Tallyho Tackle Traders!

This week’s montage is of the El Yunque Rain Forest in Puerto Rico and the Spanish Colonial City of Old San Juan. In San Juan I met up with some of our Tackle Student(s): Antonine E. as well as an Puerto Rican Entrepreneur, Clifford F. We talked investing, market strategies, and business approaches over the course of three days. We even found time to enjoy some of the finer aspects of Puerto Rican culture…three words: Ron del Barrilito.

A little bit about Antonine: This guy is solid and I really enjoyed my time with him. He’s an engineer in San Juan, he’s a family man, and a poor golfer. Just kidding, actually, Antonine made his first eagle on a par four during a torrential downpour in my presence…straight out of the movie Caddyshack. All in all he’s a fantastic person, a great addition to this thing called humanity and I look forward to his progress over the next year. You rock hard my man!

And then there is Clifford: Entrepreneurship is in this guy’s blood. He is completely new to trading but I got his account opened up and he is practicing Covered Calls and Naked Puts. He is the owner of Nabori Culture which is a ethically driven clothing line. He employs High School students in the Dominican Republic (who are typically surfers and skateboarders and need the side money) and his products are made from scratch with local materials and components. I look forward to being apart of his journey and expect great things from him. You can find him online.

Recap of Last Week’s Trades:

My personal placements from last week experienced movement to the downside. But as mentioned last week, I merely roll my naked puts into SHORT STRANGLES in such instances.

Specifically, I issued Naked Puts on X and USO.

X got beat up in the FOMC meeting, wherein I sold calls against my puts @ .40 Delta, 30 days out (Short Strangle) and I closed out the calls for X on Fri for a profit—there was unusual options activity reported on Fri on the Buy side and for Call options, typically indicating movement to the up side come next week. I should make out nicely on that trade.

As far as USO goes, I was one day too early on that one and my Puts are in the money now. Once again I have 30days for them to rebound… That, and I have the trade Strangled and it is rare that assignment takes place before expiration. I’ am within my position size rule, but if USO breaks $8.50 I will reevaluate the Puts and let the Calls run.

Environmental Hedging, Step 2:

Last week we went into Step One of Environmental Hedging. This week we are diving into Step Two: The buying of shares of net-positive companies with profits from Step One; that, or the purchasing of products from these net-positive companies with profits from Step One.

Since Step Two comes in a couple different flavors, allow me to explain them in detail:

For example, let’s say we cleaved a net-total of $500 in cash flow from Step One. Well, take that $500 and buy $500 worth of shares from the soon to be mentioned list. And we are targeting a minimum of 100 shares at the end of the day. Why? Well, you need at least 100 shares to do the Covered Call—which is Step Three of our system and will be explained in next weeks blog.

But, for now, let’s say $500 does not land you 100 shares of XYZ company. In that case you reserve the right to do two things:

1. You can buy $500 worth of shares, (whatever amount that may be), and swing trade your position—buying low, selling high, and maintaining a velocity of money until 100 shares are acquired at a later date. Maybe its just an issue of time and the trader needs 2-3weeks of Step One before enough house money is acquired to buy 100 shares of XYZ for free. Although profits may be minimal when swing trading a few shares at a time, remember, you’re helping these companies expand their business operations. And if you believe in what they do as a business there is nothing wrong with treating your position as glorified savings for the time being. Im a big believer in saving money, just not in a bank account.

2. Another possibility is that the trader is not interested in buying shares of XYZ—which could be the result of market-conditions, portfolio size, trend, and many other variables. Maybe it just came out the CEO of Whole Foods is a crazy glue-sniffer, you never know.

In such cases we go after the product. For example, let’s say you’re a young millennial and bear a very modest portfolio size. In that case it doesn’t make too much sense trying to compound 100 shares of Tesla stock @ $360 a share, now does it? It very well could take years to achieve the 100 share mark, $500 at a time. But lets say, however, the young millennial did just buy their first house… Well, in that case, purchase the product. Maybe that $500 bucks can go towards your first payment on a Tesla home battery. Or for that matter, the purchasing of a single solar panel from, let’s say, Sun Power Inc.—of which you can buy and install one at a time over the course of a year.

