GauchoChris portfolio 11/20/17

GauchoChris Portfolio Update 11/21/17

My last portfolio update was on 9/30/17:…

I was in 12 stocks at that time. I have since made a number of changes. Below is a comparison of my portfolio:

                 9/30/17	        11/20/17	change
cash		  4.3%		  2.5%		-
SHOP		 20.9% (o)	 17.7% (o)	+ through options
NVDA		 15.1% (o)	 14.6% (o)
SQ		 10.3% (o)	 13.2% (o)
ANET		 10.4% (o)	 11.9% (o)	+ shares and options
TLND		  8.8%		  8.2%		+ shares
NTNX		  6.8% (o)	  7.3% (o)
LGIH		  6.6%		  0%		sold all
TWLO		  5.0%		  0%		sold all
HUBS		  4.6%		  8.3%		+++ shares
JUNO		  3.3%		  3.5%
WIX		  3.3%		  6.7%		+++ shares
NKTR		  1.9%		  3.0%
UBNT		  0% (o)	  0% (o)	rolled short puts forward
SPLK		  0% (o)	  0%		closed long call position

The main changes to the portfolio were the following:

Sold all LGIH and TWLO shares to buy a lot more HUBS and WIX after HUBS and WIX reported solid Q3 financial results but their stock price changes post-earnings didn’t reflect the good results and the future potential. I saw value there so I added substantially. I sold TWLO because the stock continues to be a battle ground stock and I’m less certain about the 1-3 quarter outlook. I’m still tracking TWLO for possible reentry but will probably wait to see how the Q4 results turn out. I sold LGIH because I see better appreciation potential in other stocks (namely WIX, HUBS, and ANET….plus my other 7 holdings); also, I decided that I didn’t want to be in a stock that is not in what I consider to be a secular growth opportunity.

SHOP: I had sold 40% of my shares immediately after the Andrew Left short attack. I repurchased many of those (but not all of those shares) at lower prices in the days after the short attack. I have added substantially to my SHOP position by buying long term call options. In addition, I sold deep in the money puts ($130 strike price) which I continued to roll forward every 2 weeks or so; I intend to continue rolling the SHOP short puts forward until they expire worthless. I am long the following long calls Jan2019 $100 calls, Jan2020 $100 calls, and Jan2020 $120 calls. For each SHOP share that I own, I also own about 0.65 call option share equivalents so my actually SHOP position and upside is substantially greater than my 17.7% stock position. I was very pleased with the Sept quarter that SHOP reported. The rapid growth is not slowing. SHOP continues to give merchants good reason to use SHOP (UPS and DHL deals are but one example). SHOP is just beginning to focus on targeting large merchants which I think give it a way to continue its rapid growth. Overall, I still see SHOP as a possible 10x return investment from here; yes, I believe SHOP can become a $100B market cap company. It’s also a secular growth opportunity.

NVDA: I did not buy or sell NVDA shares. I did trade a bunch of options for a trade around the last earnings. These trades resulted in since trading returns. I see no reason to change my NVDA allocation at this time. I wrote my thoughts most recently here:…

NVDA is an exception for my portfolio because all of my other positions are companies that I believe can grow 10x from current prices (although SQ may now be a second exception—see below). With NVDA, I just don’t know if a $1 trillion market cap is achievable. I continue to hold because of the very rapid growth in multiple target markets and because I believe that AI is rapidly changing the world (and the world is rapidly adopting it) and NVDA is at the epicenter of this.

