Exits, 11/11/2023

How we did on the trades we exited this week, and what we can learn from them.

Dids/Pexels

This Week’s Trade Exits

As soon as I exit a trade, I note that in the comments of the post where I first mentioned the trade; at the end of the week, I try to track them all in one post. These are the trades I exited this week:

Stocks or Exchange Traded Products

None

Options Trades

1. Put spread on Bumble (BMBL 0.00%↑). Entered at a net debit of $0.20 on 11/7; expired worthless on 11/10. Loss: 100%.

2. Call spread on Fisker (FSR 0.00%↑). Entered at a net debit of $0.38 on 11/7; expired worthless on 11/10. Loss: 100%.

3. Call spread on The Trade Desk (TTD 0.23%↑). Entered at a net debit of $0.45 on 11/9; expired worthless on 11/10. Loss: 100%.

4. Call spread on Tapestry (TPR 0.00%↑). Entered at a net debit of $0.35 on 9/29; expired worthless on 11/10.

5. Call spread on Unity Software (U 19.95%↑). Entered at a net credit of $0.38 on 11/9; exited at a net credit of $0.09 on 11/10. Loss: 76%.

6. Call spread on Sketchers (SKX 1.65%↑). Entered at a net debit of $1.12 on 10/26; exited at a net credit of $1.50 on 11/7. Profit: 34%.

7. Call spread on Datadog (DDOG 29.35%↑). Entered at a net debit of $0.40 on 11/6; exited at a net credit of $0.95 on 11/7. Profit: 138%.

8. Call spread on Trip Advisor (TRIP -0.33%↓). Entered at a net debit of $0.38 on 11/6; exited at a net credit of $0.94 on 11/7. Profit: 147%.

Comments

Stocks or Exchange Traded Products

No exits this week, as our core strategy continues to perform well. As I noted in Thursday’s top names post, 14 out of 18 of our weekly top ten names cohorts from this year have outperformed the market over the next six months.

Options Trades

I’m not running a spreadsheet with every stock I research for earnings trades each week, how it scored on the ten metrics we’re using, and its 5-day return at the end of the week, so I’ll crunch the numbers this weekend, see what worked and what didn’t this past week, and adjust our weightings accordingly for next week. In the meantime, a couple of observations (which will get baked into next week’s weightings):

• Valuation. There were a couple of counterintuitive results from crunching the numbers from the week starting 10/30, one of which was that stocks with the lowest valuation rankings (most overvalued) outperformed. That might have been due to small sample size, or that week being a risk-on week, but this week, that bit us with The Trade Desk (TTD 0.23%↑). That company and a valuation rating of 1, and actually posted an earnings beat, but not enough of one to continue justifying its current valuation, apparently. Perhaps going forward, a lower valuation score will need a higher social data score to offset it. This will get worked into our weightings for next week.

• Short interest. High short interest is one of our bullish indicators, and I suspect it will continue to be one, but this week offered two examples of stocks tumbling despite having extremely high short interest. One was Fisker (FSR 0.00%↑), which had short interest of over 44%, but nevertheless tumbled after postponing its earnings call at the last minute. The other was Groupon (GRPN 0.00%↑), which had a short interest of about 32%. We had a bearish bet on it that unfortunately never filled, because the stock crashed nearly 35% after its earnings miss. That will get factored into our new weightings for next week as well. We’ll most likely see less of a bullish weighting for high short interest, and perhaps a bearish tilt for low valuation ratings. We’ll see.

A Less Risky Approach

Finally, a reminder, that if you are looking to invest conservatively, rather than to trade, the hedged portfolios created by the Portfolio Armor web app continue to perform well. Here’s one that just wrapped up (each portfolio lasts for six months), a portfolio hedged against a >15% decline that was launched on May 10th:

You can find an interactive version of that chart here.