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Long IREN vs. the shorts?

已更新

Today, a firm sent out a notice that they are short IREN so I'm going long. Their track record suggests going long when they say go short is a potentially very profitable short term strategy. They are often correct long-term, but sometimes a short wouldn't survive a margin call and short-term a contrarian long play can often yield 30-500%

Some of their recent calls:

Short call opening price the next day was 28.90. Peaked at over 40 within 2 weeks. Up over 30% in 2 weeks going long.

Short - rallied 7 of the next 8 trading days for a 30% gain.Re-iterated short again about a month after the first call and the close 1 month after the second one was 14% higher.

Short - you'd have made over 400% in 7 months going long against them this time. Even now, the price of the stock is 143% higher than when they made their short call. Good luck on that margin call or even the interest charges on that margin for that matter.

Short - they made this short call on the day of the absolute low close since the call. It closed up over 400% less than 6 months later and is still up over 300% since the call.

Short - stock rallied almost 500% in 4 months after this call... "Hello this is your broker, we're gonna need a LOT more money in your margin account".

There's a bunch more but I think I've made my point. They can be right long term, and still be very, VERY wrong short term. Both things can be true. If you'd have shorted some of these, many people would have been wiped out by the margin calls on some of these before you could ever make money. And you only get to get wiped out once. Shorting is VERY dangerous.

Also don't forget that margin interest runs around 8-10% now. It's "free" to go long provided you aren't using margin to buy (I never would) and very expensive to short these stocks unless you are correct right away. Anyone who knew ahead of time what they were shorting could make a pile on the day the news comes out, for sure. But WE don't know what the stocks are ahead of time. Only they do. But there's money to be made by us regulars when those shorts have to be covered during a squeeze or they take profits.

Props to them for leaving their research up on their website and Twitter and standing by their calls. If you have the margin call cash and the iron stones it takes to watch a shorted stock rise 500% before it falls, you can make money with some of their calls and you're a LOT braver (and richer) than I am. Shorting carries unlimited downside risk and a max gain of 100% (minus margin interest) - remember that.

Don't get me wrong, I respect short side research and there's a lot of validity to some of it. They are spectacularly correct sometimes and can do great things to protect buy and holders of individual stocks. But I'm not a long term owner of the company, just a trader of the stock. And after doing some research, the fact is, there's a lot of money to be made short-term by trading against them. This is the beauty of free markets - differing opinions create exploitable situations. I'm really glad I stumbled on that news flash.

And for the record, no I'm not naming the firm or the tickers they made calls on, as I don't wanna run afoul of the Tradingview's rules on using others' proprietary info, etc. I like this place too much and don't wanna get run off. You can look it all up for yourself easily enough with Google and the info I've shared here.

And btw - I'm not suggesting investing in IREN or any other stock, this is just my thoughts on the matter and what I'm going to do with the information. Please make your own WISE investment decisions.

註釋

Went long IREN @11.195 at the close

註釋

Some follow up details on the post above after researching all the publicly available short calls they've made.

26 shorts (not including today's) since 2019

-24 of the 26 were above the price at the time of the call at some point within the first 6 months after the short call (gain for a long position).

-Including the 2 they got "perfectly" right that basically went straight down 35% and 86% with no chance of profit on a long position, the AVERAGE high water mark (highest % gain achieved) during the 6 months following their short call was 109%. You read that right. On average, their stocks they made a short call on were up over 100% within 6 months of that call. 3 were up over 400%, one over 200% and 4 others were up over 100% in that time.

The MEDIAN 6 month high water return mark was 42%. Median factors out somewhat the huge impact of the 400 and 500 percent risers, and means half of the trades went higher than that. HALF of their short calls were at least 42% higher at some point in the next 6 months.

Now, what does this all mean? Well, it's admittedly a small sample size but simplistically, it means if someone took a long position at the close on the day they made their short position public, there is a 92% chance that at some point over the next 6 months they'd have made money on the trade. It also means about half the time they'd have touched at least +40% at some point.

Here's the catch, though. Those are high points for the stock in that 6 months. In some cases that high point came within days of their call. Others, it was at the end of the 6 months (and went even higher after). Now I KNOW I'm not good enough to pick 6 month tops consistently, and many of these tanked BADLY after those high points, so determining an exit strategy is the real trick here. Get out once I've made money but not stay in too long. I'll update again with my thoughts on that later. I'm a little tired from staring at screens all day right now.

If anyone finds something wrong with my analysis or with anything I write here I'd love to hear your thoughts. I'm about being correct (it's my money on the line after all), so I welcome criticism and questions.

