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27MAY2016 Expiries

I walked away from another trade on Monday.

music selection:  “Heaven Knows” — The Pretty Reckless (really dig this one)

I hatched a plan to write puts on Alliance Bernstein, a financial MLP.  Liquidity in the options turned out to be low and I couldn’t get my 12% annualized pricing so I passed.  Sometimes the important trades are the ones you don’t make.  Stay disciplined raptors!

ABBV, NVDA, and LLY puts expire today.  All are set to expire out of the money.  AbbVie and NVidia have pulled away and are out of range for writing new puts.  But I’ll visit Eli Lilly again on Monday.  I’m still reducing exposure so I will not be replacing ABBV or NVDA and will just go with cash in the brokerage while I wait for a more inviting market environment.

Devour your prey raptors!

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Covered call Suncoke Energy Partners (SXCP)

My old covered call expired out of the money.

music selection:  “Desire” — U2

Suncoke is a high yielding (22%) MLP in the metallurgical coal space.  I own shares with a cost basis of 11.93 a share.  The price has been a little depressed lately but I’ve more than made up for unrealized capital losses between options premiums and distributions.  I expect good things from this issue.  On Monday, I sold SXCP160819C00012500 for 25 cents a share.  The trade will be in force for 89 days and provides 8.90% bonus yield on top of the 22% distribution yield.  As long as steel remains a primary building material, this one should continue to generate a good yield.

Devour your prey raptors!

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Write Put Prospect Capital (PSEC)

My old put in PSEC expired worthless and I’m back for more.

music selection:  “Invisible Sun” — The Police

Prospect is a BDC yielding over 13%.  I’m making low ball offers via puts in hopes of getting assigned at an attractive price.  Meanwhile, I’m earning a great yield on the puts.  Assignment will result in writing covered calls against the position for bonus yield.

On Monday, I sold PSEC160617P00007000 for 8 cents a share.  The trade will be in force for 26 days and yields 16.04% annualized.  The trade also enjoys 7.7% downside protection.  I plan to be playing this issue for yield for quite some time.

Devour your prey raptors!

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Covered Call GlaxoSmithKline (GSK)

It is a pretty good day in the market for longs.

music selection:  “Ghosts” — Ladytron

My old covered call on GSK expired worthless so I’m writing another.  On Monday, I sold GSK160617C00043000 for 40 cents a share.  The trade will be in force for 26 days and yields 13.06% annualized.  I’ve cooled on the idea of having a lot of longs as the market gives me doubts at the moment.  ETFs and mutual funds have seen months of outflows and trading volumes have been very light for months.  Prices are holding but there is no conviction behind the trading.

For now, I prefer to be in out of the money puts with some extra downside protection.  GSK isn’t a good name for that as you need to be at the money to earn 12% annualized.  My high withdrawal rate means I have to earn my returns today and have little room for long term payoffs.  I might come back to this one when the market shows more life though.

Devour your prey raptors!

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Sell Puts PennyMac (PMT)

My shares of PennyMac were called away on Saturday and I’m writing puts to replace them.

music selection:  “Dudley” — Yeah Yeah Yeahs

weigh-in:  219.2 +0.2 – Fiddlesticks!

PennyMac is a mortgage REIT that has lately been a hedge fund darling.  It yields over 12% and has active options that also pay well.  I am doing quite well playing this one.  I am however, reducing my exposure by cutting the number of contracts.  I’ll be reducing exposure across the portfolio for a couple months unless I see an improvement in the general market.  Prices have been pretty good but volumes have been abysmally low and virtually every EFT and mutual fund in the market reports heavy outflows.  This is bearish short term but bullish long term.  These are signs of fear and fear is not what the top of a bubble looks like.  There is more money to be made before ‘irrational exuberance’ returns.

I sold 7 contracts of PMT160617P00015000 for 30 cents a share.  The trade will be in force for 26 days and yields 28.08% annualized.  I hope to get assigned.  Oh yeah, the trade enjoys over 3 percent downside protection.

I’ll be posting daily this week as a lot of trades are queued up.

Devour your prey raptors!

