Virtual Portfolios

Virtual Value Portfolio

The Market Shadows Virtual Value Portfolio was started on October 26, 2012 with a balance of $100,000. We opened 23 positions, with approximately $3,000 allocated to each one.

Guidelines:

  • Initial positions are opened with $3,000. Occasionally, we purchase another $2,000 worth of stock to increase our position.
  • The maximum invested in a single stock is approximately $5,000, although market action may increase the value of the position. This keeps our individual stock allocations to less than 5% of our portfolio’s total value. (Our total portfolio value is now greater than $100,000, so new positions comprise less than a 3% allocation.)
  • Changes to the portfolio are first posted on the website, and later reviewed in the Market Shadows newsletter. Check here for notice of portfolio changes.

Please check the Value Investing Section for Market Shadow’s latest actions. For current positions and our track record, visit the Virtual Value Portfolio page

 

Virtual Put Selling Portfolio

Check the Virtual Put Selling Portfolio for positions and latest actions. 

Selling (or “writing”) puts is a strategy that uses options to take a bullish position.

When we sell a put, we are agreeing to buy 100 shares of a particular (underlying) stock at a set price (strike price) through a set expiration date, if the owner (buyer) of the option asks us to.

“Premium” is the term that describes the per share price that we received upon the sale of the put. Because each put contract represents 100 shares of stock, the actual dollars received would be 100 times the premium per share.

Once we’ve sold a put, our best case scenario occurs if the underlying stock closes at or above the strike price on the option’s expiration date. In this case, the obligation to buy gets extinguished, and the premium we collected is 100% profit.

If the underlying stock closes below the strike price at expiration, the put would be exercised. If we did nothing, we would own 100 shares per contract at a net cost of the strike price minus the per share premium initially received. That amount is the “break-even” price.

Why sell a put?

  • Sale of put premium generates immediate income.
  • ‘If Put’ prices are lower than market prices at the trade’s inception because the premium for selling the put is retained by the seller – i.e., there’s a discount on the shares.
  • Due to the discount, put writers have a built-in ‘margin of safety’ that an outright stock purchase doesn’t provide.
%d bloggers like this: