I made three trades today.
music selection: “Don’t Make Me Prove It” — Veruca Salt
weigh-in: 216.0 (0.8) – Back on the wagon!
Today was maybe not the best day to sell options as the VIX had a sharp drop on news the most likely candidate to win the French presidency is now someone who is in favor of keeping the EU intact. I got pretty good pricing anyway.
First is AmTrust Financial (AFSI) which was assigned over the weekend. This is a profitable insurer that is mired in an accounting scandal regarding revenue recognition in a non core part of the business. It is pretty steeply discounted and sporting really fat options premiums right now. I sold AFSI170519C00017500 for 70 cents a share. The trade will be in force for 26 days and yields a tasty 56.15% annualized. I plan to continue writing covered calls here until the premium falls below 18% annualized. I think I can make 15% annualized with buy and hold and the tax adjusted equivalent is around 18%.
Next is a new trade in The Blackstone Group (BX). This is a financial MLP that has done very well by its limited partners over its lifetime. Investing as a limited partner requires accredited investor status as well as a lengthy lock up period of capital. But we can invest in the general partner and still earn great distributions as well as capital growth. The stock is also current sporting plump options premiums. I sold BX170602P00030000 for 1.01 a share. The trade will be in force for 40 days and yields 30.72% annualized yield while offering 4.73% downside protection. I’ll be glad to get assigned here and become eligible for distributions while writing covered calls for bonus income.
Now for something a little different. There is a Chinese company called Tencent. They own the WeChat messaging and mobile payments system that is a near monopoly in China. This phone app is very sticky and its users spend a lot of time using it daily. Margins are high and the growth rate is very high. These guys are going to be the market leader in an important niche in the worlds biggest economy for a long time. I think they could ultimately be the company with the world’s largest market cap. Yes, bigger than the likes of Google and Apple. There are no options so I’m going with a half position size of around 5,000. I bought 162 shares of TCEHY for 30.81 a piece today. I will hold these shares with a 25% trailing stop loss. The dividend here is currently trivial and I like it that way while the growth rate is still very high. It could eventually be a high yield stock though as its technology is very scale-able and they have expertise that can be exploited in other countries as well.
Devour your prey raptors!