Put candidates for Bubble Stocks

[LC]

I went with puts on PLUG as essentially a short on a baloney business and also a hedge against other high-tech stocks I bought on whims (<1% positions each, stuff like AI), essentially netting out.

[ValueArb]

I went with puts on PLUG as essentially a short on a baloney business and also a hedge against other high-tech stocks I bought on whims (<1% positions each, stuff like AI), essentially netting out.

 

Mmm, baloney.

 

 

[ValueArb]

I went with puts on PLUG as essentially a short on a baloney business and also a hedge against other high-tech stocks I bought on whims (<1% positions each, stuff like AI), essentially netting out.

 

We both must be happy today.

 

"LATHAM, N.Y., March 16, 2021 -- Plug Power Inc. (NASDAQ: PLUG), a leading provider of turnkey hydrogen solutions building the global green hydrogen economy, announced today that it will restate its previously issued financial statements for fiscal years 2018 and 2019 and its quarterly filings for 2019 and 2020, which will be disclosed in the Form 10-K for the year ended December 31, 2020 (the “Prior Period Financial Statements”)."

[LC]

I went with puts on PLUG as essentially a short on a baloney business and also a hedge against other high-tech stocks I bought on whims (<1% positions each, stuff like AI), essentially netting out.

 

We both must be happy today.

 

"LATHAM, N.Y., March 16, 2021 -- Plug Power Inc. (NASDAQ: PLUG), a leading provider of turnkey hydrogen solutions building the global green hydrogen economy, announced today that it will restate its previously issued financial statements for fiscal years 2018 and 2019 and its quarterly filings for 2019 and 2020, which will be disclosed in the Form 10-K for the year ended December 31, 2020 (the “Prior Period Financial Statements”)."

 

Sheesh! Thanks for sharing. Frankly I hadn't checked any financial news after noon, will make the night's cocktail extra tasty :D

 

And more generally, thanks for sharing the overall idea. You were able to articulate it well. I found this one attractive because it stacks quite a few things in my favor, essentially taking a directional bet + a hedge, all in one:

 

-A bet against the crappy underlying business, and a crazy overall valuation, as you described previously. Normally I wouldn't short something just based on valuation or disagreeing with the underlying business/technology.

-A downside bet on Memestocks/WSB exhuberance in general

-Inverse exposure to both (1) rising rates and (2) a market rotation out of the tech sector, and therefore a hedge against my substantial long positions in "stable" tech co's eg. MSFT

-A highly volatile stock where you can get a lot of potential exposure for little upfront costs

 

I think if you can find effective portfolio hedges (similar inverse market exposures), which also agree with your view on the individual name, and if you can get that exposure cheaply, then that is a pretty attractive bet.

[BG2008]

So this basket of puts on crap has ~doubled in the last 48 hours. The best performer was the OTM ones on SPAK (which i sized the largest as I had identified it as my favorite) That took a 5% position to a 10% position, and being a chicken I've sold a bunch of them today to lock in profits, so its now more like a 2-3% position.

 

This isn't advice, and I cost myself a great deal of money last spring by closing my puts way to soon. So I'm going to keep the last chunk (using the house money fallacy they're free!) and ride this out.

 

You made a put position 5% of your capital?

[ValueArb]

So this basket of puts on crap has ~doubled in the last 48 hours. The best performer was the OTM ones on SPAK (which i sized the largest as I had identified it as my favorite) That took a 5% position to a 10% position, and being a chicken I've sold a bunch of them today to lock in profits, so its now more like a 2-3% position.

 

This isn't advice, and I cost myself a great deal of money last spring by closing my puts way to soon. So I'm going to keep the last chunk (using the house money fallacy they're free!) and ride this out.

 

You made a put position 5% of your capital?

 

My goal is 5-10% of the portfolio in puts until this bubble pops. I figure I can make up the losses in special situation investments in rest of portfolio. Worse case is I go full Michael Burry for a few years, but I don't have investors to placate.

[bizaro86]

So this basket of puts on crap has ~doubled in the last 48 hours. The best performer was the OTM ones on SPAK (which i sized the largest as I had identified it as my favorite) That took a 5% position to a 10% position, and being a chicken I've sold a bunch of them today to lock in profits, so its now more like a 2-3% position.

 

This isn't advice, and I cost myself a great deal of money last spring by closing my puts way to soon. So I'm going to keep the last chunk (using the house money fallacy they're free!) and ride this out.

 

You made a put position 5% of your capital?

 

The combined basket of puts was 5% of my capital. Not at my computer so don't have exact numbers, but SPAK puts were the largest thing in the bucket at about 1.5% of capital. They were about 3x, and everything else was up dramatically that day as well. So my 5% position became a 10% position, and I sold a bunch down.

 

 

[bizaro86]

So the remainder of this basket is now worth a very nominal amount of money. It worked out ok for me, as I took more than my initial capital out when I sold down in the spring, but wasn't a success compared to the returns in the rest of my portfolio. That said, it did help me keep a steady hand as everything went up and to the right, so it probably added some profits that way. 

 

I'm looking at re-upping here. SPAK options have gotten so illiquid/expensive that I don't think they make sense any more. I'm probably going to re-up with the other names in the original post, and maybe some straight SPY OTM puts. Any other things people think are overvalued and/or have cheap puts I'd be very interested in hearing !

Edited November 2, 2021 by bizaro86

[Gregmal]

While I think bubble stocks could work, Ive started adding value trap old economy type names in terms of puts and shorts. You've got a good list of names to choose from that have basically sucked a giant shlong during the greatest decade of returns we've all seen, and now trade elevated because of the whole covid liquidity injection. If things go south I cant imagine they hold up well, and after continuing to see rotation and enthusiasm back into tech and bubble stuff, I think you also have to appreciate that theres no robinhood's, FANG bros, or late to the party hedge funds buying the crummy old economy laggards. Theyre not hard or expensive to short either. Value investors dont even want them anymore. A few names I'd throw out there would be AAL, IBM, INTC, ORCL, GE....those type of companies.