Shares of gene therapy player Sangamo Therapeutics (SGMO) soared 52.98% in the regular session today, December 10, and tacked on another 3.77% in after-hours trading. I always try to understand a huge one-day move like that–and frankly I frequently fail. Here’s my take on Sangamo’s big move on Thursday.
Stock have moved up so strongly that the Put Options I own in my Volatility Portfolio are no longer providing any significant downside protection against a market downturn. Especially since two of the three–the Puts on MGM Resorts International, and Vale l expire on December 18. The last Put, the one on American Airlines, expires on January 15, 2021, but I’m closing that position as well. I’m also selling my two Call Options on Barrick Gold, and the VanEck Vectors Gold Miners ETF since they also expire on December 18 and they are also so far out of the money the holding is pointless. Those Calls on gold were also added as protection against an outbreak in market volatility that never arrived.
I bought the ProShares Short Russell 2000 ETF (RWM) back on October 30 because I felt then that the market wasn’t pricing in any of the potential problems likely to hurt the U.S. economy over the next couple of months. I picked the small cap Russell 2000 index for my downside bet because it was showing the most sensitivity to news–good and bad about the economy. Well, I got the sensitivity part right. But I missed the effect of huge cash inflows on stocks in general and the Russell in particular. Right now potential bad news and even actual bad news doesn’t matter much. Stocks keep going up. At the close on December 9, Wednesday, I had a 19.89% loss in this position after today’s slight 0.69% drop in the Russell 2000 (and 0.72% gain in this short ETF.) I’m not willing to let this loss get any bigger so I’m selling this position.
Shares of what was once Kensington Capital Acquisition (KCAC) and is now QuantumScape (QS) are up 203.3.7% since I bought Kensington back on October 13, 2020 in my Volatility Portfolio. But Quantumscape isn’t planning to have its solid state lithium ion battery in production until 2024. And most investors don’t understand the wave of dilution that’s about to hit the now public shares of QuantumScape. So I’ll be taking my profits tomorrow.
If you bought shares of Kensington Capital Acquisition (KCAC) along with me on October 13, you’re received a solicitation for a proxy vote to approve the reverse merger of Kensington with privately held QuantumScape, a startup solid state lithium battery company. The merger wis a way for Quantumscape to go public. (Kensington was the 14th and last pick in my Special Report: 10 Stocks for the Post-Coronavirus economy. Kensington has called a special meeting for shareholders for November 25 to approve the merger. You can vote online to 11:59 p.m. tonight. I plan to vote in favor of the merger, since that’s the whole reason for owning shares of Kensington.
