11:55 a.m. New York time

Another trigger on my 10% trailing stop/loss, on ESTE in the Momentum Portfolio.

The Genetics Portfolio is up for management today and saw three falls from qualification as Zacks scores moved from “buy” to “hold”. Two symbols were added to genetics.

One symbol, HII, dropped off the Bench due to sliding score.

I re-established two symbols that had been stopped yesterday but still qualified, TLRY to Growth and, outside of the rules, TNK, which had been stopped from the Bench but still has a qualifying score.

The trades:

• Genetics
  • Exits
    • AQB, for a $2.56 credit, up 53 cents from entry, producing a 26.1% return over 26 days, or a 367% annual rate.
    • CGEN, a $5.98 credit, up 2 cents from entry, a 0.3% return over 22 days for a +6% annual rate.
    • INO, out for a $3.37 credit, up 25 cents from entry, an 8.0% return over seven days for a +418% annual rate
  • Entries
    • EDIT for a $31.79 debit
    • SYRS for an $8.42 debit
• Momentum
  • Exits
    • ESTE hit the 10% stop/loss and was sold for a $5.64 credit, down $1.39 from entry. The exit produced a 19.7% loss over seven days for a -1,030% annual rate
• Growth
  • Entry
    • TLYS, a position exited January 13 by a trailing 10% stop/loss, re-established for an $8.86 debit.
• Bench
  • Exit
    • HII, formerly of the Growth Portfolio, for a $3.37 credit, up 25 cents from entry, showing a +8.0% return over seven days for a $418% annual rate.
  •  Entry
    • TNK, exited January 13 by a trailing 10% stop/loss, re-established for a $23.79 debit

By Tim Bovee, Portland, Oregon, January 14, 2020

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9:15 a.m. New York time

I used the cash freed by the latest stop/loss sale to add another symbol the Utilities Portfolio. We’re in earnings season, which usually means dividend season. Utilities may dividends, so I’m attempting to capture those payments.

I entered a position on PNW for a $91.66 debit.

9:05 a.m. New York time

PSTI in the Genetics Portfolio triggered its 10% trailing stop loss. I exited for a $4.02 credit per share, up two cents from entry, producing a 1.8% return over 18 days, or a 36% annual rate.

10:50 a.m. New York time

Today I shall manage the stocks Growth Portfolio, in accordance with the modified plan I wrote about over the weekend in the post “Solving Problems“. There were also a couple of positions stopped out that required handling.

Three positions — LAWS, LPLA and MHO — dropped off of the Growth screen. Two positions hit their trailing 10% stop/loss levels, TLYS in Growth and TNK, which had been moved from the Momentum Portfolio to the Bench.

TX reappeared on the Growth screen.

TLYS issued guidance to traders of poor sales performance over the holidays, and is trading 28% below Friday’s close. I found no specific news on TNK, but since it’s an oil tanker company, it’s subject to the present volatility in energy.

Although I’m not scheduled to manage the new Utilities Portfolio until Thursday, I used a portion of the influx of cash to begin the build-out, purchasing AES.

The trades:

• Growth
  • Exits
    • LAWS, for a $55.91 credit, up $3.38 per share from the entry price, producing a 6.4% return over 10 days, or a 235% annual rate.
    • LPLA, a $98.02 credit, up $1.86 from entry for a 1.9% return over five days, or a +141% annual rate.
    • MHO, a 42.85% credit, a two-cent profit showing a 0.05% return over four days for a +5% annual rate.
    • TLYS, a $22.82 credit, down $2.70 from entry, producing a 21.6% loss over four days for a -1,970% annual rate. The trailing 10% stop/loss was triggered.
  • Entry
    • TX, for a $23.19 debit.
• Utilities
  • Entry
    • AES, for a $20.32 debit
• Bench
  • Exit
    • TNK, previously on the Momentum screen, for a $2.82 decline from entry, an 11.3% loss over six days for a -686% annual rate.

By Tim Bovee, Portland, Oregon, January 13, 2020

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3:20 p.m. New York time

I’ve made no secret of my malaise concerning certain aspects of using the Zacks system of trading. It boils down to two things: There are often a lot of changes in each portfolio every day, and there are a lot of whipsaw, positions that have a buy signal one day and a sell signal the next. Both are strange for a system that claims to be looking three to six months ahead.

It has never been my ambition to become a day trader, and yet, Zacks has turned me into a quasi-day-trader, although I still don’t trade in and out within a single day. My goal has always been to trade a few hours, get the records up to date, and then go live my life. Because, believe it or not, there is life outside of the markets.

