Brook Reef

Buying to Close 10/7 $270 QQQ Puts for $0.14 Realized gain of $1.50 Realized cash return of 0.58% With the market rally of the last two days, I had the opportunity to close my puts for a nice gain. Making 0.58% in a week on my otherwise idle cash is pretty amazing - and combined with rolling the prior puts, I made just over 1.0% in just over 4 weeks. Selling cash-secured puts can be a great way to generate return in a rallying or flat market. But if the market drops, especially quickly, these puts can become horrible trades. The market could easily drop back down quickly, so I'll move back to cash and wait for the next opportunity.

Buy to Close 9/30 QQQ $270 puts for $0.96 Sell to Open 10/7 QQQ $260 puts for $1.64 Net (new) proceeds: $0.68 Total Net Proceeds: $2.88 Total Net Return if expire worthless: 1.1% I initiated this position by selling $270 QQQ puts for $2.20. Closing the position means I made $1.24 - which is a 0.45% return in a month. Not too shabby for idle cash in a down market... But I'll roll my gains another week by collecting an additional $0.68 per contract and reducing my cash-at-risk by ~4%. I'm not sure the best way to account for this kind of transaction - the two legs are very linked, but also could be thought of as separate transactions. For now, I'll show both ways...

Selling $270 QQQ puts expiring 9/30 for $2.20 10% notional position, if executed. Selling some puts on QQQ. This strike price gives me 10% downside protection in exchange for making 0.81% on my cash. Which isn't bad for a month-long trade and with that kind of protection. QQQ is down from ~$400/share at the start of the year - which is ~25% at today's level. To drop another 10% isn't out of the question, but also isn't a given. At my strike price of $270, that's down 32%+ from the high...not a bad time to consider buying.  Selling puts like this when you think the market might drop but you're ready to start building up a position is a great way to make money, protect capital, and get long.

Selling CSCO @ $49.40 Realized gain of $7.83 (18.84%) Selling CSCO on the pop today following earnings. Market is in a somewhat precarious position both from a technical perspective and from a cadence perspective. Volumes are down on the rally and the VIX has fallen to pretty over-extended lows. CSCO specifically has a gap to fill between the earnings announcement today and a quarter ago. I think I can buy back once either the market dust settles or CSCO falls...or both.

Covering QQQ @ $326.48 Realized gain of $6.89 (2.07%) Covering this trade before walking away for lunch and ahead of the Fed Minutes release this afternoon. I'm comfortable with the position and this was a somewhat quick trade, as stated in the SHORT note. No need to let a winner turn ugly.

Shorting QQQ @ $333.37 10% position Shorting QQQ here after the impressive summer rally. We'll see if the rally holds or not - but I'll hedge my long position (still 24% net long) and see what happens. I'm not going to give this one a long leash - if the rally ends, it ends. If it continues, I'm out.

Selling NFLX @ $250.35 Realized gain of $27.52 (12.38%) NFLX has a big gap to fill AND is about to bump into a declining 150-day moving average. Coupled with the possible coming cuts at various tech companies and I'll take my gain and run elsewhere.

Buying CSCO @ $41.57 2% position I've always had a soft spot for value traps - and CSCO tends to be a value trap. However, it's a decent business and a nearly 4% yield - so I'll buy some on today's selloff. There are a lot of high quality companies getting punished - at or below pre-COVID levels. I'm going to start buying this kind of stock. 2 years have passed and many of them are in better positions than back then - offsetting any valuation impact from higher interest rates. It's not quite time to start buying stocks, broadly, but the ones that have gotten beaten down like CSCO deserve a look.

Selling QQQ @ $322.43 Realized loss of $5.62 (1.71%) Apologies - but my stop got hit in yesterday's carnage. I knew the trade was aggressive when I put it on, but the risk/reward was worthwhile. With the VIX spike yesterday, especially into the final hour of trading, it's not time to push bets. Remember, when the VIX spikes, what do I do? Reduce my gross! I'm 39% gross exposed and 34% gross long of equities. Not bad positioning to start upping my exposure when the VIX stops going up. We'll see how the first hour or so of trading goes today before deciding whether to do anything. My inclination is to buy risk assets, but after this loss I might start with a pair trade or two.

Buying QQQ @ $328.05 20% position I've said it before and I'll say it again - but REVERSALS MATTER. The VIX has reversed alongside the broad equity indices. That's time to act! There's a lot of risk out there with earnings reports coming - but I'll push out some chips and see what happens. Buying the Qs here this afternoon with tight stops at the day's low and hopefully grabbing upside on earnings results...

Selling DIA @ $352.75 Realized gain of $4.77 (1.37%) I upped my stop order on this today to ensure I made a profit. I put it below the open in case we got a reversal today - and that happened. So I locked in my gain and can move on. This trade and the QQQ/IWM trades that accompanied it are a lesson in active position management. I entered with clearly defined stop orders and let the positions work. The QQQ stop got hit quickly. The IWM trade turned into a decent profit as I moved up my stop. And I let this one ride a bit as the broad thesis remained intact. I added 24bps to my account value between the 3 trades. I'm now sitting on about 60% cash and am ready for the next great idea. Is the relief rally over? Do bonds rally? Let's figure it out!

