Brook Reef

Closing Pair Trade of Long XLU vs. Short XLY Sell XLU @ $74.97 - realized gain of $0.72 (0.97%) Cover XLY @ $187.76 - realized gain of $1.60 (0.84%) Total Realized Gain: 1.81% Pair trades are a bit like black magic. You use zero money and make money. Like turning air into water or lead into gold. I would keep this position on longer, but can't resist the urge to lock in a nearly 2% gain in less than a day. I pushed my gross exposure up by 40% yesterday and this will pull back half of that.  I'm now sitting at 58% gross and 38% net. I'll be ready for the next opportunity!

PAIR TRADE: 10% each side Long BND @ $79.42 Short JNK @ $102.91 Boom! In 2 trades I've jumped my gross exposure up by 40% without affecting my net. That's how I play a VIX decline into market weakness. The idea on this trade is that credit spreads will rise as the economy weakens (by design) as the Fed raises rates to quell inflation.

PAIR TRADE: 10% each side Long XLU @ $74.25 Short XLY @ $189.36 My total positioning rules should be clear by now: when volatility spikes, I reduce my gross exposure. When it falls, I add gross. With the VIX below 20 and holding, it's a day to build up some gross exposure. My market view remains that we'll chop or trend downward from here in equities and rates will be downward, especially at the long-end as the Fed raises shorter-term rates into a sensitive economy. That said, buying utilities gives me rate sensitivity. And shorting consumer discretionary benefits if/as the economy slows. So this trade is in-line with my broad view. Utilities are cheap. If rates keep rising, the downward pressure on allowed returns will ease. If rates fall, the somewhat fixed-income stream of income will be worth more. But I'm a fanboy...

Selling DOCU @ $109.67 Realized gain of $2.42 (2.26%) Meme stocks are surging - so I'll take this chance to get out mostly unscathed on a bad trade (after doubling down lower). 

Selling EIX @ $68.64 Realized gain of $5.06 (7.96%) The latest wildfire in Boulder is a reminder that we haven't made ANY progress on mitigating risk of future fires. And while EIX and other utilities should be mostly insulated from the worst outcomes, it's not a good sign for population growth - even if the required infrastructure upgrades will benefit the utility. But in California, a state with already high prices, this is going to be a tough battle. EIX isn't cheap enough to justify holding here...and I'll own some in UTG.

Selling June 30, $380 QQQ Calls for $4.34 Realized gain of $0.98 (29.17%) I use options to give myself exposure when I'm not sure enough to act on the underlying. And to add juice to high conviction positions - but usually the former.  I bought 2 kinds of QQQ calls when it looked like the market was going to dump hard but I wanted maintain some upside. Now that it looks like the market wants to rally, the smart move is to take my profits and consider adding some puts to profit from a big move down - a counter-trend move. If tomorrow is another up day, I'll buy some puts. If not, I'll remain patient.

Covering AMZN short @ $2,971.56 Realized gain of $38.66 (1.28%) This wasn't meant to be a day trade, but the broad markets dumped after the Fed announced their rate increase and the press conference gave Powell the opportunity to get everyone bulled up. I don't know what can de-rail this market - but clearly rate increases and war can't do it. Be quick with your shorts and careful with your longs. The house of cards continues higher.

Shorting AMZN @ $3,010.22 4% position Call me crazy, but there's a chance the recent rally isn't "real". Combined with weakness in the Chinese stock market and supply chain, and it would mean some pain ahead for Amazon. Next to Google, what company's product or service do you use most often? I Google questions and buy stuff on Amazon. In any event, this trade will reduce my net exposure and will have a short leash if the rally continues.

Buying DOCU @ $72.96 Adding 1% 2% position DOCU has gotten absolutely crushed in the last few months. I bought it down 20%+ on a day and it's down about 50% from there. Yes, it will have to double for me to break even on that initial trade. But by buying more here, I only need the stock to go up 32% to get even. Have you e-signed anything lately? I do it almost weekly. For personal use. For work. And it's always DocuSign that is the trusted resource. Does that necessarily mean it's a great stock? No. But being the go-to resource for anything usually leads to good outcomes. See "Google" and "Amazon". 

Selling QQQ April 14, $375 Calls for $0.84 Realized gain of $0.15 (21.74%) I YOLO-ed some calls on Monday during the depths of the selloff and get to dump one of the positions today after the epic rally. I'll hold the June calls for now - but they're currently up over 20% as well and I might use my cost basis as a stop - but need to think on it...I'm probably holding over night. In any event, buying calls on selloffs is a way to get or add long exposure while protecting downside. This tiny position was only 0.1% of my book - but represented 40% if exercised at the strike price. *There are reasons not to translate it this way to measure exposure, but it's directionally correct.* I'm now hunting for shorts.

Covering QQQ @ $321.40 Realized gain of $22.61 (6.57%) Like I said, I reduce my gross exposure on volatility spikes. I might regret covering this short, but have to respect the selloff and potential for a rally from here. It doesn't hurt that the cash register grows a bit on closing this position!

Closing Pair Trade of Long RSP vs. Short SPY Sell RSP @ $148..51 (loss of 2.53%) Cover SPY @ $416.17 (gain of 3.78%) Total Gain of 1.25% One of my rules is to reduce  gross exposure on volatility spikes. Sometimes that means selling the fringe long ideas. Sometimes covering shorts. But almost always that means closing pair trades. The fact that this was a profitable trade is great! Smaller stocks have already sold off relative to the large caps (the thesis behind this trade) but they're also likely to lead on any major selloffs. Like more major than this one. I'm thinking the next leg is up, though whether that starts today or in a week is anybody's guess when the VIX is over 35.

Buying 2 sets of QQQ Calls: April 14, $375 calls for $0.69 (0.1%) June 30, $380 calls for $3.36 (0.3%) You Only Live Once - so "YOLO" some calls. Perhaps even HODL them! (Hold On for Dear Life). During yesterday's big selloff, I took the chance to YOLO some calls on QQQ - seemingly oversold in the short-term. I probably won't HODL them until expiration, but could see doubling my money on a relief rally or bear market bounce.  Volatility is heightened. The VIX was over 35 yesterday and this morning. So this isn't a high value idea. Just a trade with minimal downside.

Selling TLT @ $140.29 Realized loss of $6.26 (4.27%) I made money on the EDV long and JNK short trades - but lost more than that gain here. Oh, well - can't win them all and the rationale for putting on this position was/is correct even in the timing was wrong. Either way, I was wrong and the loss is the cost of the lesson that I hopefully will learn. I now have zero bond exposure and can react accordingly to the next big move - note that bond yields have moved down dramatically this week on a lot of volatility.  When the VIX spikes, I cut exposure - I've cut my gross by 25% today!

Selling EDV @ $130.15 Realized gain of $1.60 (1.24%) This trade started as a big ugly loss but turned into a small profit. Coupled with my small profit on the JNK short, and it's not too bad of a use of capital. Cutting gross exposure on vol spikes is what I do.

Covering JNK @ $102.84 Realized gain of $1.31 (1.26%) I pushed this trade on as way to stop the losses on my Treasury long positions. It's made me a bit of money (and the Treasury positions are much less in the red) so I'll take off this short today on a red tape.  I like to cut my gross exposure on volatility spikes - and the VIX at 34 today is a spike.

Covering KBA @ $39.00 Realized gain of $1.49 (3.68%) Covering EEM @ $44.63 Realized gain of $2.45 (5.20%) Did you know that most historical crashes happen on a Monday following a selloff Friday? We'll see if that happens - but in the meantime, I'll cover a few shorts on this selloff Friday for a profit. I don't need to be a hero - and think there could be a better chance to short something else soon. I use my short book to reduce risk on the long book - not necessarily to ride it to the bottom. My "call" is that the stock market is extremely overvalued - especially the mega caps. I have a pair trade on to take advantage of that view.  So I'll be on the hunt for overbought mega cap and extreme valuation names to short against my boring, "real asset" heavy long book. Emerging markets and China is what I short as the cherry on my sundae. Taking the cherry off is how you start to eat a sundae, right?

Selling DUK @ $101.04 Realized gain of $1.04 (1.04%) In real life and here, I sold DUK and a few other smaller utility positions today to add to UTG. I don't care for Duke as a company and like the utilities industry broadly, so will own only "best idea" utilities directly from now on. Duke isn't a "best idea".

Buying UTG @ $32.44 5% position It's no secret that this portfolio doesn't match my actual account 100% of the time. I have a series of small positions and footholds in about 30-50 funds & companies for a variety of reasons - whether to keep an eye on them, they have high but risky dividends, or are lottery tickets of sorts. But I try to keep any position that is larger than 2% updated here. Just so we're clear on that. But I've slowly been accumulating shares in UTG, a closed-end fund that invests mostly in utilities. UTG is a unique CEF in that it has never cut its distribution and tends to grow it, albeit modestly, over time. The current monthly payment of $0.19/share equates to a 7% yield. While I think I could outperform UTG by buying my own basket of utilities, I don't have access to such cheap margin debt. You see, UTG is about 130% net long. They have access to borrow at something at or below 3%. My margin rate is somewhere north of 8% today. So I'm

PAIR TRAIDE:  Long RSP @ 152.36 Short SPY @ $431.90 10% positions each side This is a trade that's been begging to be put on for a LONG time. The mega caps have kept the broad indices afloat while large corrections have happened under the surface. That can't continue forever - so I'll put on this trade to capitalize. Hopefully, the trade works whether the market goes up or down.