Yet, even with its flaws, the method is profitable. Looking at the 23 trades using Zacks and completed so far in January, 57% have shown a profit. The average result of all trades, win or lose, was 2.2%. That’s the profit for the holding period, running from 43 days down to a single day, so the annualized profit is quite large.

Of the seven whipsaws — in one day, out the next — four showed a profit and three, a loss. The highest win was 2.6%; the greatest loss, 3.6%. Beyond those two, the rest of the whipsaws had profits or losses of less than half a percent.

So far only four trades qualify for a test to see what happens a week after I exited. They split — two profitable, two not — but the two losses were losing when I exited, and one of the winner was winning at exit. Only one flipped. It was showing a 1.8% loss when I exited and a week later was showing a 1.5% profit.

It’s a small universe of data. It’s impossible to draw a robust conclusion.

However, the data suggests that there wouldn’t necessarily be a change in the win/loss rate if I were to increase the sampling span to a week rather than a day, the latter being the shortest allowed under the Zacks system. Doing so would fix my workload problem by stretching it out and eliminate the irritating whipsaw problem entirely.

Beginning the week of January 13 I shall alter my sampling of the analysis to once a week for each portfolio. I have assigned each portfolio a day of the week for the first week. The second week, I’ll move everything forward by a day, flipping Friday’s portfolio over to Monday.

At present I have four portfolios, three based on screens of the Zacks database and one based on a watchlist of “buy” or “strong buy” holdings in an exchange-traded fund. To fill all days of the week, I shall add a fifth portfolio, Utilities, based on a watchlist of “buy” or “strong buy” holdings by the exchange-traded fund XLU. It will provide dividends and ought to be relatively low turnover.

This week’s rotation, picked by random number, will be the Growth Portfolio on Monday, Genetics on Tuesday, Momentum on Wednesday, Utilities on Thursday and Value on Friday.

By Tim Bovee, Portland, Oregon, January 11, 2020

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10:50 a.m. New York time

The algorithms overnight tossed two positions, one off of the Growth Portfolio and another off of the Value Portfolio. A rogue bid triggered the stop/loss on a Growth holding, and I re-entered.

The trades:

• Growth Portfolio
  • Exit
    • LHCG, for a $142.94 credit, up $5.44 from entry. The position produced a 4.0% return over three days for a +481% annual rate. The exit was a false trigger of the 10% trailing stop/loss, perhaps caused by a rogue bid.
    • MHO, removed from Growth and transferred to the Bench as it continues to have a “strong buy” rank.
  • Entry
    • BRT, for a $17.67 debit.
    • LHCG, a $143.62 debit as re-entry after a false stop/loss.
• Value Portfolio
  • Exit
    • MET, for a $52.50 credit, down 3 cents from entry, producing a 0.06% loss over one day for a -21% annual rate.
  • Entry
    • HIBB, for a $24.88 debit.

By Tim Bovee, Portland, Oregon, January 10, 2020

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The Energy Select Sector SPDR ETF (XLE)

Update 2/22/2020: I’ve exited my short iron condor position on XLE for $1.11 per contract/share, a loss of 71 cents, with shares trading at $54.30, down $5.13 from the entry price. I unwound the position in two moves, first buying back the short put spread, which was in the money and so prone to exercise, and then allowing short call spead to expire without a profit, leaving the partial results unchanged.

XLE began a constant fall six days after I entered the position, reaching a point around the short put strike price once it settled. The implied volatility rank stood at 40.5% at exit, which is 8.8 points above the entry level. Short option trades anticipate a decline in the IVR because it contributes to the profit. Not so in this case.

The options position produced a 64.0% loss over 41 days for a -569% annual rate.

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I have entered a short iron condor spread on XLE, using options that trade for the last time 43 days hence, on February 21. The premium is a $0.40 credit and the stock at the time of entry was priced at $59.43.

The profit zone for this position is between $62.40 on the upside and $55.40 on the downside.

The implied volatility rank (IVR) stands at 31.7%.

Premium:	$0.40	Expire OTM
XLE-iron condor	Strike	Odds	Delta
Long	63.21	87.0%	14
Break-even	62.40	83.0%	18.5
Short	62.00	79.0%	23
Puts
Short	56.21	77.0%	21
Break-even	55.40	81.0%	17.5
Long	55.00	85.0%	14

The premium is 33.1% of the width of the position’s wings.