Buying NFLX @ $222.83 2% position Let's panic sell Netflix because they lost 200k subscribers out of 200 million! Send shares down 35% in a day! Run for the exits! ............ Or we dispassionately buy shares of the industry leader now trading at a very reasonable 20x P/E. Pick you adventure. I'm probably early here.

Covering TWTR Short at $44.93 Realized gain of $1.05 (2.28%) Dirty day traders need to make some money too! This was a very reactionary trade that needed a short leash. Making 2% in an hour or so is pretty darn good - so I'll take the profit and let the story play out without worrying about it from here. Say I think TWTR is worth $35/share vs. Musks' "offer" of $54.20. That's about equal upside vs. downside (20% each). While the probability of going down might be higher than going up, I don't want to have to babysit the story. Frankly, I don't care about whether Twitter gets taken private by Musk or anybody else.  On to the next trade!

Shorting TWTR @ $45.98 5% position Is Elon Musk really going to take Twitter private at $54.20/share? Remember, the board of Twitter estimated the value of shares to be over $70 less than a year ago! Anytime I can bet against Elon's wild tweeting, I do. He's a visionary, to be sure...but he's very full of sh!t when it comes to non-visionary things.

Selling IWM at $200.37 Realized gain of $1.90 (0.96%) I let the stop breathe a bit, but pushed it tighter today to ensure a gain. The choppy morning trading and inability to hold incremental highs is the rationale for getting aggressive with the stop order. This gain nearly makes up for the loss on QQQ I realized when that stop got hit last week. I'm still long of DIA with a bit of room on that stop of $341.90 vs. the last price of ~$346.xx

Selling WBD @ $27.48 Realized gain of $3.42 (14.21%) This might not be the best representation from a tax-standpoint - but I think this amount of gain best reflects the decision I made to buy shares of T before the spin. I think there's more upside from here - but the huge debt load relative to other streaming services is daunting and fraught with risk. I don't need to play that game...and am more of an income-focused investor. I'm holding a few shares in my real account - as a lottery ticket of sorts - but below the threshold where I'll keep it in this portfolio.

Yesterday, my shares of  AT&T spun out 0.24 shares of WBD for every T share I held. I wrote an estimate of the adjusted cost basis using a logical approach - basically assuming the spinco value on Day 1 reduced my cost basis of AT&T.  (I'd purchased AT&T at $24.06 - so assumed by cost basis was 76% of that, or $17.80. The remaining $6.26 of cost-basis was applied to WBD and scaled up for the share count difference.) I learned today, after all of the dust settled and WBD shares are trading "regular way", that the cost basis of WBD is $0.00 - and my cost basis of T is unchanged. This has pretty important implications for my decision making on what to do with WBD shares. Long story short, I'm not selling in taxable accounts but plan to sell in non-taxable accounts and roll the proceeds back into AT&T. My debate on this platform is: 1) Do I treat the account as taxable? 2) Do I treat the account as non-taxable? 3) Do I continue with my adjusted cost-basis ...

Closing pair trade of long BND vs. short JNK Sell BND @ $77.21 - realized loss of $2.21 (-2.78%) Cover JNK @ $99.36 - realized gain of $3.55 (+3.45%) Total Gain of 0.79% The VIX is at highs of the day after reversing lower early and that's my sign to reduce gross exposure. So I'll take my profit on this trade and move on with life. We will likely see credit spreads widen further - but making about 1% on a fixed-income trade in a week or so is a great gain!

AT&T spun shares of Time Warner Discovery today - 0.24 shares of WBDWV per T share. T weight down from 4% to 3% - cost basis down from $24.06 to $17.80 WBDWV now 1% weight with a cost basis of $24.06 I think I'm doing the math right here on the cost-basis for WBDWV. My original T cost basis was $24.06 - so subtracting the implied value of the spinco based on the split ratio means my T cost basis is now $17.80. That means my unadjusted basis in spinco is $6.26. But it needs to be scaled up by the share count difference - so 6.26/.24 = 24.06 Does that make sense? The value of spinco is set to be equal to pre-spin T - with share number being the adjustment factor, not price? Feels about right given where both shares are trading today relative to Friday and my cost basis estimates. I'm not sure when I can actually trade spinco - and don't know if I'll keep it or dump it to buy back to 4%+ in AT&T. The yield on T is a juicy 5.78% and it's in a MUCH BETTER situati...

Stopped out of QQQ @ $348.69 Realized loss of $4.22 (1.20%) I've still got my IWM and DIA long positions. Had I been paying more attention, I would have let this breathe a bit more - but that's ok. With the VIX turning down from the spike at the open, I'm on the hunt for new longs. It still looks to me that the bear market rally has room to run.