SQ: SQ has moved slightly ahead of ANET in my portfolio allocation. This is due solely to stock price movements of the two stocks. SQ has had and continues on a nice run upwards. I have not traded any SQ shares or options since I last posted my portfolio allocations. I was very pleased with the Q3 financial results and the company’s progress. Some things that stood out for me on the earnings call is that SQ is increasingly adding large sellers as evidenced by the changing mix from small sellers (<$150K) to larger sellers. One very important point is that even with the larger sellers, SQ reported that 80% of them are self-onboarding!!! SQ continues to add customers AUTOMATICALLY!! Also, SQ is adding more and more capabilities making their customers more happy and also more dependent on SQ; SQ’s offering is very sticky. Also, SQ’s recurring revenue continued to grow at very rapidly (84.4%). Despite the run-up, I don’t intend on selling any shares as I continue to believe in their secular growth prospects. Also, I believe that SQ can easily become a $50B company. When I bought at $17 and in the low $20s, I believe SQ could be a 10x investment. Now, it is a $17B company. Can it become a $170B company? I’m not as sure as I was it becoming a $50B company. I believe it can grow 3x from here; as its market cap grows I think its 10x potential is reduced. Perhaps, I’ll consider trimming when its market cap grows to $30B or so. I had sold puts on SQ to buy Jan2019 $20 calls and Jan2019 $30 calls. These puts have expired worthless. For each share of SQ that I own, I also control about 0.3 call option share equivalents giving me more upside than my 13.2% allocation in stock.

ANET: I added some share to ANET in the past 2 months. I also increased my long term position by adding Jan2020 $250 calls financed by selling Dec2017 puts. ANET continued to execute. They seem to be rapidly taking market share from CSCO in routers and switches as evidenced by ANET’s and CSCO’s Q3 results. In addition, the data center markets are rapidly growing. Revenue continues to grow above 50% y/y and 1 yr EPS is growing at 67%!! I don’t see this growth slowing and so ANET is one of the stocks that I own that I would be comfortable adding to now despite it’s recent 20% share price appreciation. In addition to my shares, I own Jan2019 $200 calls and Jan2020 $250 calls. I am also short the Dec2017 $260 puts which I expect to keep rolling forward until they expire worthless. For each share of ANET that I own, I also control about 0.4 call option share equivalents giving me a larger position and more upside than what is reflected in my 11.9% long stock position.

HUBS: HUBS is now my 5th largest position, slightly higher than my TLND position. Growth continues a rapid clip. EPS is also improving. I liked the Q3 results and continue to really like the prospects. I added substantially to my position after the Q3 earnings.

TLND: I liked the Q3 results and see no reason to sell. TLND is one of my smaller companies at less than $2B in market cap. It is definitely a secular growth company as more and more companies will try to make use of more and more data. I think it can easily increase to a $10B company in the coming few years. I took the opportunity to add a bit last week when the investors sold some of their shares into the open market. There was no dilution and the shares were trading only around 100k shares per day so a 2.75M share (27.5 times the average daily volume) infusion into the open market was probably going to cause the share price to drop. It dropped 10% and I took the opportunity to add some.

NTNX: I have not changed my position since the end of September. I wrote about NTNX several months ago and at that time I considered it to be 50-70% undervalued (so I thought a 2-3x increase would be justified). Since then the shares have risen by about 25% so I still think it can double. I own a 7.3% position. I also own the Jan2020 $25 calls and control about 0.6 call option share equivalents for each share in stock that I own. I had financed the call options purchase by selling $30 and $35 short puts. I recently repurchased the $30 short puts and am still short the $35 puts. NTNX will report their results for the quarter ending in October. I am currently considering a trade around the result.

WIX: I thought that WIX had a very strong Q3. The company continues to execute and growth is continuing as before. Prior to Q3 result, I was on the fence about WIX. I thought that my money might be better served in some of my other investments. After the result and the share price drop, I decided instead to add substantially to my WIX position. I more than doubled my position and I will continue to watch the progress.

JUNO and NKTR: JUNO and NKTR are my 2 smallest positions. They are both biotechs with drugs in development for cancer (I-O therapies). I bought them after I sold KITE after the acquisition by GILD. Both stocks are not driven by earnings or by revenue growth but by clinical results progress for their potential drugs in their pipeline. Both also have the potential to be acquired if their drugs continue to show progress in clinical trials. I did not add to either position since Sept 30 so the change in allocation is solely due to share price changes. NKTR has been on a tear recently (up about 120% since my purchases less than 3 months ago) after providing very positive clinical results for their I-O pipeline drugs. NKTR also has a pain drug that if approved could become a blockbuster.

