to chime in if you know the answer(s), or if I’ve misstated anything above. Always appreciate the opportunity to learn!

Day 20: Inching Closer to Even

My account ended up about $20, finishing the day at $1,861.

Today’s Positions

  • Canopy Growth Corp. (CGC): 40 shares @ $27.44 (0.77%)
  • YETI Holdings, Inc. (YETI): 10 shares @ $30.07 (4.08%)
  • Microsoft Corp. (MSFT): 1 share @ $136.08 (-1.05%)

Yeti Holdings, Inc.

My shares of YETI continued their run higher today up over 4%. I’m down less than $1 total return at the moment so that feels good. I had bought back into YETI when its shared dropped from above $36 to below $30 at the end of September. I bought in at $30.23 per share on August 1st, and it pretty much stayed below that level all of August. I’ll likely hold out for a bit to see if we can turn a small profit before selling and moving that $300+ to cash.

An interesting side note on Yeti Holdings. I saw an article come across my news feed from Jim Cramer where he had commented in his lighting round that he sees YETI up 100% for the year so he doesn’t want to push it. He’s right, Yeti started out January 2019 around $15, and is now back up over $30. I’m hoping it still has a little room to run but I shouldn’t get greedy. I will likely have a quick trigger if it starts to trend lower.

Baytex

Because I’m a glutten for punishment, I had to peek back at BTE a few times today to see if I could have broke even or made a few bucks if I held out a little longer. While it trended higher early this morning, reaching $1.49 per share, it finished the day back down at $1.42. So, I don’t feel too bad about the price I got yesterday. I think I can move on from that one.

Sportman’s Warehouse and Tailored Brands

I am definitely feeling the FOMO (fear of missing out) on these two. Especially TLRD, which ran up almost another 10% today. That’s 25% this past week! And SPWH ended the day up 4.5%. Not too shabby either.

OptionAlpha

I’m continuing to slowly work through the Intermediate course, and decided to start paper trading a $2,000 account in ThinkorSwim (with TD Ameritrade) to get a better understanding of how some of the more advanced options trades work. While messing around last night, I saw ADPT had super high volatility so I went ahead and place a call credit spread just to get my feet wet.

In the paper account, I sold the 18 OCT 19 $45 CALL and bought the 18 OCT 19 $50 CALL to create the spread. I made a note that the trade is really too big for my account, seeing as how my max trade risk should really be $100 if I’m going to stay within the rule of only risking 5% or less per trade.

But anyways, I figured if I’m going to learn I should start simulating some trades. If I understand correctly, I initially profited $120 on the spread minus fees, and have a max risk of $385. So if the stock stays below $45 until October 18th, then it will be a profitable trade. At the end of the day today, ADPT is up 4.53% to $41.27. So on paper my spread is down $42.54… woops!