Also, to be fair, they actually do a good job getting most of their short calls right EVENTUALLY, even if that carries a lot of risk from margin calls and interest charges in the short term. If someone would like me to discuss those short numbers at some point, let me know and I'll be happy to. I'm anti-shorting (at least long term) just from a risk and cost perspective, not anti-these guys (as I hope I made clear earlier). Making money long is just easier and safer so that's usually my angle.

註釋

I'm not greedy. I'm tempted to take my one day gain of almost 10% and go home. But in trying to decide how I wanted to exit the trade I thought about a lot of different ideas. Trailing stops, trailing stops activated at a certain level, risk-reward ratios, etc. What I settled on may be kind of arcane, but it's based on the premise that I am a trader who would rather hit a ton of "singles" and "doubles" but not strike out much. Perhaps that's not the best way to do things, but your trading style needs to suit your personality.

I have no problem if someone decided to do a trade like this and go for the home run or even a grand slam. I think it's very possible given the research I've done on their calls, and the fact that the short research firm basically just said IREN is overvalued. Not like many of their biotech calls where there was straight up malfeasance and criminality involved. In fact, their short target is simply a return to where IREN was a month or two ago.

That said, I decided to throw out the outlier trades (3 highest and lowest peaks in the 6 months after the call) and make my target a trade that would rank just above the bottom quartile. That is, getting out once the trade made it just above the cutoff for the 25% of least profitable trades remaining after the outliers were removed. It's a very conservative trade target, but I'm the guy who would rather make 4 25% trades comfortably than try to hit on a 100% trade and lose because I got to greedy.

That 2nd quartile cutoff is around 20% so I'll take my money and go home on this trade when it gets to +20%. After today, that could be next week.

Will I leave money on the table? Probably given the history I looked at. But a 20% is a good trade, especially if you can do it multiple times a year (and I think I definitely can). I will sleep well once it's closed and I'll put that money to work in another idea. The good news is I'm never short of ideas. Just if it goes to +500%, please don't remind me I got out at +20%. That's just not nice.

I'd love to hear people's reaction to my process. The hardest thing for me in trading has always been exit strategy. If anyone has a different and compelling idea, I'd love to hear about it.

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Oversold, so i added a lot at the end of the day yesterday at 10.225. It's a regular oversold trade now on top of my original trade premise. I wouldn't have added if that wasn't the case.

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Oversold again - added 1 lot @ 9.43 at the close

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IREN has outperformed the rest of the miners this week and a close today above 10.30 (closes the gap down from last week and pushes through resistance from the 2 lows on 7/17 and 7/24) makes me think $11 this week is very doable, though a pullback tomorrow wouldn't surprise me a bit.

The fact that IREN rarely goes over a month without getting overbought and it's already been 3 weeks since the last one has me optimistic that that is where it's headed. If so, a 1 week target of $12.50 is well within reach. The other miners have some earnings this week that could either push it there in a hurry or provide pushback.

Realistically, though, their earnings really shouldn't do much to IREN except insofar as they might make the industry more or less attractive on a macro level. The price of bitcoin and their own mining rates are the big influences, in my opinion. Maybe the cost of upgrades to their facilities is a wild card, but I have no way of knowing that. So from what I see, today is a very bullish day that feels like some shorts are bailing out for the time being. Time will tell.

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Added 1 lot at the close (oversold) @ 8.38

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Oops. It wasn't really oversold at the close yesterday. I made the buy decision yesterday 10 min before the close but that last 10 min rally took it out of oversold territory so I just sold my lot I purchased yesterday a few minutes ago pre-market for 8.52. At least I made a profit on my mistake.

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OK today it's oversold i promise. Added 1 lot at the close @7.92

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Added 1 lot @6.76 at the close

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Closed 2 most recent lots at the close as IREN is now short-term overbought. The two lots turned a profit of 0.9% and 17.9%, respectively.

交易進行

Forgot to update this yesterday. Oversold again so I added 1 lot at the close at 6.44

交易進行

Overbought so I sold the most recent lot (6.44) at the close @ 8.03 for a 24.7% gain in
7 trading days.

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Still holding 11.195, 10.225 and 9.43 lots, btw. If it bumps a little higher tomorrow I think I'll probably sell some calls. The premium on this one is juicy.

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Sold Oct 18th $12 calls on all 3 lots today for .25. It's overbought after today, but the miners will go on a tear if opens the trading day tomorrow significantly above 65K. Today felt like a lot of short covering to hedge that possibility. As a result, if Bitcoin falters (and I think it will since it is also short term overbought), IREN could give a lot of today's gains back. Even if it does go on a tear, it would have to go up another 33% in the next 18 trading days to call away my stock. I'm not saying it can't but it has some heavy lifting to do to pull that off.

