I opened two positions and closed one.
music selection: “Number 1” — Goldfrapp
weigh-in: 210.6 (1.8)
Two of today’s trades are driven by reaction to Trump. First, I am closing my Capital One (COF) short for a loss. The bank has serious headwinds in the form of lots of questionable credit card lending but the entire financial industry looks to benefit enormously from the Trump administration. I shorted 68 shares on 10OCT2016 for 73.56 per share. I am closing the short today at 87.90. I book a loss of 975 dollars or 19.49%.
My second Trump trade is to fill out my half position in AMLP to a double position. I want to go overweight here as Trump has vowed to approve Keystone and Dakota Access pipelines. It is clear the entire midstream sector is going to benefit from a favorable regulatory environment. The ETF yields over 8% while I wait. I sold an in the money put to try to get assigned, AMLP170217P00013000 for 50 cents a share. The trade will be in force for 40 days and yields 35.10% annualized while enjoying 2.50% downside protection.
Finally, I want to get back into PennyMac (PMT) to restore some lost distribution income as I trimmed positions to get defensive at year end. I did a buy/write strategy here, buying 600 shares at 16.69. I then wrote 6 calls, PMT170217C00017500, for 25 cents a share. The trade will be in force for 40 days and yields 13.04% annualized on top of the underlying 11.31% distribution yield. A total yield of 24.35%.
I’ll be back next Monday with some fixed income type investments to further improve my passive yield.
Devour your prey raptors!