Worse case scenario, that $500 bucks can go to organic groceries from Whole Foods, or from your local farmers-market. Better yet, start your own vegetable garden with that $500 bucks. Now, don’t dog on the gardening bit until you have tried it. It is by far one of the most therapeutic activities in the world and very gratifying. Its also the environmentally responsible thing to do—its much better than wasting water on grass that serves no purpose beyond the aesthetic and the convent excuse to drink a six-pack while you “mow” it. If you’re limited on space, check out vertical gardening methods on YouTube. Its fun, its healthy, its an important skill set to acquire, and you can sell or preserve your bounty.

No matter what side of the political identity spectrum you fall on, both conservative and liberal purviews support sustainability or self-sufficiency. One group just calls it “self-sufficiency”, the other “sustainability” and at the end of the day they bear the same results. And if your are a centric then, assuredly, you won’t argue with a reduction or complete elimination of your grocery bill, would you? There is nothing wrong with free food, folks.

As the blog progresses I will be submitting a treasure trove of self-sufficiency suggestions, all of which will be designed to reduce living expenses, improve quality of life, and increase one’s personal infrastructure.

Targeted Stocks:

WFM—Whole Foods Market.

Ive had a fantastic trading relationship with WFM. I have selected WFM not because I am a fan of WFM, mind you. I mean, the food is amazing with a large variety to bear, but the company has had a history of price gouging and poor management, among many things. I personally prefer the farmer’s market over gentrification.

That said, the reason(s) why I trade / own WFM are:

1). It fits the Environmental Hedging philosophy and offers options with good premium.

2). Fundamentals are solid and holds a consistent P/E Ratio of 20.

3). Owns a majority of farming contracts with certified organic farmers and commercial gardeners—which is ultimately where I want my money making an impact. This is why Amazon bought it in the first place, not because of brick and mortar.

4). The sucker channels very nicely, which makes for a dream Covered Call stock. That said, it was just purchased by Amazon so we will have to see what happens next. The deal isn’t solidified, but will most likely go through. Which means WFM stock may be absorbed by Amazon or there could be a stock split. I am speculating a bidding war takes place. Stay tuned…

TSLA—Tesla Motors.

There is no case to be argued on this one, whatsoever. But I will, however, poke the bear. Elon Musk is the Steve Jobs of my generation. He is a visionary and will leave a lasting impact on this planet and our human system—everything from robotics, to transportation, A.I., energy, and supply chain dynamics. And thats just on this planet. The sky is not the limit for this guy.

That said, an investment in TSLA is, currently, an investment in management. It is important to understand that Tesla is a debt driven company and with the end of the market-cycle approaching, there is a very good chance it will get beat up in the crash. After the crash, however, I will be putting a large amount of capital into TSLA. For now I trade TSLA and will explain that trade next week.

SPWR—Sun Power Inc.

Sun Power is a solar company which does both residential as well as large-scale solar projects across the globe. On the residential level their products are very affordable as well as effective. As a stock it is cheap, very cheap, just under $8 a share cheap. At one point in time SPWR was upwards of $42 a share. It also gets a decent bang for its buck on options’ premium. Ill explain my approach to SPWR next week.

FSLR—First Solar Inc.

Also a solar company and is more so geared toward large-scale solar projects. FSLR use to be on the Tackle 25 but was taken off as result of fundamentals and a drop in options premium. That said, premium has picked back up since then and fundamentals have improved. FSLR also has some major, large scale project on the horizon. I believe this will help further improve their fundamentals and expand their operations. I’ve owned it for a couple years and have had great success doing Covered Calls on the stock.

The above mentioned are mere targets, next week Ill go over how I approach and profit off of them… Also I will be checking in from the United States next week. I’ll be there for my favorite cousin’s wedding, Bridget J., whom is a Professor of Native American Studies at the University of Washington in Seattle—top of her field according to some. I’ll see if I can squeeze and interview out of her…

Also, next week, we will have a special guest, Josh Van Alystine. Josh is a recently retired Special Forces Operator and a student of Tackle Trading. I am very excited for the interview and the wisdom he will drop on us. Anticipate a insightful, inside conversation pertaining to the war in Afghanistan as well as the environment, his views on these issues, and ways in which we can help. We are lucky to have students like him.

Until then, keep it Detroit Velvet Smooth!

Bob Shannon.