Happy Fourth of July Tackle Traders!!
As we celebrate our Independence Day let’s remember what it takes to be on the right side of history. For one, never bring a sparkler to a Roman candle fight. Two…its ok to dip into your 401-k to buy your mother-in-law a ready-cut fruit bowl. And three…if you drink a fifth on the fourth you might not go fourth on the fifth.
That said, we do have a shorter than usual trading week coming up—one which left off in a curious place. As coach Noah pointed out we have a “alligator”, or, more commonly coined, “megaphone” pattern rearing its ugly head on the S&P.
This reversal pattern details a battle between the Bulls and the Bears and is indicative of a confused marketplace—which makes sense. The G.O.P. is fumbling the Healthcare Bill, Twitter has been commandeered by cyber-bullying, theres mixed economic data coming to and fro, and distrust has been, effectively, weaponized. Price action, however, has the ability to persuade truth when the truth is unclear. Its funny how technical analysis can take polarizing realities and turn them into objective information.
But let’s take note, folks. The charts are telling us that the Bears have stopped growling and this has the Bulls somewhat worried. But all of this can go both ways in the age of High Frequency Trading Systems if you really think about it, so let’s see what happens. As Beau Moody would say: “Stay frosty, and keep those cards tight this week”.
Last Weeks Robin Hoods:
X—United States Steel, Inc
Yep, still rolling on X and doing well. Collected 75% premium on one round of naked puts and rolled up from the 18.5 to the 20 strike price and reissued a second round late Thursday. I anticipate steel stocks popping to the upside sometime next week, assuming the steel dumping issue is properly addressed. Technically, it looks primed.]
USO—United States Oil Fund.
Crude has made a nice rally but unforeseen until the trading week had already ended Nigeria and Libya submitted higher crude outputs than previously expected. This might throw OPEC a curve ball. I’am still in the position and will remain there until I receive confirmation… If it does drop I shall strangle my position. Until that happens I will remain bullish.
FCX—Freeport McMoran Inc.
Yep, I went ahead and pulled the trigger on this one. Sold the $12 strike price and I am feeling good about what I am seeing. Short of market a melt-down or bad news this sucker ought to run. It has a nice “W” pattern at support and a lot of big players have been gobbling up shares of it.
Environmental Hedging: Targeted Stocks
Last week I explained the Covered Call trade and we have been targeting FSLR, SPWR, TSLA and WFM.
WFM—Whole Foods Market
As far as Whole Foods goes I have been suggesting to hold off until direction sets on that stock. This will be the case for some time. Let’s be patient, folks. Until I see something I like I will be leaving it out.
FSLR—First Solar Inc.
If you had pulled the trigger on FSLR at the beginning of this blog you should be up 1-5%. Right now, however, the stock is consolidating. The can mean one of two things: a reversal to a higher low or a break-out if it is given a reason to break-out. Thus far we haven’t been given a reason for a jump to the upside. Thus, I did a half covering of my position.
What that means is rather basic: Let’s say I have 200 shares of FSLR—a half covering means I have sold 1 call option as insurance on my gains. If it drops, I will add another call. If it jumps I will buy back the call I have sold. Wednesday would be a solid day to sell insurance or receive confirmation on a break-out. Knowing solar, however, I see it settling back into its trading range.
SPWR—Sun Power Inc.
Same goes for SWPR as does FSLR. One thing about SPWR, however, is that the company is looking like it will win a majority contract for the California Net-Zero program. This is exciting news but early news at that. Let’s wait and see what happens.
TSLA—Tesla Motors
Oh boy I love TSLA. Last week I had mentioned Bull-Put Spreads as an appropriate approach to TSLA. The reason why is because its a high value stock, spreads help reduce margin exposure. Since TSLA is fluttering at a higher-low give it sometime to settle down. Be patient.
As far as taking ownership of TSLA goes, I am sticking to my guns and waiting for a post-crash purchase. In the meantime, the profits I do make on TSLA are going into a slush fund to buy products and shares with down the road.
Environmental Hedging, Step 3, continued…
Last week we went over the Covered Call, which our the primary approach to FSLR, SPWR, TSLA, and WFM in Environmental Hedging. Apart of the Covered Call, however, is the notion of compounding gains. This is the most essential aspect of Step 3 in the system.
Einstein dubbed compounding gains as “the eighth wonder of the world” and we will be harnessing that power for the betterment of our environmental landscapes. Since compounding gains comes in a couple different varieties I brought on a trading legend, Jake Pelley, to explain how compounding gains in stock, specifically.
The cool thing about Environmental Hedging is that not only we compound gains in stock, but we as well compound gains in these companies’ products as well as non-profits. So, it is a three-fold form of compounding—all paid for by the net-negative companies of the world. Pretty cool, right?
Now, Jake is apart of the Legacy / Tackle Trading family and is a personal mentor student of of our in-house Theta King, Gino Poore. Jake is a hall of fame icon from Legacy / Rich Dad and the way he earned that merit was by having a confirmed 13,000 trades WITHOUT a single loss. The kid is a stud, and, better yet, a soft-spoken family man. I look forward to having Jake on board for further blogs and educational additions to this system.
So, as you can see the gains possible just from compounding shares can be immense over the course of 10yrs. And that is just the conservative take on what this system can provide, objectively. Furthermore, that was just with FSLR…SPWR, TSLA, and WFM were not included in Jake’s example.
Now, as we do Step 1 of the system, combined with Step 2 & 3, I am sure you can envision that 10yr mark could be achieved much faster than the conservative approach detailed in Jake’s example. This all come down to one simple thing: THE SYSTEM MUST BE COMPOUNDED.
Personally, after three years of compounding this trading system, I am about 3/4 of the way to acquiring the necessary funds to achieve home energy independence. The problem is, I do not have a house, haha! I am a full fledged nomad until April-May of 2018.
Since I am living out of my back-pack, I am instead piling those gains into a slush fund such that, after I am done traveling the world and spreading this system over the course of a year, using environmentally sound cash-flow, I will have enough money to install a full array of solar-panels and an expansive vegetable garden when I purchase my home, wherever that is. ALL FOR FREE!
And yes, I have my aim fixed on a Tesla Model 3 down the road, but first comes first and that is nest-making.
Next week, I will go into more detail on compounding and reveal Step 4 of this system, which is the final step.
The rest of the year I will just be trading the system and explaining what I am doing on a weekly basis, whether that be in terms of travel or in terms of trading. It will simply be a 1-2-3-4, rinse, wash, repeat—ad infinitum—as all good trading system are set up…
Join me on the journey and let’s set a firm example for generations to come.
The video attached is Week 5 of the blog. I took it easy this week, just some hiking in the Wasatch Mountain range and some golf with the boys from Tackle Trading… and, some more golf with a few gentlemen from Wall St.
Cheers, and Happy 4th of July—MERICA!!!
Bob Shannon
