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Monday Option Trades

Several positions expired over the weekend.

music selection:  “Tenth Avenue Freeze-Out” — Bruce Springsteen

weigh-in:  198.0 +1.2

Multiple positions expired over the weekend.  Shares in Match Group (MTCH) were called away at 46.  Shares in Ford Motor Company (F) (held short) were put away at 10.

I have a buy/write position in Scott’s Miracle Grow (SMG).  The thesis is they have moved strongly into the supply of the legal marijuana market where they are earning superior margins.  The position has struggled none-the-less.  I sold covered calls this morning at a strike below my entry price.  I sold SMG180921C00085000 for 20 cents a share.  The trade will be in force for 33 days and yields an expected 2.60% annualized.  Assignment will result in a 5 dollar per share capital loss.

I decided to get back into Match Group (MTCH) after being called away with cash secured puts.  I sold MTCH180921P00048000 for 2.25 a share.  The trade will be in force for 33 days and yields an expected 51.85% annualized while enjoying 5.36% downside protection against a decline in share price.  I should do very well here.

I opened a new position in Ingersol Rand (IR).  This is an industrial company that supplies such brands as Trane.  It is a high margin business in a strong uptrend and offers attractive put premiums.  I sold IR180921P00100000 for 2.28 a share.  The trade will be in force for 33 days and yields an expected 25.22% while enjoying 2.09% downside protection against a decline in share price.  I’m very happy with what the market gave me here.

I sold four covered puts against my short position in Ford Motor Company (F).  The yield is low but it helps cover my cost to carry the short.  I sold F180928P00009000 for 7 cents a share.  The trade will be in force for 40 days and yields an expected 5.07% on an annualized basis.

Finally, I sold puts in communications provider CenturyLink Inc. (CTL).  I sold CTL180928P00023500 for 90 cents a share.  The trade will be in force for 40 days and yields an expected 34.95% on an annualized basis while enjoying 4.52% downside protection against a decline in share price.  This is a good return for what is normally a slow moving stock.

I was unable to get a fill at an attractive price on Macquarie Infrastructure Company (MIC).  I will try again tomorrow.

Today’s trades average an expected annualized return of 23.94%.  This is how I regularly beat the S&P 500, while taking on less risk than buy and hold indexers.  Check in Friday for Friday Fixed Income where I highlight high conviction ideas in the fixed income space.

Devour your prey raptors!

 

{ 2 comments… add one }
  • Chris B August 21, 2018, 7:02 pm

    I’m considering only selling call options on days when the VIX is showing some kind of spike. The rationale is that these are the only days there is enough IV to sell to make it better than even odds. The problem with this plan is that IV only tends to rise when stocks are falling – exactly the time you’d like to have already-existing short call positions. What’s your take? Is it better to sell calls into an IV spike or on a quiet slightly up day?

    For put selling, the calculation seems clearer. You would much rather sell on a day when stocks have already fallen and IV/VIX is high than the day before.

    • The Lizard King August 21, 2018, 9:08 pm

      I don’t try to time the market. The pattern of VIX spikes seems very random to me. If I knew more technical analysis I might be able to be more intelligent about timing my trades.

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