Today has provided an opportunity for those dip buyers to get into some of my favorite stocks. Here’s an updated look at what is in my portfolio and it’s percentage of allocation.
A note on some of my holdings:
On my DRIP holding, I bought a put option contract that expires 3/18/22 at $7 strike price.
On USO, I am holding two different call options. The first is 3/18/22 expiry at $55 strike price. The second is 4/14/22 expiry at $60 strike price.
AA and FCX are new holdings for me. I picked them both up within the last few days. I’m a big believer in the aluminum story. I analyzed the few companies that processed or extracted aluminum and Constellium was the one with the most momentum. However, after the 15%+ day that Alcoa had, I knew that was the one I wanted to hold.
I am running a very low cash balance. I haven’t had it this low in a long time. I typically hold quite a bit in cash to take advantage of down days and other opportunities.
Ramaco has taken over my portfolio. I love this coal stock but it has gotten to be huge. I’m looking to trim it down and take some profits.
I’m anticipating getting into gold and silver again soon. I expect them to make big moves like we’ve seen in the other commodities. This is another reason I need to trim METC and raise some cash.
The good news for uranium just won’t stop, can’t stop. The Financial Times has a new article out (behind paywall, sorry) about the UK’s push towards a nuclear future. The UK has a “net zero” goal by 2050. This means they want to reach net zero carbon emissions by that date. UK ministers are planning on putting nuclear power “at the heart of Britain’s strategy”. Ministers are also looking to build smaller modular reactors. This is similar to the story that came out of France. More of these smaller plants will be built as opposed to one or two large plants. This is long-term bullish for uranium. Like I said yesterday, we are in the very early stages of what could turn out to be the biggest bull run in uranium ever.
On the fossil fuel front, oil has been a steady riser. At the beginning of the Biden administration, they shut down pipeline developments and curtailed drilling on federal lands. Now they are getting desperate to negotiate the oil price back down. First Biden has begged OPEC+ to drill more. Now he is begging the US oil industry for help. None of this makes any sense if you look back at the end of Trump’s administration. The US was energy independent as Trump left office. Oil was plentiful and cheap. By badmouthing fracking and shutting down new leases on federal land, we’ve suddenly become dependent on outside sources for oil. It’s like we are repeating all the mistakes of the 1970s.
Traders have swallowed up this story and profited hansomely.
And they intend on continuing the party as they are increasingly betting on oil hitting $100, then $200 per barrel. Bloomberg reports that “someone is betting that oil will soar to a record $200 a barrel”. A trader (or multiple traders) have purchased December 2022, $200 call options on Brent oil futures. The volume hit 1,300 contracts last week. For those that know option trading, they know that this is unusual. See most option contracts that are traded happen near the current price. This is considered “at-the-money” trading. Once you start to get away from the current price, trading becomes thinner as the probability of your options being “at-the-money” at expiration diminishes. In this case, expiration of the contract happens in December of 2022.
Wagers that West Texas Intermediate (WTI) will hit $100 are also rising in popularity.
This is similar to the positioning that took place in 2006-2008. Before we had the blow-off top in oil prices in 2008, traders got overly bullish and over positioned in 2006. We had a bull market run in oil beginning in 2002. As more and more traders got into oil, prices continually pushed higher. Then there was a big drop in oil prices in the fall of 2006 until the beginning of 2007. This shook out a lot of those overly bullish traders. Once they were forced out, oil went on a rampage with Crude Oil futures passing $140 a barrel in June of 2008 before cratering due to the recession. We could easily be in for another wild ride and traders are now positioning for it.