There are a lot of similarities in our portfolios.
My big 5 are the same as yours. Yours make up about 94% of your portfolio, mine make up about 99%.
My trough was also on Mar 16 when I was down 16.0% and you were down 22.8 (more leverage).
As of yesterday though, I was up 28.2% and you were up 16.2%, which surprised me, as you are often up more on the upswings due to the leverage you use. I’m not sure how to explain that. Maybe because I got into ZM earlier in the rise than you did?
Thanks, Saul.
Yes, I noticed that our portfolios converged in their composition earlier in April. In this case, I think we mostly came to similar conclusions and took similar actions (rather than influencing each other). I think we agree that it should work out well.
Yeah, you have done much better than I have. The leverage helps me considerably on the upswings and hurts me more on the downswings.I do it because I think upswings are inevitable in the long run. However, for me to benefit on the upswings, I need to have leverage on the stocks that are going up. I only have options on AYX and CRWD so if those do go up big then my increases will fly up fast. Your ZM position is around twice as large as mine so that has benefitted you greatly. I bought ZM in December and January for $65-70 but I also added a bunch at around $123-125. ZM has helped your returns significantly in 2020, much more than ZM has helped my portfolio.
I’ve had the AYX options since November 2019 so they have been in place all year. I added the CRWD options in March and April when CRWD was between $48 and $60.
To get a better idea of how the leverage affects my portfolio, we can look at the portfolio highs and lows:
2/18/2020: +40.7% YTD <<< 2020 high
3/16/2020: -22.8% YTD <<< 2020 low
7/26/2020: +100.0% YTD <<< 2019 high
10/22/2020: +24.8% YTD <<< 2019 trough after peak
I think that if you were to look back at your 2019 high and the trough after that high, you would probably find that your 2019 high (as a percentage of your 2019 start) was lower than mine and your trough after that high was not as deep as mine.
Similarly, I would guess that your 2020 YTD peak (as a percentage of your 2020 start) was lower than mine. Your 2020 trough was -16% while mine was -23% so my drop was deep as we would expect.
Any other difference is returns are due to you having been better stock picker.
So the leverage adds higher highs and lower lows. If the market and our stocks are expected to go up in the long run, why wouldn’t I want to have higher highs and accept lower lows? I only need to be careful of 2 things. First, I need to make sure that my options have enough time before expiration to avoid getting stuck in a prolonged slump. The risk is not zero but it’s a risk I monitor and accept. Second, I need to make sure that the total portfolio value stays high enough relative to any margin that is utilized by selling put options. I monitor this carefully and I limit my use of short put options. Also, I don’t always use short put options.
Chris