Here’s the transcript to this week’s Live Q&A chat. Join me next Wednesday at 2pm EST at https://tradingwithcody.com/chat or send me an email with your question at support@tradingwithcody.com.
Let’s rock n roll, baby.
Q. Cody, what percentage of your trading portfolio is currently long? Cash? Short?
A. As you know, I always include the disclaimer that you can’t really go off of my own percentage allocations because my income and real estate assets are quite high relative to my stock assets, so I think such percentage discussions can be misleading. But my rough allocation in the stock portfolios right now is: 50% long, 20% short, 30% cash (recall that I sent in more cash a couple weeks ago, which again underscores how misleading my percentage allocations would have been to most subscribers before that money was sent in as my cash % would have been misleadingly lower.
I know Cody. Just want to see where you stand now as fiscal cliff Gyrations are now with us until it gets passed, fails and we fall off cliff and final resolution.
Q. Cody, no questions today, just a “Thank you” for the great service. I really appreciate the tips, the daily contacts and the weekly chats and availability of the other investors who are navigating their way through the shoals. I think I’m learning some good stuff here.
A. Thanks! We work very hard to create a great product and a value-added community and frankly, I’m very proud of this site and the people we have on it. I too learn a lot from all of you and from providing the service. Thanks for your business!
Q. I second that. Thanks Cody.
A. Thanks for the kind words and all the referrals you’ve sent along Steve. We’ve had some great feedback from them already. Did the rest of you see this incredibly kind and out-of-the-blue article Steve wrote about our community here at TradingWithCody.com? A Hearty Recommendation: Cody Willard
Q. Cody (and friends)… I’m following your lead and trimming 1/10th of my AAPL options. However, I’m confused on the best strategy. I have a range of April 2013 options. My 660s show a 100%+ gain, however my 690s are down 50%. I also have some that are about even. Given the expiration dates are equal, do you typically sell the higher price at a loss or do you lock in profit on the lower price option? I know you can’t advise me on what to do, I’m just looking to understand what your playbook would tell you to do in this situation. Thanks.
A. The short answer when considering your gains and losses as part what instruments to sell is that unless there’s an absolutely HUGE tax benefit to selling one set or the other, then you should focus 100% on what set of calls have the best risk/reward from here. That is, the only thing that matters is where those options are likely headed, not where they’ve been over the time that you’ve owned them. In the scenario you laid out, with several different strike prices with the same expiration, I’d probably look at selling the lowest price strike calls first (in your case, the $660s) because they have more potential downside with the higher value they currently have and the higher priced calls will still give you huge upside if the stock can rally back above their strike prices. Good luck!
Q. Cody, I am a new member. Please help me if I should buy FB stock or options at this point or can I still look at AAPL options? Thanks!
A. This is from my book, Everything You Need to Know About Investing: “Q: How do you get started with your first trade? How much of each stock do I buy when I start building my portfolio? A: You want to try to have your cake and eat it too — start off by putting 1/3 as much money as you want to eventually invest into the top 5 or 6 stocks that you have done your homework on and want to invest in and put some more in after a few weeks in whatever stocks are rated highest at that point and so on. Use scales and don’t rush in. Always have plenty of cash and/or income to be able to sleep at night no matter what happens to the markets.” You can read the whole book by clicking here. Just be VERY careful with your options trading if you’re not very experienced in it. You can always just buy common stock tranches when you see me buy calls.
Q. Hello Cody, I am a big Apple fan, as well as investor. I have been following your blog for the past few months and I wanted to thank you for the options play for April 2013 (CALL AAPL 660) which resulted in a profit of over 125% in less than 3 weeks. I sold this position yesterday. I am still long AAPL, but unlike you I prefer vertical spreads instead of naked calls or stock. I wanted to ask you how come every time you trim AAPL or start buying, almost immediately the stock price reacts? It is quite curious, since I know you are not big on technical analysis. Maybe you have millions of subscribers that follow your advice? I also own FB on your recommendation and have been patiently waiting for it to go back up (bought at 27). Are the recent positive news on the stock a possibility for it to fall back to the low 20s (contrarian), and if it does go down, should I look for some options?
A. Congrats on the huge homerun on the AAPL calls! Those are the types of trades to remember for a lifetime rather than to expect as normal. As for the answer to why AAPL might move down when I trim and up when I buy is probably more to do with having owned it and traded it since $7 a share using a strategy of scaling in on weakness and/or loading up on AAPL when it crashes and then trimming when it feels like it’ll never go down again for any reason ever. I do have about a million readers a month on my various outlets, but I don’t think my followers’ scaling in and out of the stock along with me are probably moving enough shares to truly impact AAPL’s near-term movements. I’m sticking with most of my FB position, but as I wrote in Trade Alert – More scaling, but don’t be a daredevil, I bought calls when the stock was below $19 a share a couple weeks ago and I trimmed some of those back earlier this week when the stock popped to above $25-26 a share. It certainly could fall back to the low $20s (or lower) and I’d probably again be a buyer of some long-dated calls if it does.
