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New written puts for Monday 27.46% annualized

I have three new trades today.

music selection:  “Kodo (Hishou Version) — Yoshida Brothers

weigh-in:  208.2 (1.0)

First up is a return to the theme of Big Cheap Tech.  I’m going back to Oracle (ORCL) for its healthy cash and reasonable pricing.  If I get assigned and can’t exit gracefully for a long period, I should still do well as this is a company that rewards shareholders.  I sold ORCL180119P00050000 for 1.43 a share.  The trade will be in force for 40 days and yields a projected 26.10% annualized while enjoying 3.29% downside protection.

Next up is a much smaller tech company but one with great prospects and even better cash flow: ON Semiconductor Corporation (ON).  ON provides electronics components to consumer goods manufacturers such as car companies.  It has stable growth to go along with its strong cash performance.  I sold ON180119P00019000 for 50 cents a share.  The trade will be in force for 40 days and yields a projected 24.97% while enjoying 4.88% downside protection.

Finally, I’m going back to Target (TGT) for its strong balance sheet, stable sales, and outstanding cash flow.  The retail sector has taken a beating over the last year.  We’ve reached the point where Wikipedia has a page for “retail apocalypse”.  To me, this signals shorting retail is no longer a contrarian trade.  The retail hate has gone mainstream so the sector should be poised for a short term rally.  I sold TGT180126P00062000 for 2.50 a share. The trade will be in force for 47 days and yields a projected 31.31% annualized while enjoying 4.20% downside protection.

The three trades average a projected annualized return of 27.46% while generating 1,046 in cash income for the month of January.  Three more positions due to be rolled after expiring this Friday should add another 1,000 or so to the January total.  2018 looks to be a strong year at the raptor.

Devour your prey raptors!

{ 8 comments… add one }
  • Chris B December 12, 2017, 7:34 pm

    That’s a lot of bullish exposure. I’m over 100% long myself. I think there are opportunities to hedge market risk while also potentially gaining upside in a continued bull market scenario by betting against weak companies like JCP, LC, and SHLD – or at least doing long straddles when you can. However, it’s hard to bet against the trend – you and I have received nothing but burns doing that. Bull markets train us in this way to go long, but they’ll eventually abandon us.

    • The Lizard King December 12, 2017, 8:11 pm

      Watch the 10 and 2 year Treasuries for an inversion of the yield curve. That is a sure sign we are about 6 months from recession.

  • Joe December 15, 2017, 5:18 am

    Thanks for the recession signal to look for.

  • Chris B December 15, 2017, 2:54 pm

    The curve is flattening. Might be time to switch from naked UVXY puts to spreads.

    Also, I’ve lived through three bubbles, and each time we were assured by even the most bearish financial media that the pending collapse would be localized to [insert: asian debt / tech stocks / housing industry]. So what happens when bitcoin finally collapses? Again, we’re being reassured that there will be no contagion.

    • Steve December 15, 2017, 3:10 pm

      I would have told you that those assets (e.g. housing) were way bigger than Bitcoin, but I just checked and Bitcoin now has a market cap around $300B. Still tiny compared to housing, but it’s starting to get large enough that serious money will be lost when the bubble bursts.

      • David December 15, 2017, 6:37 pm

        Bitcoin market cap is misleading. There is 1M coins in Satoshi’s addresses that will most likely remain dormant forever. There is also a lot of lost coins due to hardware failure or throwing your laptop in the trash. Then you have the hardcore ones that will die with their coins in cold storage.

        The percentage of live coins is much smaller than the percentage of actively traded stock of public companies with similar market cap. You can add a few billions to the market cap by buying a few millions worth of coins. That’s how illiquid the market is.

        If it were to crash tomorrow, it wouldn’t have much impact. If it crashes in 2 years, investment funds will have had enough time to get on the BTC train through futures and tightly couple BTC with the rest of the markets. That’s going to hurt.

  • Steve December 15, 2017, 7:32 pm

    How do you normally go about selling covered calls and puts? Do you simply do a market trade or do you you use a limit order to try for a better price?

    • The Lizard King December 15, 2017, 9:51 pm

      Always use a limit order. Somewhere between the bid/ask is a point where only your contracts will be on the NBBO. That is your signal to sit tight and wait for a buyer.

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