And if it does..👏👏👏 for both it and me. My 3 lots (when factoring in the .25 from the calls, will make anywhere from 9 to 30% profit each if they get called at 12. This is definitely a win-win situation. If they don't get to $12, it's like I get a .25/share dividend that yields 2.8% in under 1 month. Plus, if the stocks tanks between now and then, I can just buy back the calls, too, if I want. So many possibilities and I like them all.

交易進行

I added 1 lot to my position at the close @ 7.73 because it's oversold now. Essentially, I bought back the lot I sold on Sept. 17th at a 4% discount. Also, as of today, the calls I sold a week ago have fallen by about 58%. I won't buy them back unless I can do so at a 75% or greater profit, but one more solid down day and that will happen. The only reason I would buy them back at all now is so I can sell new ones when it gets overbought again, which could easily happen before the 18th. Exercise probability is below 5% at this point, so it turns out selling the calls was the best move, allowing me to profit on the retracement since the lots I owned weren't profitable yet during the most recent overbought episode.

I'm currently holding 4 lots of stock, purchased at 11.195, 10.225, 9.43 and 7.73

After all trades and collected option premiums are considered, I'm down an average of 5.2% per lot on those 4 lots, which considering the stock is down almost 31% since I first opened the trade, is a very positive development. Had I been simply DCAing each time it became oversold and not selling, I would have 50% more capital committed to the trade right now and each lot (on average) would be down almost twice as much. That doesn't factor in opportunity cost either - the capital NOT allocated here has been free to be used on other profitable trades during the nearly 10 weeks this trade has been active. There is a method behind all this madness and it's one that has worked to improve profit/lot/day held and reduce both total holding time and total capital allocation time and time again.

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Just closed out the calls I sold for .25 on Sept. 24 for .05 --- +80% in 10 trading days. I will sell them again when the price rises enough that selling them again makes sense.

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Added a lot (oversold) at 7.335 before the close today.

Lots currently held:

11.195
10.225
9.43
7.73
7.335

交易進行

Sold the 2 most recently purchased lots at the close today at 8.73 for gains of 12.9% in 10 trading days and +19.0% in 4 trading days, respectively. Still holding the 9.43, 10.225 and 11.195 lots. Will sell calls on them tomorrow if it is up again.

交易進行

Sold Oct 25 $12 strike calls today on the remaining lots at $.10 because it's day 2 of being overbought and none of the lots are profitable yet. As always, a win-win scenario whether it gets to $12 or not.

註釋

100% gain on the Oct 25 covered calls I sold Oct. 16th that expired worthless over the weekend. I won't sell calls again until it's overbought again which (the way it's going so far today) could very well be by the end of the day today.

I think there's a mix of two things on the table here. Obviously the rise in over the weekend and the possibility of a break above 70k there is real. All the miners are rallying because of that today. But I think there's more to the story than that. Short sale volume in all the miners has been rising since early August and a breakout in or the miners (or both together, most likely) means short covering is probably playing an outsized role here. That will accelerate should a meaningful break above 70k happen.

I think an upside break in is a possibility, but I'm not totally convinced yet. 70k has been tested 3 times and even today tested a 4th time and has been pushed back. If it fails again today, that makes resistance there that much stronger. If strong resistance like that fails, though, there could be a BIG run up this week as shorts cover. That would hold for the miners as well. IF doesn't close above 70k today, I will be selling calls again because I think short term momentum would flip somewhat negative if that happens. Again, I'm not trying to hit home runs here and I don't have a problem with anyone who is. Both ways work, just one is riskier than the other.

The quiet part to , though, is that earnings are coming and there is upside POTENTIAL in their high performance computing business being ahead of expectations, as well as aggressively increased mining capacity targets coupled with the rise in the price of bitcoin. Should those deliver and the price of Bitcoin stay near 70k or run higher, that's a recipe for both a near term beat of expectations and fuel for a higher run going forward. Those could all produce positive surprises in the earnings. At the very least, I expect talk of those from the company to be positive on all those fronts, but if it runs up into earnings and disappoints at all, shorts are waiting to pounce, based on recent short volume.

I think volatility will be higher than normal all the way into earnings, which is a double-edged sword, obviously. Selling options when vol is high is the standard move if that occurs and I will continue doing that whenever the stock is overbought. So long as the strikes turn me a profit if the calls are exercised, I'm happy. I realize I give up potential to the upside if that happens, but I'm OK with that. All the way back up from the August lows, I've been selling calls tactically and it keeps working. The key is to keep the strikes WELL out of the money and duration very short. Call premium alone when prices are volatile produces returns well above what trading most other names can produce.