Q. Cody, Any of your sources speaking about Apple sales so far and going into the holidays? Sales looking good?
A. I got no sources that have any scoops on sales trends at Apple these days, not that I’ve ever had “inside sources” on such trends other than just putting together my own analysis using every thing I touch, see, read and hear. The rule of large numbers makes it harder for people to know how the quarter’s numbers are truly trending overall anyway. The biggest hurdle for AAPL to hit its numbers next quarter is probably supply as much as it is demand.
Q. I would like to buy some AAPL options. Can I pull the trigger now?
A. As you know I actually sold some of my AAPL calls yesterday as the stock has run nearly $80 since my last tranche buy of calls. That said, AAPL’s still my biggest position because I think it’s going higher in coming months and years. To get started if you don’t own any AAPL calls (or if you don’t feel like you own enough AAPL in general), I’d start with a tranche buy of about 1/5 or so as much capital as you plan on putting into that instrument now and then slowly scale into more over coming weeks. Don’t go crazy on options though. Use much more common stock than options in general, ok?
Q. Why is Google much stronger than Apple last 2 days?
A. I always tell people that it’s pretty much impossible to rationally pinpoint a reason for one stock to move a certain way over a one or two day period, as hundreds of thousands of people and money managers trade it for their own personal reasons.
Q. Haven’t seen you too fired up about GOOG calls lately. Any reason, or are you just waiting to see what happens? That sucker was definitely in a “high” and has been in a “low” for about a month.
A. I still have a good-sized position in GOOG but I don’t think I’ve bought any of it back since we trimmed it back near its highs. I don’t have a good reason for that, the trigger finger just isn’t itchy on GOOG for me right now.
Q. Whew, quite a few questions already in the hopper… Here are mine: 1. Is there a housing play we should shoot for, such as Home Depot or Lowes? Curious to hear your thoughts… 2. If you’re right about AMZN’s current/projected value and the trends for Wal-Mart, would the latter be a potential for shorting or puts at some mark? Based on that research, should we buy some longer-dated AMZN calls? Thank you for those timely tips on AAPL calls, and the FB calls worked out great. I sold some Jan 2014 FB calls at 30 bucks for a nice profit as well. Cheers.
A. 1. I’m not bullish on housing as a whole. Real estate, especially land in places like here in NM where you can get it for 50-70% off where it was selling in 2006-7, is very high on my list of assets and recommendations. If housing comes back and HD/LOW’s stocks rally big over the next couple years, I’d expect most of our revolutionary, high-beta longs to be up much more than those two “housing derivative” plays anyway. 2. Wal-Mart is such a powerhouse and profit engine that I’d be leery about shorting it just about ever. I generally stick with shorting crappy, welfare-dependent companies like our huge homeruns in the Apollo, LPS, AONE and other such plays.
And to finish, Wal-Mart is a huge welfare recipient via targeted tax subsidies from local, county, state and federal governments around the country. And also, congrats on the FB trade! Nicely done.
Q. I’m curious if DDD still has a flag out for you?
A. I just don’t like accounting questions and the flags raised in those DDD reports were enough for my non-forensic-accounting risk/reward analysis to get the hell out and not look back. Feet to fire, I’d expect DDD still has upside even if it is a fraud (which I’m not saying it is) before it would crash. I don’t want to risk my money any time I’ve got questions about the numbers.
Q. Hi Cody. Do you have any updated thoughts on DDD since divesting a couple of weeks ago? Has the accounting issue been resolved as being a non issue?
A. Did you see my answer about the DDD accounting questions above? I’m likely done with that stock period.
Q. What is your opinion on GMCR? Can I buy the stock now or options?
A. When the great fraud-uncovering shorts like David Einhorn says that GMCR’s numbers can’t be all that they are touted to be, I’d rather be on the short side of the stock and/or look at buying long-dated puts on the name.
Q. Is EXPE a buy now?
A. I’ve not done any work on EXPE in a while, so I’ve go no edge for ya. Sorry.
Q. Your opinion on PCLN?
A. Please search the site for PCLN and you’ll see why it’s one of the few stocks that I refuse to trade because I’ve just never gotten in sync with it right, I guess.
Q. Cody, when are you coming out with a mobile app for Trading with Cody?
A. Good question. We’ve tried building a mobile app ourselves, and the feedback from you guys was not positive. I need to get serious about hiring some developers to do a professional job and get a TradingWithCody app into the app stores asap. Thanks for asking and forcing me to get on it.
It would be great to see a new TWC App as I spend most of my time during the day on mobile devices. Thanks!
Q. Cody you have not posted your portfolio analysis in the last couples of weeks. I mean, that analysis in which you rank your positions. Can you do that this week?
A. Yes, between travelling back and forth to Philly and being sick and there being a Txgiving holiday, I guess we forget to get it sent out. Will send it out Friday.
Ok, that’s good! Thanks a lot I really appreciate. Best.
Okay folks, that’s another wrap. Don’t forget to give the audio guys back your microphone and earpiece before leaving the set.
