A Different Kind Of Market
Since last week’s election, we’ve been in a euphoric market for crypto and other “Trump trades”, i.e., names that are expected to benefit from President-Elect Trump returning to the White House. This market calls for a different kind of trading. Valuation and other fundamental metrics aren’t going to help us here.
But Portfolio Armor’s Top Ten Names might. That—along with what our understanding of what a “Trump trade” is, is what we're betting on here.
Bigger And Faster Than We Expected
As we mentioned in our previous post, last Monday, we opened a call spread on Tesla, Inc. (TSLA), which was both one of our system’s top ten names, and a “Trump trade”, given Elon Musk’s alliance with Trump. Our bet was on the stock hitting $350 by next December. This was the "less-contrarian long term trade" mentioned below.
As it happened, Tesla hit $350 on Monday.
Clearly, we weren’t bullish enough.
Leaving Money On The Table
Because the Tesla trade was a call spread, it wasn’t feasible to take profits on it on Monday. However, we had two 200% exits on straight call trades, but it still felt like leaving money on the table. Plus, on Tuesday, we had an exit on a call spread expiring this week. That call spread was on Sea, Ltd (SE), which is sort of tangentially a Trump trade in that it's a Greater China stock (based in Singapore) and positioned to benefit from the big stimulus that market strategists expect China will be forced to implement to counter Trump 2.0 tariffs.
Options
Call spread on Sea, Ltd (SE 0.00%↑). Entered at a net debit of $1.64 on 10/7/2024; exited at a net credit of $4.10 on 11/12/2024. Profit: 150%.
Calls on Robinhood Markets (HOOD 3.02%↑). Entered at $2.30 on 10/31/2024; exited (half) at $7 on 11/11/2024. Profit: 204%.
Calls on Bit Digital (BTBT 5.43%↑). Entered at $0.75 on 9/13/2024; partial exit on 11/11/2024 at $2.30. Profit: 207%.
Getting More Aggressive On Tuesday
On Monday night, there were four “Trump trades” in our daily top ten names. On Tuesday, we placed bullish bets on all of them. This time, we used options expiring this year, so we’ll be able to take profits sooner. Given the rapid advance of stocks like Tesla though, you're probably wondering if this is a bubble. Let's address that.
What If This Is A Bubble?
It most certainly is a bubble, but bubbles are when you can make the most money in short periods of time. The key is to get out before it bursts. If I had to guess how long this bubble would last, I’d say until about the end of the year.
Between now and then, traders are free to imagine all sorts of positive impacts from a Trump 2.0 administration—maybe they’ll start a Strategic Bitcoin Reserve? And so on. Once Trump enters the White House in late January, those hopes will meet some resistance and Trump trades may need to be repriced.
So, we are going to try to take profits before the end of the year.
Maybe This Isn’t For You
Maybe you would rather stay safe. That’s fine; you can download our iPhone hedging app by clicking on the QR code below or aiming your iPhone camera at it.
But If You Want To Swing For The Fences…
We are keeping an eye out for more Trump trades for later this week. If you would like a heads up when we place them, feel free to subscribe to the Portfolio Armor trading Substack/occasional email list below.
