Postcards: Buffett, Beaches, Bars, Boats, and Profits...

I received an email from Porter, who encouraged me to unveil my favorite trades... and put a little sunshine on them. Welcome to the "Buffett Beach Bid" trade.                                                                                                                                                                                                                                                                                                                                                                                                                 Forwarded this email? [Subscribe here]() for more You are a free subscriber to Postcards from the Florida Republic. To upgrade to paid and receive the daily Republic Risk Letter, [subscribe here](. --------------------------------------------------------------- [Postcards: Buffett, Beaches, Bars, Boats, and Profits...]( I received an email from Porter, who encouraged me to unveil my favorite trades... and put a little sunshine on them. Welcome to the "Buffett Beach Bid" trade. [Garrett {NAME}]( Jan 22   [READ IN APP](   Market Update: This feels like a short squeeze as we are now at all-time highs. Our S&P 500 signal is positive, but that’s largely due to crowding in stocks like Apple (AAPL) and Microsoft (MSFT). We’re still under pressure and volume is still light. Be cautious. Dear Fellow Expat: When I was 13 years old, I saved up my money to buy a boxset of music. The boxset: Jimmy Buffett’s Boats, Beaches, Bars & Ballads. I still have the artwork in my office - although Compact Discs have largely gone the way of the Dodo. But it’s not Jimmy Buffett that we want to focus on today… it’s Warren Buffett. Because Warren has provided us with my favorite trade of the last two years. And it’s been a profit center for us. Porter sent me an email on Thursday encouraging me to tell you my favorite trades - the ones that we return to on a regular basis. And I warmly agree with this idea. So, let’s get started. We dub this simple trade the “Buffett Beach Bid.” [Upgrade to paid]( Trading Occidental For the last 18 months, Warren Buffett’s company Berkshire Hathaway (BRK.A) has been buying up Occidental Petroleum (OXY) whenever shares fall into the $56 to $58 range. We’ve called this range - the Buffett Buy Zone. But we are taking advantage of his actions with what we’re calling the Buffett Beach Bid. This is a pretty simple trade. We are selling a credit spread - and we are targeting an 80% probability of profit, a 20% return, and an annualized gain over 100%. With Occidental we have two legs to this position. You will buy the March 15, 2024 $50 put for $0.39 in this scenario. And then, you will sell the March 15, 2024 $52.50 put for $0.78. When you sell a credit spread - you only need to provide the margin for the difference between the two positions. So, as you can see in our estimated returns from OptionsProfitCaclulator.com - you will need $211 in margin to make $39. That gives us an estimated return of 18.5%, with an annualized return of $125%. And, as noted, the probability of profit is nearly 80%. Now, what’s great about this trade is that the breakeven price for the stock is $52.11. And as we’ve seen - Warren Buffett has been buying the stock above $55 for the last two years. Here are Buffett’s last three purchases - totaling more than $1 billion since October. We have consistently used this trade for two years - and it’s a wonderful way to make money on a stock that has traded sideways during that time. There are three scenarios to this trade. - If the stock goes up, the value of the spread goes down. As a result,  we make money. - If the stock just trades sideways, the value of the spread will decay. As a result, we’d make money. - If momentum is positive and the stock pulls back, we’d be happy to own it at a lower level. But if our Energy signal goes negative, we can just cut our losses and look for an opportunity to reenter this position.  That’s not our last trade idea of the week. We’ll talk about our next trade when our signals go negative using the ProShares Short Russell 2000 ETF (RWM). We’re calling that one - in honor of Jimmy Buffett - “A Pirate Looks at Shorting.” Stay positive, Garrett {NAME} Secretary of Defense Disclaimer Nothing in this email should be considered personalized financial advice. While we may answer your general customer questions, we are not licensed under securities laws to guide your investment situation. Do not consider any communication between you and Florida Republic employees as financial advice. Under company rules, editors and writers cannot recommend their positions. The communication in this letter is for information and educational purposes unless otherwise strictly worded as a recommendation. Model portfolios are tracked to showcase a variety of academic, fundamental, and technical tools, and insight is provided to help readers gain knowledge and experience. Readers should not trade if they cannot handle a loss and should not trade more than they can afford to lose. There are large amounts of risk in the equity markets. Consider consulting with a professional before making decisions with your money.   [Like]( [Comment]( [Restack](   © 2024 Garrett {NAME} 548 Market Street PMB 72296, San Francisco, CA 94104 [Unsubscribe]() [Get the app]( writing]()