Shares were called away early in Prospect (PSEC) and I sold another discounted bond.

music selection:  “This Is It” — Kenny Loggins

Twelve contracts worth of PSEC were called away last night, leaving me with two contracts.  Shares went for 8.00 and had been purchased at 7.87 for a buy/write strategy.  Those shares were in force for 37 days and yielded 22.20% annualized.  I have replaced the exposure with written puts.  I sold PSEC160916P00008000 for 15 cents a share.  The trade will be in force for 52 days and yields 13.16% annually.  This trade may be about played out as it is attracting lower options premiums than when I originally got into it.  The market seems to be saying the stock is fairly priced and is expected to trade sideways.

In discounted bond news, I sold the Avon Products bond for 90 cents on the dollar today.  The trade cleared seconds after my PSEC puts from a long open good till canceled order.  The bond was purchased on 15DEC2015 at 70.3 cents on the dollar.  I paid 2 dollars in commissions and 32.81 accrued interest.  I will update this space at the end of the trading day when I get my broker report detailing commission and interest paid.  Estimated annualized return is about 40%.

*Update 6:25 PM local time* – The sale of the AVP bonds came with 4.75 paid in commissions and 47.98 paid in accrued interest.  The trade was in force for 225 days and yielded 45.31% on an annualized basis.

Devour your prey raptors!


Update Prospect Capital (PSEC) / Update Discounted Bonds

Never miss another opportunity to devour prey!

2 thoughts on “Update Prospect Capital (PSEC) / Update Discounted Bonds

  • July 28, 2016 at 8:04 am

    I must say, I’m really liking your bond trades. Have you trade many bonds that ended up defaulting; since I assume you’re buying when everyone else is selling?


    • July 28, 2016 at 9:56 pm

      Tonka, I have a few that are in bankruptcy and/or default. They are Breitburn Energy, Peabody Coal, Energy XXI, Linn Energy, Midstates Petroleum, and Noranda Aluminum. After coupons received, those positions are 481.15 total in the red for me. I expect to be vindicated as the long term historical average for recovery by bondholders in bankruptcy is 40 cents on the dollar. So on average, I think I will make small profits on those positions. They will go in the category of “underperforming” capital instead of “losses.” For certain, you need to diversify as eventually some bond positions, even when bought at a steep discount will be losers. The winners do so well that you can afford a few losses though.


Leave a Reply

Your email address will not be published. Required fields are marked *


This site uses Akismet to reduce spam. Learn how your comment data is processed.