In summary, I have reduced my number of positions from 12 to 10. I am currently happy with my allocations and my concentrated portfolio. I believe that I am in stocks that offer me the best possible upside from here. I realize that this concentrated portfolio requires close watching. In addition, I had taken some additional risk by selling in the money short term put positions with near term expirations to finance the purchase of long term calls. This approach has really paid off for me as most of the short put positions are expired worthless while the long term upside from the calls remains in tact.



Hi Chris,

Thanks for sharing your portfolio and strategy with us.

Very creative strategy!


Your invisible soldiers are really working hard for you this year…lol

Chris, Do you care to share your YTD portfolio returns with the rest of us?

Do you care to share your YTD portfolio returns with the rest of us?

I don’t track my returns anymore, and I’m not sure why my returns matter to anyone…you can see the stocks that I’m in and see how those stocks have performed and are performing. I mainly look at my overall portfolio value. I do know that I’ve had quite a run since 9/20/17 and in the past 4 trading days alone my portfolio is up about 10%!!

To give you an indication, on 9/30/17 my portfolio needed a 39.8% gain to reach my end of 2014 balance and a 90.2% gain to reach the August 2015 peak.

After today’s market close, my portfolio only (still) needs an 11.0% gain to reach my end of 2014 balance and a 50.9% gain to reach my August 2015 peak.


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Chris, you are long a number of options. I love your positions. I have often thought as an option seller that a positive theta ($ earned via time decay/day) might be a more powerful force than compounding interest. This is why short strangles make money even when direction is wrong. Can you comment on the theta of your portfolio? It seems it must be negative theta, which is swimming upstream and it means your port needs to be directionally correct or returns will suffer greatly.

Nice summary, very interesting to read


I have often thought as an option seller that a positive theta ($ earned via time decay/day) might be a more powerful force than compounding interest. This is why short strangles make money even when direction is wrong. Can you comment on the theta of your portfolio? It seems it must be negative theta, which is swimming upstream and it means your port needs to be directionally correct or returns will suffer greatly.

Hi Gator,

You are are taking about time decay of my options positions. Yes, a seller of options takes advantage of the time decay because he is collecting a premium on the options and since options have a time value the seller makes money as the options decay.

The way that I have been doing these trades is by selling in-the-money-short term puts and using the proceeds to buy leaps (near-the money calls with expirations that are far out usually 14 months or longer…as long as 2+ years). As you know, the rate of time decay is very slow when the options have a lot of time left on them and the time decay accelerated rapidly as the expiration date approaches. Time decay is VERY rapid during the last 2 weeks before expiration.

I sell puts that are usually a few days or up to a couple of months before expiration. Remember, that I am selling in-the-money puts so the time value is a lot lower on the puts for 2 reasons: options that are in-the-money have lower time value and options that are closer to expiration also have lower time value. Therefore, you would think that I am at a disadvantage by using my options tactic. Yes, if you talk to an options trader he would probably say that my approach is not too efficient and an options trader would probably prefer a tactic that takes better advantage of time value and volatility. Such a trader is really focused on options pricing. I am more focused on what I think the underlying stock is going to do and don’t care so much if the options prices are a “good deal”. If I think the stock price is going to move a certain amount by a certain date then I will do the trade based primarily on that. An options trader wouldn’t do this trade because he is focused on delta, theta, and veta with little regard for the fundamentals of the underlying.

If I am correct about the timing and movement (direction and magnitude) of the stock then I end up with the puts expired and the calls remaining in my portfolio. I will add that sometimes I am right about the direction but the magnitude of the stock price is smaller than I expected. In such a case, I can keep rolling the puts forward on month. This allows me then to harvest some time value and make extra money from each roll forward. To this I add the if the short puts remain deep in the money I may need to roll forward with a very slight credit or an even trade.

I calculate the time value of each my option positions on my portfolio every Friday by taking the midpoint of the bid/ask. Since my strategy has been working very well, I currently have A LOT more long call positions and A LOT less short put positions in my portfolio. My long cause have position time value and my short puts have negative time value in terms of dollar. Here is how my portfolio currently breaks down:

Long stock positions: 90.3% 
Options in-the-money:  5.6%
Options time value:    4.1%
TOTAL                100.0%

The above time value of the options positions was last calculated last Friday so it will be a little different (but not much different) after I recalculate after the market close today.