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No Trade

SIRI expired out of the money over the weekend.

music selection:  “Crazy” — Seal

weigh-in: 202.4 +1.0 – doh!

My puts in Sirius XM (SIRI) expired safely out of the money over the weekend.  I earned 552 for my trouble.  This morning, I entered a limit order for SIRI180622P00006500 at 10 cents a share.  That trade would have been in force for 40 days and yield an expected 14.04 annualized.  Unfortunately, the order never cleared the market.  I was unwilling to go lower and take on more risk for such a small amount of income.

I am in the process of dialing down my risk now that the yield on the 10 year Treasury has breached 3%.  This removes about 15,000 in liability from my account.  I have said it several times before and the best trade you can make is often times – no trade.  It makes no sense to pick up pennies in front of a steam roller.

Being able to pass on trades while early retired requires a strategic fixed income allocation.  Like I often discuss during Friday Fixed Income, I earn enough passive income to cover about 126% of my budget.  This is critical to ensure I can wait out the markets if nothing attractive is on offer.  Volatility is back near all time lows and option premiums are getting weaker.  I may have to pass on several more trades before the big money starts rolling in again.

In the meantime, I will de-risk and raise cash.  When the business cycle rolls over again, probably driven by inversion of the yield curve, I will be poised to strike.  Premiums will be plump again (and further supported by higher interest rates).  There will be attractive risk-reward setups in deeply discounted high yield bonds again.  And there might be good opportunities for short trades as well.  I am planning ahead to weather the storm.

Devour your prey raptors!

{ 4 comments… add one }
  • Chris B May 14, 2018, 10:07 pm

    It’ll be an interesting summer for sure. Glad you don’t feel pressured to make a trade. Seems like a good time to sell covered calls and to buy put protection with the proceeds.

  • Jrbroker May 17, 2018, 1:27 am

    Take a look at BUD and MO, they have been hit hard, but they are attractively valued and pay hefty premiums, oh and also heavy dividends, ,,,

    • The Lizard King May 17, 2018, 1:22 pm

      Thanks for the tips. I’m actually selling MO, since I stopped out this week. That was a buy/hold position in my tIRA account. Replacing it with DWDP, I’ll write that up Monday. BUD is a great company. If I get some shares called away to free up some margin, I might trade it.

      • Jrbroker May 17, 2018, 3:20 pm

        Cool!! U welcome, I’m starting positions on both, BUD maybe more long term

        Will take a look at
        DWDP , thnx for the tip ….

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