The profit zone covers a 5.0% move to the upside and a 7.3% move to the downside of the entry price, for total coverage of 12.3%

The risk/reward ratio is 2.0:1, with maximum risk of $81 and maximum reward of $40 per contract.

By Tim Bovee, Portland, Oregon, January 9, 2020

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11:35 a.m. New York time

Here are today’s stock trades:

• Value Portfolio
  • Entries
    • MET, for a $52.53 debit
    • SIG, for an $18.84 debit
• Growth Portfolio
  • Exits
    • AMED, for a  $173.74 credit, up $6.26 from entry, producing a 4.7% return over two days, or a +682% annual rate.
    • TX, a $22.02 credit, a gain of 8 cents from the price at entry. The return is 0.4% over one day for a +133% annual rate.
  • Entries
    • FN, for a $66.00 debit
    • MHO, a $42.83 debit
• Momentum Portfolio
  • Exits
    • ENPH, for a $31.74 credit, up $2.91 from the entry level, producing a 10.1% return over two days for a +1,839% annual rate.
    • PERI, an $8.41 credit, up 22 cents from entry, showing a return of 2.6% over one day for a +960% annual rate.
• Bench Portfolio
  • Transferred in from
    • Growth: CNXM
    • Momentum: DQ, PFGC, TALO and TNK

11:05 a.m. New York time

Stocks. As noted below, I’m discontinuing the Momentum Portfolio as a primary vehicle. I’ll retain it as a secondary, meaning if a symbol is dropped from one of the other portfolios but appears on the Momentum screen, I’ll retain it until it disappears from that screen as well. And, if it has disappeared from all screens but still has a “strong buy” score from Zacks, I’ll hang onto it in the Bench Portfolio.

Meanwhile, I’m building out the Value Portfolio as a new primary vehicle, which I expect to be fairly stable. By Value I mean stocks who appear to be worth less than they should be according to their financial metrics.

Today I exited two positions from Growth and Momentum, respectively, added two each to Value and Growth, transferred four from Momentum to the bench, and ignored five additions to Momentum. Details to come.

10 a.m. New York time

In stocks, today’s Momentum Portfolio changes using the Zacks algorithm continues to churn — 10 exit signals, most of which were entry signals within the last couple of days.

I am declaring the Momentum Portfolio to be a failure, won’t be replacing today’s exits and will retire the portfolio as soon as the positions that remain have received their exit signals.

9:45 a.m. New York time

I’ve entered a short iron condor position on XLE and posted the analysis.

9:35 a.m. New York time

The implied volatility rank on XLE, the energy exchange-traded fund remains above 30% and the uncertainty in the Middle East appears to have lessened. I’ll be analyzing XLE for a short iron condor position this morning.

By Tim Bovee, Portland, Oregon, January 9, 2020

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Technology Select Sector SPDR Fund (XLK)

Update 2/19/2020: I exited my short iron condor position on XLK for a $2.01 debit per contract share, a loss of $2.44 per contract share. The underlying stock was trading for $102.90, up $3.00 from the entry price. 

XLK stayed on a nearly constant uptrend during my holding period, moving above the $96 short call strike price into unprofitability, where it stayed. The implied volatility rank was 28.8% at the close, down 2.8 points from the entry level.

The options position produced a 60.7% loss over 40 days for a 128% annual rate.

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I have entered a short iron condor spread on XLK, using options that trade for the last time 44 days hence, on February 21. The premium is a $0.79 credit and the stock at the time of entry was priced at $92.66.

The profit zone for this position is between $96.79 on the upside and $85.79 on the downside.

The implied volatility rank (IVR) stands at 55.3.

Premium:	$0.79	Expire OTM
XLK-iron condor	Strike	Odds	Delta
Long	98.00	89.0%	12
Break-even	96.79	83.0%	18.5
Short	96.00	77.0%	25
Puts
Short	88.00	76.0%	22
Break-even	85.79	81.0%	17.5
Long	85.00	86.0%	13

The premium is 31.6% of the width of the position’s wings.

The profit zone covers a 4.4% move to the upside and an 8.1% move to the downside of the entry price, for total coverage of 12.5%

The risk/reward ratio is 2.2:1, with maximum risk of $171 and maximum reward of $79 per contract.

By Tim Bovee, Portland, Oregon, January 8, 2020

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3:10 p.m. New York time

Today’s stock trades.

