Financial Velociraptor

Several positions expired over the weekend.

music selection:  “Mr. Blue Skies” — Electric Light Orchestra

weigh-in:  197.8 (0.2)

First a little housekeeping.  My short position in AMCX triggered its trailing stop loss on Thursday.  I stood by my discipline and bought to close on Friday.  I booked a 1,444 short term capital loss on the trade.  I collected 125 in covered put trades during the holding period bringing my net loss to 1,319.  My only short positions are now a synthetic short in JCP, and a sell/write position in F.

Venator Materials (VNTR) expired out of the money over the weekend. I wrote fresh puts this morning.  The trade was to sell VNTR180720P00017500 for 50 cents a share.  The trade will be in force for 33 days and yields an expected 31.60% annualized while enjoying 3.90% downside protection.

Scotts Miracle Grow (SMG) continues to underperform.  My calls went unassigned and I  have rolled them by selling SMG180720C00090000 for 1.15 a share.  The trade will be in force for 33 days and yields an expected 14.13% annualized.  I am up a little over 2% in the trade after considering options premiums collected to date.

Shares of ON Semiconductor (ON) were called away over the weekend.  I am selling puts again but reducing the exposure from 6 contracts to 4.  I sold ON180720P00025000 for 80 cents a share.  The trade will be in force for 33 days and yields an expected 35.39% annualized while enjoying 5.51% downside protection.

Match Group (MTCH) is still recovering from news that Facebook plans to enter their market.  Shares have covered significantly and premiums are attractive.  I sold MTCH180720C00046000 for 1.05 a share.  The trade will be in place for 33 days and yields and expected 25.25% annualized.

My diagonal call in Lam Research (LRCX) is performing poorly and is down 3,159 since initiation.  My short call expired over the weekend and I rolled down and out to LRCX180727C00205000 at 1.20 a share.  The trade will be in force for 40 days and yields an expected 8.44% against my cost basis in the long call of 129.80.

Shares of Michael Kors were called away of the weekend.  I am writing puts again by selling KORS180727P00068500 for 1.59 a share.  The trade will be in force for 40 days and yields an expected 21.18% annualized while enjoying 2.02% downside protection.

Finally, my strangle in Seadrill Partners (SDLP) expired safely out of the money over the weekend.  This has been a great play for me as the stock looks to be range bound for the foreseeable future between the 2.5 and 5 strikes.  I can collect the underlying 12.58% distribution while earning low risk bonus premium.  I am up 47.53% in the position to date.  I rolled the position by selling SDLP181221P00002500 and SDLP181221C00005000 for 20 cents and 5 cents, respectively.  The trades will be in force for 187 days and yield an expected 15.61% and 1.95% respectively.  The short put enjoys an impressive 27.67% downside protection.  I hope to continuing trading this position for a long time.

Devour your prey raptors!

Three more closed end funds for your consideration.

music selection:  “You Might Think” — The Cars

Each Friday, I post three closed end funds invested in debt and debt like securities. These can serve as the anchor of a income centric portfolio to support early retirement. I keep 40% of my portfolio in this sector and it is sufficient to cover my early retirement budget. I have another 60% available for trading and growth to ensure I stay ahead of inflation.

Advent Claymore Convertible Securities & Income (AGC) is a closed end fund that seeks  total return through investments in global convertible and non convertible securities and utilizing and option writing strategy.  It pays an income only distribution on a monthly basis.

• Discount to NAV – 11.16%
• Yield – 9.84%
• Effective leverage – 40.91%
• Expense ratio – 3.49%
• Learn more

NexPoint Strategic Opportunities Fund (NHF) is a closed end fund that seeks current income with capital appreciation through investment in floating and fixed rate loans, bonds, debt obligations, mortgage backed and asset backed securities, collateralized debt obligations and equities.  It pays an income only distribution on a monthly basis.

• Discount to NAV – 8.89%
• Yield – 10.69%
• Effective leverage – 14.77%
• Expense ratio – 2.54%
• Learn more

Eaton Vance Tax Advantaged Bond And Option (EXD) is a closed end fund that seeks to provide tax-advantaged current income and gains through the use of a tax-advantaged short-term, high quality bond strategy and a rules-based option overlay strategy.  It pays a managed distribution on a quarterly basis.

