a. Performance
Overall Performance:
Year-to-date Performance:
b. Portfolio Change
Before I get into this, I'd just like to reiterate that I think SoFi's earnings report will be fantastic tomorrow. Still, I am very surprised by how cheap put options on this name currently are. For this reason, it feels prudent to use a very small amount of capital to cover a sizable amount of potential losses. This allows me to do so without selling any shares and adding to my tax bill. I hope the puts expire worthless and the shares keep moving higher. I repeat... I remain convincingly net long SoFi.
With that said, I've purchased $26 puts expiring this Friday. For context, this transaction represents 2% of my SoFi stake and 0.16% of my overall portfolio. We invest in a world where surprises happen. SoFi is up about 200% over the last year and has morphed into a Wall Street darling. Its multiple has expanded to a much more fair level. While I fully expect them to once again show how elite of a team and company they are, I can't resist the opportunity to allocate this small of a dollar amount on this much protection for a volatile name that has gone parabolic.
Let's run through some scenarios:
The stock responds very positively to what I expect to be great data. If the stock rallies ~2.2%, that fully covers the cost of this insurance.
The stock is flat after earnings. The puts are worthless and I lose that small amount of capital.
The stock falls a little bit after earnings. The puts are worthless and I lose that tiny investment on top of the stock decline.
The stock falls enough for the puts to be in the money. Two examples:
The stock falls to $25. My equity stake at that price would be worth 15% less than it currently is. The intrinsic value of the puts would cover ~24% of those losses.
The stock falls to $23. My equity stake at that price would be worth 22% less than it currently is. The intrinsic value of the puts would cover about 50% of those losses.
c. Holdings
