Wrong, But Still a Big Win

by JDH on November 7, 2020

Last week I explained how to bet on a Trump win, based on my assumption that Trump would win the election, easily.  Needless to say, there was no landslide win for either side.  As I write this, there was no win for anyone, yet.  However, it was still a very profitable week.  Here’s the play by play:

On the assumption of a Trump win, a put my money on JP Morgan, Exxon Mobil, the S&P 500, and the Nasdaq.  Specifically, I did the following:

On October 30 (the Friday before the election) I bought a few shares of Exxon Mobil for $32.45.  On November 3, election day, I sold them for $33.60.  I figured “hey, I have a tiny profit, I’ll take it).  By Friday November 5 it was trading under $33, so that was a good call.

For everything else, I played options.

On October 28 I bought QQQ calls, $280 strike, expiring on November 6.  Paid $4.60 for them.  I realized this was a high risk play, so the next day, October 29, I sold them for $4.94, and made a tiny profit.

I realized that a November 6 expiry date might be cutting it a bit close, so I bought the QQQ 280 strike calls, but expiring a week later, on November 13, as follows:

  • on October 29 I bought 10 contracts for $8.15 and 10 contracts for $8.00
  • On October 30 I bought 10 contracts for $3.98, 10 for $5.33, and 20 for $4.10.
  • I finished my buying the day of the election, November 3, buying 20 contracts for $5.16

Feeling slightly risk averse, I sold the November 13 QQQ $285 calls on October 30 (30 contracts) for around $2.75.  On November 3 I was feeling confident, so I closed out the cover by buying them back for $1.93, again for a small profit.

That left me holding 80 contracts.

On November 4, the market opened up, so I sold them for $9.00.  80 contracts, nice profit.

I also played the SPX.  On October 30 I bought the $350 calls, expiring on November 13, for 68 cents, and sold them on November 3, election day, for $2.20.  Big win.

I also bought the November 6 expiring SPY calls, $350 strike, on November 3 for around 90 cents, and sold them on November 4 for prices between $1.20 and $1.77.  Another nice profit.

My biggest profit was JP Morgan.  On October 30 I bought the November 13 $100 calls for $2.20, and sold them the day after the election for $5.75.  Very nice.

All in all, lots of transactions, all winners.

What did I learn?

If I had waited another day to sell I would have doubled my profit.  If I had waited two more days more profit would have been lower.  So, I’m fine with when I sold.

Also, I had targets in mind, but when I saw a profit staring me in the face, I took it.  This was high risk speculating, not investing, so to hold on for the top price would be crazy.  These are options.  They expire.  They are a wasting asset.  If there is a profit, take it, and I did.

What happens next?  I have no idea (clearly).  I am now holding a lot of cash, my highest cash position of the year, and I’m fine with that.  Let’s see how the world unfolds before determining next steps.  I’m guessing the next step involves gold, which appears ready to run, but I’m well positioned there already, so I’m fine watching and waiting, for now.

The weather here in Ontario is great, so off to enjoy it.  See you next week.