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20MAY2016 Expiries

I have six positions expiring today.

music selection:  “Nights In White Satin” — The Moody Blues

A covered call in Suncoke (SCXP) will expire out of the money.  I’ll be writing another on Monday

A covered call in Teekay Tankers (TGP) will expire in the money and shares will be called.  I admit it, I made a mistake in buying this.  I was already too exposed to commodity pricing and I got clobbered here.  I’m glad to walk away with anything.

A written put on CH Robinson Worldwide (CHRW) will expire safely out of the money.  Price is getting away from me and I think I may say goodbye to this one.

A strangle in PennyMac (PMT) looks to expire out of the money.  The written call is threatened and will go down to the wire.  As long as the stock remains range bound, it matters little.  I’ll keep playing this one for option income and collect dividends in the periods I hold shares.

A covered call in GlaxoSmithKline (GSK) will expire safely out of the money.  I’ll roll the position on Monday.

A written put on Prospect Capital (PSEC) will expire safely out of the money.  I will also roll this position on Monday.

The above positions returned 720 dollars in premium income.

Devour your prey raptors!

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Update Discounted Bonds

I sold some of my bonds for a profit.

music selection:  “Just Between You And Me” — April Wine

The broad high yield bond market has been showing some unexpected strength.  On April 27, I had an opportunity to close some positions near par.

First was Ensco (ESV).  The 8.500 coupon was originally entered into on 9FEB2016 for 75.525.  I sold for 100.3.  About 65 dollars in interest was accrued and paid.  Round trip, after commissions, the return was 33.47% or 156.60% annualized.  Nice!

Second was US Steel (X).  The 7.000 coupon bond was entered into on 8DEC2015 for 63.000.  I sold for 99.9.  About 35 dollars in accrued interest was collected.  The round trip, after commissions return was 52.78% or 136.64% annualized.

Finally there was Scientific Games (SGMS).  The 8.125 coupon bond was purchased on 7DEC2015 for 79.000.  The sales price included about 21 dollars in accrued interest.  The round trip return was 22.33% or 57.40% annualized.

I also have a hopeful sell order in place for Freeport McMoran (FCX) open till cancelled at 98.900.  Currently pricing is 96.375 so any good news out of FCX could result in triggering.

Devour your prey raptors!

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Buy/Write HCP, Inc. (HCP)

I opened a buy/write on HCP.

music selection:  “Lights Out” — Santigold

weigh-in:  219.0 (0.2) – disappointing week

HCP is a REIT that is focused on the medical space.  They particularly own a lot of nursing care homes and stand to benefit from the increasing need for long term care for aging baby boomers.  The company has a long history of raising its distribution.  I bought shares at 36.33 and have a yield on cost basis of 6.73%.

To juice returns, I sold HCP160617C00037500 for 65 cents a share on the 6th of May.  The trade will be in force for 43 days and yields 15.17% annualized versus my cost basis.  That is a potential for a combined 21.9% annualized total yield.  There is potentially some interest rate risk exposure here but I think the fears the Fed will raise the benchmark rate by a large amount are overblown.  At least I’m sure enough to risk hard earned money on it.

Devour your prey raptors!

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Share this GoFundMe campaign

Raptors,

Do me a favor and check out the GoFundMe of a friend who is raising funds for original research in Economics and Education.  If you can’t give, share to social media.  Jack’s Dissertation.

Devour your prey raptors!

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Strangle Cheneire Energy (LNG)

My old strangle on LNG expired out of the money and I am back for more.

music selection:  “Almost Easy” — Avenged Sevenfold

Cheneire Energy is building natural gas export infrastructure.  It should lead to a highly predictable and profitable business.  I own 200 shares and will add 200 more at the right price.  To that end I wrote LNG160610P00035000 for a 1.35 a share.  The trade will be in force for 39 days and yields 36.10% annualized.  The trade also enjoys 13.14% downside protection.  The put is slightly in the money as of this writing.

I also sold covered calls, well out of the money, on my shares.  I sold LNG160610C00048500 for 14 cents a share.  That trade will be in force for 39 days and has an annualized yield of 4.28% against my 30.60 cost basis.

This one is a favorite of Carl Icahn who owns 19% and is agitating for more shareholder friendly management practices.  I feel good about my chances here.

Devour your prey raptors!

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