• Discount to NAV – 12.80%
• Yield – 12.61%
• Effective leverage – none
• Expense ratio – 1.44%
• Learn more

Devour your prey raptors!

Completed all my sets today.

music selection: “Rock Warriors” — The Rods

waist-line:  40 inches

I tried to run all my errands at once today.  The big mistake was having a full restaurant meal and then trying to work out.  When I was straining on overhead press, it was clear a lot of the blood I needed was busy in my stomach.  I still managed to complete 5×5, although I was maybe turning a little blue in the face from the strain.  From now on, I eat after I lift.  Next time, graduate to the big bar and the safety cage for overhead press.

Squat and deadlift continue to be ‘easy’.  In fact, I think the squat is getting easier even as I add weight as my form has improved and I think I have more flexibility from the repetition of stretching down low to get my thighs horizontal.  At 15 pounds added per week on average for squat and deadlift, they should become more challenging quickly however.

Devour your prey raptors!

I closed my UVXY long puts.

music selection:  “Rock And Roll” — Led Zeppelin

My UVXY puts have been deeply underwater since the issuer made the decision to reduce the leverage of the underlying from 2.0 to 1.5x.  I had a loose plan to hold until the strike was at the money but have been entering unlikely to be filled limit orders in hopes of getting a favorable fill.  Today, I sold UVXY200117P00006000 for 2.59.

Since the puts were purchased at 4.35, the 76 contracts yield a 13,376 short term capital loss.  I’ll be sitting out the trade for 30 days to avoid the wash sale rule.  I don’t want to lose a 13 thousand tax benefit!  I’ll be letting my 7.5% notional direct short in VXX decay to zero and no longer topping it up.  Instead, I’ll target 5% notional short in UVXY playing it as a synthetic short.  That will give the same look through exposure but without the monthly drag of hard to borrow fees that are coming in around 100 a month right now.

A synthetic short should be immune to any future changes to the leverage rate.  I don’t want to make that mistake again.  Importantly, by playing both ends against the middle, the volatility premium at any given time should become mostly a non-factor.  Before, when buy just a long put, there was a penalty to entering the trade during high VIX environments.  Now all that matters is the nominal price of UVXY, which should reliably decay over long periods of time.

I was going with 10% exposure to long puts.  With a naked call as part of my strategy, I will be utilizing some margin.  Thus, I am scaling back the size of the trade.  At 5%, I will be using 7.5% margin (my broker will calculate the 1.5x leverage of the underlying as a margin consideration.)  In the event of a short term doubling of price, I will thus be at 15% look through exposure.  I can tolerate that.

Finally, I will stop topping up the trade if the 2 year treasury yield exceeds the 10 year yield.  I will close the position completely if the 90 day yield exceeds the 10 year and probably open a short in SPY.  This lizard is watching the yield curve with great interest.

Devour your prey raptors!

Two positions expired over the weekend.

music selection:  “You’re Not Alone” — Lacey Sturm

weigh-in:  198.0 +0.4

Two hundred shares of Target (TGT) were called away from me.  I’m writing a single contract put.  To that end, I sold TGT180727P00078000 for 2.29 a share.  The trade will be in force for 47 days and yields an expected 22.80% on an annualized basis.  The premium also provides some downside protection.

A covered call in Blackstone (BX) expired out of the money over the weekend.  Blackstone has been a little disappointing but is still in the black after the premiums collected.  I sold four contracts of BX180727C00035000 for 20 cents a share.  The trade will be in force for 47 days and yields an expected 4.44% on an annualized basis.  I remain eligible to collect the underlying distribution of about 10%.

Devour your prey raptors!

Three possibilities in the closed end fund debt space.

music selection:  “You’re No Good” — Van Halen

Each Friday, I post three closed end funds invested in debt and debt like securities.  These can serve as the anchor of a income centric portfolio to support early retirement.  I keep 40% of my portfolio in this sector and it is sufficient to cover my early retirement budget.  I have another 60% available for trading and growth to ensure I stay ahead of inflation.

Aberdeen Global Premier Properties Fund (AWP) is a closed end fund that seeks current income through investment in global equity and debt securities.  It pays an income only distribution on a monthly basis.

• Discount to NAV – 8.33%
• Yield – 9.40%
• Effective leverage – 3.41%
• Expense ratio – 1.35%
• Learn more

Aberdeen Income Credit Strategies (ACP) is a closed end fund that seeks a high level of current income with capital appreciation through investing in a portfolio of senior loans.  It pays an income only distribution on a monthly basis.

