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Monday Trades – AMLP, PMT, COF

I opened two positions and closed one.

music selection:  “Number 1” — Goldfrapp

weigh-in:  210.6 (1.8)

Two of today’s trades are driven by reaction to Trump.  First, I am closing my Capital One (COF) short for a loss.  The bank has serious headwinds in the form of lots of questionable credit card lending but the entire financial industry looks to benefit enormously from the Trump administration.  I shorted 68 shares on 10OCT2016 for 73.56 per share.  I am closing the short today at 87.90.  I book a loss of 975 dollars or 19.49%.

My second Trump trade is to fill out my half position in AMLP to a double position.  I want to go overweight here as Trump has vowed to approve Keystone and Dakota Access pipelines.  It is clear the entire midstream sector is going to benefit from a favorable regulatory environment.  The ETF yields over 8% while I wait.  I sold an in the money put to try to get assigned, AMLP170217P00013000 for 50 cents a share.  The trade will be in force for 40 days and yields 35.10% annualized while enjoying 2.50% downside protection.

Finally, I want to get back into PennyMac (PMT) to restore some lost distribution income as I trimmed positions to get defensive at year end.  I did a buy/write strategy here, buying 600 shares at 16.69.  I then wrote 6 calls, PMT170217C00017500, for 25 cents a share.  The trade will be in force for 40 days and yields 13.04% annualized on top of the underlying 11.31% distribution yield.  A total yield of 24.35%.

I’ll be back next Monday with some fixed income type investments to further improve my passive yield.

Devour your prey raptors!

{ 2 comments… add one }
  • t January 10, 2017, 7:11 pm

    You didn’t annualize that COF yield! j/k

    I do think it is a good lesson on shorting stocks though. You need the market to realize what you have realized while you are still liquid (unlimited downside). That’s why all the hedge funds who short stocks are so vocal about it. The business channels and the internet give them a platform to do it.

    Good luck with your other trades and thanks for the honesty on the loss.

    • The Lizard King January 10, 2017, 11:51 pm

      Haha. It would be pretty ugly annualized. I’m about break even on my remaining shorts. Which is fine. You expect to lose money on hedges most of the time. Really, its a “win” you don’t want for the rest of your portfolio.

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