If the calls get assigned, I will make lots of money and I'll just wait for the next pullback. If they don't, I'll make less money and do it again the next week. That's the game I play, and it's been very profitable for me historically. It will continue being profitable, I'm sure. I follow my rules and stay true to my system, regardless of euphoria or panic in the markets.

交易進行

I sold the 9.43 and 10.225 lots at the close for 10.90 since IREN is overbought and didn't close above 70k during the stock session. I kept the original lot and I'm still shooting for a 20% gain on that one, so I will wait one more day before I sell a call on that lot to see if Bitcoin breaks 70k overnight.

Lot 2 (9.43) gained 15.6% in 66 trading days
Lot 3 (10.225) gained 6.6% in 71 trading days

The original 11.195 lot (Lot 1) is the only remaining lot held.

交易進行

Oversold again so 1 lot was added at the close for 8.52

2 lots currently held:
11.195
8.52

交易進行

Sold the lot I bought yesterday for 8.9439 before the close for a 5% gain in 1 day. Normally I'd hold it longer, but I suspect there will be some election-related volatility so I'll take my 5% and wait until the next oversold event.

The 11.195 original lot is the only one I'm still holding. Including the original lot posting as a 24% loss right now, I'm up 17% overall on since July 11 (+16% if you exclude the option trades). The 10 stock trades have averaged +8% each and have lasted an average of just over 25 days each. At this point, the original 20% I had targeted on the original lot is just a bonus if/when it happens. I'll keep adding if it gets oversold and selling when it gets overbought.

註釋

Just sold Nov 15 $13.50 calls on the original and only remaining lot for $.30 ($30 each). It's overbought and the weekend will likely give Bitcoin buyers time to return Bitcoin to more reasonable levels. If not and it does keep rising and gets exercised, I make my original 20% goal on that lot at 13.50, so again - win/win regardless.

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So much for returning to reasonable levels... I'm curious to see what happens there in the next few days. This run feels unsustainable, but who knows.

7 天前

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The Nov 15 $13.50 calls I sold have expired worthless, so that knocks another .30/share off the cost of my original lot. In all, the call options I've sold have reduced the effective cost/break even price of my original lot by 1.20/share to 9.995. I'm still going to shoot for 13.50 with the stock, but if all I wanted was a 20% gain I could now sell at $12 and make 20% based on the adjusted cost. I will definitely sell another out of the money call next week, as implied volatility should be rising as we get closer to earnings on the 26th and with holding near 90k. The only thing that would stop me from selling a call is if the price opened above 13.50 on Monday and I just don't see that happening.

前天

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IREN is oversold again so I added another lot at 9.72.

I didn't sell a call this week on the other lot, because I couldn't get a price for a 13.50 weekly that made sense and I didn't want to go out to next week (though now I obviously wish I would have), because earnings are next week.

With Bitcoin doing what it's doing, this week's price action is a little puzzling. Short volume is up a lot, so I'm guessing that the miners are being used as a vehicle to short Bitcoin more cheaply and with leverage. Otherwise I'd guess it is fears over earnings or someone with a LOT of money knows something about the class action that I don't.

I personally think earnings almost have to surprise positively, but the quarter ended before Bitcoin really got parabolic. I think if it didn't show up on the balance sheet this quarter, guidance will force estimates for next quarter to be raised and give it a bump. That's just my 2 cents and predicting earnings really isn't my game, so I don't stand by those comments. Whatever happens, happens.

Regardless, long IREN when it's oversold has been repeatedly one of my best trades of the year from a per day return standpoint and with Bitcoin challenging 100K, I expect that to continue. I'll update if I sell calls or add further to the position or sell any lots.

Lots held:

11.195
9.72

昨天

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Closed the lot I bought yesterday just before the close for 10.81. A one day gain of 11.2% - what an absolute GIFT. Surprisingly, it's not really that uncommon for this stock, though. I also decided to sell a Nov 29 13.50 call for .25 today on the original lot, since the price spiked and selling volatility is always a good idea.

I'm not totally convinced will have an upside breakout next week, though it very well could, and even if it does, the miners have all been acting wonky so there's no guarantee it'll follow Bitcoin higher. I never have any idea how stocks will react to earnings, either, so best to hedge after a pop like this in my book.

I think earnings should be good, given the mining updates, and I think forward guidance should be very good given the price of Bitcoin over the last couple of months, but you just never know. At least if it poops the bed next week, I'll have .25/share to show for it, making the adjusted cost of the original 11.195 lot now 9.745. And if it does jump, I'd be selling it at 13.50 anyway since that's my original 20% target.

redwingcoach