Financial Letter - August 25th, 2019
238 Issue (since 01/24/2015)
CKL Inc. offers presently to his customers a portfolio based essentially on performance (0.9/10): the 0.9 indicates the annual administrative % cost of management; the 10 represents the 10% of management fees on the gains above the high-water mark. The portfolio is made by only one ETF US plus options strategies of the US market. This style of portfolio requires a capital of 250,000US$ or equivalent in CAD and the level 4 in options negotiation.
It is now available on Kindle and on other electronic reading platforms in French a short manual on the Day Trading. The title is: « Le ‘Day Trading’ ou La négociation sur séance (1) », written by Charles K. Langford and Audrey Parent Thibeault.
It is available on Kindle and on similar electronic reading platforms, in French, a short manual on the put/call ratio. The title is: « L’antagonisme entre les options put et call: l’analyse du put/call ratio », written by Charles K. Langford and Laurence P. Darveau.
The book “L’alchimie qui crée l’or – Le chasseur de tendances boursières II” is online (Amazon.ca and the title) on Kindle. It is in French. The book is a “bestseller” in the category business and finance. It's also available on all other readers platforms (Kobo, iBook, etc.).
A second book is available on the reading software like Kindle, Kobo, iBook, etc. Its title is “The Trend Hunter” and it is in English.
The website of Charles K. Langford Inc. is : www.charlesklangford.com
Market Risk (Systematic Risk)
The market ((S&P500 Index and its derivatives) ended the week lower at 2,847.11 points compared to the previous week at 2,888.68 points, down 1.4%. In August the index is down 4.5% and, since the high of July 26, it is down 6.0%. However, the index is up 14% since the beginning of the year.
The reasons are the even more strong commercial dispute between US and China.
In our accounts, where permitted, we did the following strategy. (CKL0522)
Week of August 19th, 2019
Since the market is very volatile we did an option strategy that profits form the theta. We implemented an asymmetrical Condor strategy with the SPY. Our prediction was that the SPY would stay between 287 and 295 during the week, We used Long Puts (284) and Long Calls (297) as our parachutes in case the market rose and fell substantially.
The following trades were done :
- 5 Short Put 2019/08/20 (287) @ 0.90 August 20, 2019
- 5 Long Put 2019/08/20 (284) @ 0.46 August 20, 2019 (Parachute)
- 5 Short Call 2019/08/20 (295) @ 0.49 August 20, 2019
- 5 Short Call 2019/08/20 (297) @ 0.16 August 20, 2019 (Parachute)
- Repurchase of short Put 2019/08/20 (287) @ 0.06 August 23, 2019
- Sale of Long Put 2019/08/20 (284) @ 0.05 August 23, 2019
- Repurchase of short Call 2019/08/20 (295) @ 0.03 August 23, 2019
- Sale of Long Call 2019/08/20 (297) @ 0.01 August 23, 2019
Profit of the strategy
Short Put: +0.90 – 0.06 = 0.86
Long Put: -0.46 + 0.05 = -0.41
Short Call: +0.49 – 0.03 = 0.46
Long Call: -0.16 + 0.01 = -0.15
Profit = (0.86-0.41+0.46-0.15) 0.76 * 5 * 100 = 380$
Total profit of Condor per lot of 5 options = 380 USD$ in three days.
The strategy is done at credit. This means at zero cost excluding trading fees. A margin account is required.
The following chart shows the market is always in the bull trend but weakened by the inablity to form a “W” (horizontal trend lines) and by the incomplete bearish right triangle (diagonal resistance line and horizontal support line).
The Langford Management
Presently our investments are in ETFs and ETN offering a high return, with a dividend yield between 5 to 10 % per year, at pro rata temporis, monthly. The market has a positive bias. We don’t think for the moment to change the allocation because also the products with higher returns are also bullish.
In the USD accounts, still we have cash in the form of FLOT, MINT, NEAR. In the CAD accounts, it is PSA or the equivalents. In the average, our portfolios are invested 60% in revenue and 40% in directivity.
In some, more aggressive accounts we have increased the capital synthetically with option strategies to profit of the upward momentum. In accounts that allow futures markets, we have futures contracts in long position on stock indexes.
Our portfolio management is always ad hoc, for each client. But also, we offer now five standardized mini-portfolios for clients interested:
- Bullish aggressive
- A contrarian as a hedge or profit
- Bullish and dividend oriented
- Against inflation
- Bullish, aggressive on non-traditional assets.
(The portfolio management fees of Charles K. Langford Inc. is 0.9% of assets, per year (equivalent to $900 per $100,000). The capital under management is invested exclusively in ETF, ETN and options)
Among a group of selected stocks and ETFs, this week we have middle- and long-term buy signals on the following stocks and ETFs.
TREND FOLLOWING
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Middle-term bullish |
Long-term bullish |
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Canadian Market |
BWR.V |
GOT.V |
About Options
Investors that believe the current Canadian market offers interesting bullish opportunities, they can buy the call GUD (stock closed Friday at $7.68) October18/6.00 @ $1.80 whose delta is 0.95 and gamma 0.09 (accelerator of delta). This call will offer a profit of 95% of the stock increase at a cost that is about 4 times lower than the present price. If the stock goes down, the maximum loss is the premium.