I decided to start publicly sharing my trades and performance back in August due to the many requests I was getting from readers asking about how I was positioned in my own portfolio. I was a little hesitant at first due to fear and impostor syndrome but I’ve noticed that the daily ritual of writing commentary and publishing the allocation and performance metrics has been a very useful tool in and of itself. The habitual nature of it keeps me focused and the fact that it’s public helps me avoid making dumb mistakes due to potential embarrassment. Sometimes putting the ego at risk can pay off!
This quarters performance definitely payed off.
Performance
Herewith the performance metrics and risk analysis for 7/1/21 through 9/30/21, according to IBKR’s reporting functionality:
Overall Performance = 170.67%
Max Drawdown = 19.05%
Peak to Valley = 9/10/21 - 9/23/21
Recovery = 5 days
Sharpe Ratio = 4.46
Sortino Ratio = 10.48
Standard Deviation = 6.25%
Downside Deviation = 2.66%
Mean Return = 1.73%
Positive Periods = 35 (53.85%)
Negative Periods = 30 (46.15%)
Capital allocation throughout the period was as follows:
A chart of daily returns per asset class is below:
Position Contributions
The top 5 individual trade contributors during the period were the following:
HCC Oct15 25 Calls contributed to 44% of the overall performance
DAL Sep17 43 Puts contributed 16%
HCC common equity contributed 9%
BTU Aug20 12 Calls contributed 6%
BTU common equity contributed 5%
Bottom 5 trade contributors:
AAPL Aug20 140 Puts contributed to -6% of the overall performance
SPY Jul16 423 Puts contributed to -5%
ARCH Jul16 80 Calls contributed to -3%
QQQ Aug20 360 Puts contributed to -3%
SNAP Sep17 60 Puts contributed to -3%
Underlying Contributions
The top and bottom performers by underlying equity can be view in the following graphic:
Contributions by sector and asset class are below:
Summary
As you can see, most of the losing trades were hedges such as AAPL and SPY puts. The aggressive hedging allows the portfolio to be moderately leveraged in its core ideas and positions without worrying about a broad market selloff disrupting the strategy. Sometimes the hedges do well despite what equity indexes are doing, as evidenced by the Sep17 DAL puts which contributed to 16% of this quarters performance.
Most of the portfolio performance during the quarter was from Warrior Met (HCC). I highlighted the special situation in HCC early on June 30, and explained many times that the fairly extreme portfolio weighting which I was carrying in the name was due to the high probability that the strike situation would be resolved, combined with the fact that HCC arguably has the best met assets in North America. I continued to trade HCC well and we even sidestepped the selloff after earnings was released, which I highlighted was a possibility.
Overall we took profits on HCC mostly above $24 per share and in the end the strike was not resolved. I think market participants priced-in the resolution, which was the reason the stock rallied to almost $27 per share, from a base of around $17. It may be hard to read all the notes, but here’s my working chart of HCC below:
There is still a lot of opportunity trading HCC and I hope to steer us well through the Q3 earnings which are rapidly approaching.
If The Coal Trader can continue Q3’s performance throughout Q4 it will be one of my best trading runs ever. With third quarter earnings less than a month away and an energy crisis developing this winter, I expect lots of volatility and lots of opportunity to match this past quarters performance. I look forward to sharing the journey with subscribers each day and hope I can continue to add value for The Coal Trader readers along the way.
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