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Monday trades: SIRI, PMT, SM, CNNX

SIRI and PMT were assigned to me over the weekend.

music selection:  “Future Foe Scenarios” — Silversun Pickups

weigh-in:  204.6 (0.6) – progress

I have newly assigned shares of Sirius XM (SIRI) at the 5.50 strike.  This morning, I sold SIRI170929C00005500 for 20 cents a share.  The trade will be in force for 40 days and yields an impressive 33.18% annualized.  I’m high on the long term potential for this name but I’m highly on the volatility premiums and will be trading in and out of this one to capture current income.

I also have new shares of PennyMac (PMT) at the 17.50 strike.  Premiums proved weak this morning and I had to settle.  I sold PMT171020C00017500 for 15 cents a share.  The trade will be in force for 61 days and yields 5.13% annualized.  That isn’t very appetizing but the underlying does yield 10.84% so I’m doing pretty well on the whole.

I sold new covered calls in SM Energy (SM) and have to admit I’m very disappointed in my performance here.  In fact, I’m close to being stopped out of the position even though I have a wider than normal 35% trailing stop on this.  I sold SM171020C00022500 for a pathetic 5 cents a share.  The trade will be in force for 61 days and yields a miserable 1.33% annualized.  The additional 10 cents in annual distributions is worth a feeble additional 0.72%.  There is no putting lipstick on this pig.

Finally, I sold a covered call on CONE Midstream Partners (CNNX).  The ticker is CNNX170915C00020000.  The trade will be in force for 117 days and I received premium of 25 cents per share for an annualized yield of 3.90%.  Since shares are unlikely to be called away, I expect to collect the distribution which is worth another 6.56% a year.  Long term, I think this will be a distribution growth machine and price will recover with distribution growth.  This is one to be patient with.

Together, the average annualized yield on the four trades is 10.88%.  After a 25% tax drag, that is good for an expected after tax return of 8.16%.  Add in the distributions on the underlying and I am beating the long term average of a buy and hold S&P 500 investor.  Not bad for a period when I doing relatively poorly with my trading.  I’ll take it.

Devour your prey raptors!

{ 7 comments… add one }
  • Chris B August 22, 2017, 2:16 am

    SM kinda stands out in this list. Has it become solely a directional bet on a recovery in fossil fuel prices? There’s no dividend and no significant options premium. There are more straightforward ways to buy a leveraged lotto ticket on fossil fuel prices, such as buying a Jan ’19 $9 strike call on USO for 11.5% of the underlying’s price, or better yet over 100:1 leverage with a Jan ’19 $9 strike synthetic long that’s already ITM by 0.71 for only 0.80 (yesterday’s last prices)! What’s the rationale for not exiting and deploying the $ in the direction of ideas like SIRI or UVXY? (Not to nit-pick a portfolio sore spot, just curious)

    • The Lizard King August 22, 2017, 1:55 pm

      SM has a lot of potential. They have restructured their lease holdings to focus almost solely on the best acreage in the Permian. Their next quarter should show a huge improvement. The market isn’t catching on like I hoped though. My initial trade had a nice return but it has languished since that first expiry. I’m closely watching my trailing stop.

  • Jason August 26, 2017, 6:11 pm

    I hope The Lizard King is staying out of Harvey way !!! Be safe !!! Jason

  • Steve August 31, 2017, 2:56 am

    Hey there, hope you have managed OK during the flooding. This has certainly sucked for many! Very unexpected for some.

    ‘Also, I am human or cephalopod and have checked the appropriate box’ – I always enjoy your comment on Tako, but maybe you actually are cephalopod and did not check the appropriate box 🙂

    • The Lizard King September 1, 2017, 2:59 pm

      Thanks Steve!

      Internet has been down here since Sunday night and was just restored as of 958 AM local time. Relief!

      I made out pretty well. I’ll do a hurricane post shortly after lunch to tell the tale. Transparency coming Saturday as well.

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