• Discount to NAV – 7.81%
• Yield – 10.34%
• Effective leverage – 30.07%
• Expense ratio – 3.11%
• Learn more

NexPoint Strategic Opportunities Fund (NHF) is a closed end fund that seekscurrent income with capital appreciation through investment in floating and fixed rate loans, bonds, debt obligations, mortgage backed and asset backed securities, collateralized debt obligations and equities.  It pays an income only distribution on a monthly basis.

• Discount to NAV – 9.97%
• Yield – 10.76%
• Effective leverage – 14.77%
• Expense ratio – 2.21%
• Learn more

Devour your prey raptors!

I’m off schedule by one day this week.

music selection:  “Uprising” — Sabaton

waist-line: 40 inches

I had a lot of errands to run on Monday and just never made it to the gym as planned.  So I’m on a Tues/Thur/Sat schedule this week.  It is for the best as I tweaked my left wrist somehow last week.  Not sure if it was from lifting or not.

I’m up to 40 or 45 pounds on all exercises.  I’ll be able to use the big bar and power cage from here on out.  The hardest exercise right now is the overhead press.  I can tell I’m going to max out there very soon.  Shoulders are hard!

My weight has been really good, hovering around 197 to 198.  I’m very happy to have settled below 200 for what looks like ‘for good’.   The waistline measurement seems to vary by as much as a full inch from day to day.  I’m assuming that is probably most water.

Slow but steady progress!

Devour your prey raptors!

I topped up my short position in VXX.

music selection:  “Every Day Is Exactly The Same” — Nine Inch Nails

My long puts in UVXY continue to be “dead money”.  My best guess is the position is ultimately a losing one (currently down over $13k.)  I expect to recover a lot of that but may take the hit early to harvest the tax loss.  The trade still works.  There is just a one off event from the reduction in leverage during the early year volatility events that left long options buyers holding the bag.

I have since taken to shorting VXX directly.  I tried this before with UVXY but the borrowing rate was punitive and shares to borrow often became scarce.  I was always getting a warning from my broker that my shares had been sold by a counterparty and they were searching for an alternative lender but I might be forced out at the market price if that effort failed.  VXX has proven to have much more reasonable borrowing rates and I have never gotten a notice that the broker is looking for shares to borrow.

I am now keeping 7.5% (notional) of my Interactive Brokers taxable account in VXX short shares.  Whenever my exposure falls 1,000 dollars below the target, I top up by shorting more shares.  To that end, I shorted 50 shares VXX at 32.40 today.  I now hold 728 shares short with proceeds of 29,488.  Exposure sits at 23,522 indicating an unrealized short term capital gain of 5,966.  Since February, my interest expense at the brokerage has been about 120 a month.  Some of that is from short positions in F and AMCX but most of it is from VXX (I am not aware of a report that would let me zero in on the details.)  At any rate, it seems I’m up about 5 thousand net.

I will be paring this trade back if the 2 year treasury yield passes that 10 year yield.  If the 90 day yield passes the 10  year yield, I will close it completely.

Devour your prey raptors!

Three positions expired over the weekend.

music selection:  “You know what the night can do” — Steve Winwood

weigh-in:  197.6 (0.8)

The first of my positions that expired out of the money over the weekend was my covered put against a short position in Ford (F).  Overall, the trade is in the red.  I still expect the credit cycle to turn and cause subprime lending to evaporate.  That will absolutely crater this company’s sales.  I sold F180817P00010000 for 6 cents a share.  The trade will be in force for 75 days and yields 2.67% annualized against my cost basis of 10.96.

Next is GrubHub (GRUB) which is a diagonal call on which the short leg expired out of the money over the weekend.  I sold GRUB180713C00125000 for 50 cents a share.  The trade will be in force for 40 days and yields an expected 6.37% against my cost basis of 71.60 on an annualized basis.  To date, the trade is up 1,528.

Finally, there is Skyworks (SWKS) another diagonal call on which the short leg expired out of the money over the weekend.  I sold SWKS180720C00110000 for 50 cents a share.  The trade will be in force for 47 days and yields an expected 6.10% annualized against my cost basis of 63.70.  So far, the trade is down 2,330.

Devour your prey raptors!