End of 2nd month JC Options Fund

This is painful. In addition to the above picture, I close my LB option and roll over to next month. Overall, it is a net loss, wiping out all the gains (plus more losses) in my 2nd month of options. 

I have a list of lessons learnt from this month. You can find them here from Ally website, I can relate to quite a few of them. I will learn from my mistakes, let me think through my strategies. I read Ray Dalio's Principles and I learn that pain is good. It helps you to grow up.

https://www.ally.com/investing/options/top-10-option-trading-mistakes/

Also a lot of my friends took a hit because of FL (Foot Locker), don't give up, there is bound to be some bad calls, close it and move on. Sometimes I make money, sometimes I lose money, as long as the good calls are slightly more than the bad ones, I end up making money.

In addition, I bought a total of 300 shares of L Brands. I took a quick look and overall insider shares acquisition is increasing in 2017.

LB ticks all the boxes. I have intention to build up to 1000 shares of LB only, my new rule of thumb is keep all portfolio at about 5% of entire portfolio.

L Brand owns the following brands:

Bath & Body Works - personal care, soaps, sanitizers and home fragrance products. 1700 North American stores, Bath & Body Works has 80 stores in more than 20 other countries operating under franchise, license and wholesale arrangements

PINK- college woman and campus life 

La Senza - Fun flirty lingerie brand celebrating young, sexy and value-oriented customers

Henri Bendel

Victoria's Secrets - signature bras, panties and sleepwear, popular fragrances, body care and athletic line, Victoria Sport

Victoria's Secret Beauty and Accessories - This smaller concept started with airport travelers, focuses on award winning fragrances, body care and accessories.

Company Background

L Brands is an international company that sells lingerie, personal care and beauty products, apparel and accessories.  The company operates more than 3,000 company-owned specialty stores in the United States,Canada, the United Kingdom and Greater China, and its brands are sold in more than 700  franchised locations worldwide. 

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Market Research

Intimate apparel industry is a $29 billion global market 

The largest customer base is the 45 to 54-year-old group followed by the 25 to 34-year-old group

Victoria's Secret's PINK brand dominates the growing teen market with sales of roughly 1billion.

Strength - Economic Moat

Segment Leader, sell an experience, top of mind => Branding

Sticky to the product - the products help customers feel sexy, bold and powerful, entice customers to pamper and indulge themselves and enjoy everyday lives.

Economies of scale - capitalize on production, logistics supply chain and combined with technologies to achieve cost efficiency

Enhancement of branding - has highest number of best models and photographers to advertise for their products, organize annual fashion shows to improve brand image

International presence - global footprint (in Middle East and Africa)

Ecommerce is gaining traction - strong online sales 

Weakness

The dress can be worn only in bars and movies but in real life there are few people who wish to wear such dresses

Limited market in Asian market

Opportunities

Strengthen online e-commerce stores

Open key strategic stores worldwide

Market to Men through a new brand

Threats

Competitors offer similar products - differentiation is minimum in terms of functionality

Economic downturn will affect sales 

A lot of competitors 

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Risk Assessment

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Competitors' Analysis

The intimate apparel market is also fragmented with Hanes which has sales of $1 billion followed by Fruit of the Loom, Jockey and Maidenform

Sales Per Square Feet & Sales per Store

Sales per square feet per store shows a slight deterioration.

Sales per store shows slight deterioration. In 2017, the sales level is dropping due to its change in business direction.

Another possible hit on L Brands' brands are the high rental cost and competition from e-commerce. Alibaba's Aliexpress, Wish and Amazon are driving prices down. E-commerce will deteriorate L Brands' business as the branding is not as strong as those branded stuff such as LV, Hermes, Burberry, Prada, etc.

I am seating on about 30% cash at this moment and to me now cash is king. I sold put on 5 TLT contracts at 123 (my thanks to L.H. for his guidance) and I intend to shift some money into TLT and will pare down to 15% cash 15% TLT.