• Growth Portfolio
  • Exits
    • BYD, for a $29.78 credit, up 51 cents from the entry price, producing a 1.7% return over two days for a +318% annual rate.
  • Entries
    • ITRI, for a $83.33 debit
    • LPLA, a $96.16 debit
    • TX, a 21.94 debit
  • Transferred to the Bench: HII
• Momentum Portfolio
  • Entries
    • CS, for a $13.93 debit
    • PERI, an $8.19 debit
    • SNE, a $70.60 debit
    • TGNA, a $17.04 debit
  • Transferred
    • From the Bench: DQ
    • FORM, duplicating the Growth Portfolio position.
• Genetics Portfolio
  • Exits
    • CLLS, for a $16.78 credit, up 4 cents from entry. The return was 0.3% over one day for a +90% annual rate.
• Bench Portfolio
  • Exits
    • STM, for a 27.31 credit, up 58 cents from original entry in the Growth Portfolio, producing a 2.2% return over 2 days for a +398% annual rate.

9:45 a.m. New York time

XLK Analysis posted.

9:35 a.m. New York time

The exchange traded fund XLK moved to a high implied volatility rank this monring, and I’ve entered a short iron condor position. Analysis to come.

By Tim Bovee, Portland, Oregon, January 8, 2020

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iShares MSCI Emerging Markets exchange traded fund (EEM)

Update 2/11/2020: I’ve exited my short iron condor position on EEM for a $0.15 debit — identical to the profit — with shares trading a $44.14, down $0.66 from the price at entry. 

EEM peaked four days after I entered the position, dithered near the top for four more days, and then began a sharp decline for nine days. It thereafter recovered about half of its loss, allowing the options to reach my optimal exit level, which is half of maximum potential profit.

The implied volatility rank stands at 27.4%, down two points from the entry level.

Shares showed a net decline of 1.5% over 35 days,  or a -15% annual rate. The options position produced a 100% yield for a +1,043% annual rate.

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I have entered a short iron condor spread on EEM, using options that trade for the last time 45 days hence, on February 21. The premium is a $0.30 credit and the stock at the time of entry was priced at $48.83

The profit zone for this position is between $47.03 on the upside and $42.03 on the downside.

The implied volatility rank (IVR) stands at 27.6.

Premium:	$0.30	Expire OTM
EEM-iron condor	Strike	Odds	Delta
Long	47.73	90.0%	10
Break-even	47.03	84.5%	15.5
Short	46.73	79.0%	21
Puts
Short	43.00	76.0%	23
Break-even	42.03	81.0%	18
Long	41.73	86.0%	13

The premium is 26.4% of the width of the position’s wings.

The profit zone covers a 4.9% move to the upside and a 6.7% move to the downside of the entry price, for total coverage of 11.6%

The risk/reward ratio is 2.8:1, with maximum risk of $83.50 and maximum reward of $30.00 per contract.

By Tim Bovee, Portland, Oregon, January 7, 2020

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The Industrial Select Sector SPDR Fund  (XLI)

Update 2/4/2020: I exited my short iron condor on XLI 17 days before expiration, for 21.7% of maximum potential profit. The exit debit was $0.36 per contract share, for a $0.10 profit, with shares trading at $83.58, up $0.91 from the entry level.

XLI followed the broad market pattern of peaking in mid-January, about a week after I entered the position, and then falling for more than a week thereafter. The implied volatility rank closed at 35.5%, which is 3.5 points higher than the level at entry. For the short iron condor strategy, the hope is always for a falling IVR as the options approach expiration.

Shares rose by 1.1% over 28 days, or a +14% annual rate. The options position produced a 27.8% return for a 362% annual rate.

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I have entered a short iron condor spread on XLI, using options that trade for the last time 45 days hence, on February 21. The premium is a $0.46 credit and the stock at the time of entry was priced at $82.67

The profit zone for this position is between $86.46 on the upside and $77.46 on the downside.

The implied volatility rank (IVR) stands at 31.1.

Premium:	$0.46	Expire OTM
XLI-iron condor	Strike	Odds	Delta
Long	87.00	88.0%	12
Break-even	86.46	84.5%	15.5
Short	86.00	81.0%	19
Puts
Short	79.00	78.0%	22
Break-even	77.46	83.5%	16.5
Long	77.00	89.0%	11

The premium is 30.7% of the width of the position’s wings.

The profit zone covers a 4.6% move to the upside and a 6.7% move to the downside of the entry price, for total coverage of 11.3%

The risk/reward ratio is 2.3:1, with maximum risk of $104 and maximum reward of $46 per contract.

By Tim Bovee, Portland, Oregon, January 7, 2020

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