I’m bringing back an old theme of mine to grace the Tales of a Technician blog’s pages. There are multiple motivations behind the resurrection. First, it was one of the most popular monthly posts because it helped members of #teamtackle. It provided a look over my shoulder at some of my trades each month. Second, it helped my own trading and journaling. Every month I had to collect my trade data and analyze the results to share with readers.

My goal is to publish the “The Month that Was” series on the first of every month. Herein lies a look back at the November that was.

Theme of the Month

November marked the month that Wall Street officially priced-in a post-pandemic world. With the arrival of multiple hyper-effective vaccines, investors have moved beyond the novel coronavirus’s trauma and its effects.

They’ve peered into the future and absolutely love what they see. Don’t believe me? Look at the economically sensitive Russell 2000 Index. 2,000 small companies lie among its ranks, and they were decimated in March. From peak-to-trough, the Russell (RUT or IWM) fell 43%. Fast forward to last month, and the flip has officially switched. November’s 18.2% gain for the Index was its largest monthly gain in history.

You don’t get rallies of that magnitude unless there’s a tidal wave shift in capital flows. The little guys have gone from loathed to loved.

What I Did Wrong

I’m happy to report that this was a month where I found it difficult to identify any glaring errors. And that’s as it should be! It’s a sign of progress. If I were coming to you every single month with horrific missteps, you’d eventually have to wonder if I was learning from my mistakes and modifying my behavior.

After all, there are only so many dumb things you can do. Once you’ve done them all, then it’s just a matter of how many times you have to repeat the same mistakes until you wise up and knock it off.

When looking back to identify any mistakes, I usually focus on my losing trades. But remember, just because you lose on a position doesn’t mean you necessarily did something wrong. Given the incredible rise in the market, I only had a few losers. Though try as I might, I can’t find any fatal flaws in my entry or management logic. They all had good setups, I followed my plan, and the market beat me. Simple as that.

Absent the benefit of hindsight, I can honestly say I wouldn’t have done anything differently. Here were the three trades that went awry.

GLD: Played a poor boy covered call on the Nov 5th breakout. It was a beautiful pattern that was arguably upended by the mad dash to equities. I’ll highlight the position below in my Trade of the Month.

RUT Condor: November marked the largest gain for the Index in history. Do you think a position poised for neutrality is going to profit in that environment? Not a chance. Luckily I kept my portfolio leaning bullish all the way up, so I more than made up for the loss.

LAC: Short-term speculative long call play on the potential breakout over $12.15. It didn’t work, and I bailed at a 50% loss.

What I Did Right

You may not remember this, but the S&P 500 was below the 50-day moving average heading into November. It wasn’t until Nov 4th that buyers jammed prices back above this oh-so-important smoothing mechanism. The primary thing I did right was to follow my process of turning bullish when the S&P 500 moved above the 50-day. I shudder to think about my results if I didn’t shift more bullish when the price action demanded it.

No one could have known November would be one for the history books, but it was undeniable the market was turning bullish. Credit goes to those who recognized the return to an uptrend and pounced on long delta plays. Here were my winning trades for the month:

Naked Puts, Covered Calls: EEM, IWM, SLV, CCL, PLTR,

Bull Puts: DIS, BABA, MA,

Bull Call: AAPL, AMD,

Poor Boy’s Covered Call: XLF

Long Stock: RUN, PYPL, AMD,

Trade of the Month

Let’s look at how I managed a GLD poor boy’s covered call (PBCC) that didn’t work. On Nov 5th, I entered a PBCC by purchasing the March $180 call for $10.40 and selling the Dec $190 call for $2.54. The net debit was $7.86.

Gold prices quickly soured, and by Nov 11th, it was obvious I needed to adjust the position. I rolled down the short call to bring in more premium. I bought back the Dec $190 call for 62 cents (gain of $192) and sold the Dec $185 call for $1.09.

Fast forward to Dec 4th. GLD kept crumbling, and I had captured most of my premium on the Dec $185 call, so I repurchased it (paid 13 cents, captured $96 gain) and rolled to the Jan $184 call (for 96 cents). I wanted to keep the strike well above my long $180 strike so that if gold prices recovered, I still had a bullish risk graph.

At the time of this writing, GLD has made a substantial rebound. Best case scenario is for prices to work their way back toward $184 by Jan expiration.

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