I bid on six trades and completed four.
music selection: “Gemini Dream” — The Moody Blues
weigh-in: 206.4 (2.8) – A good week.
Six positions expired over the weekend. I was able to reestablish four but two more offered no attractive bids. PSEC and ORCL both expired out of the money and left me with an opportunity to write new puts. I was unable to find a bid that allowed for my minimum 12% annualized return on put writing. I’ll move these two to the watch list and look for better opportunities in the future. I have four covered call trades to share with you instead.
SM Energy has disappointed but I’m working to make the trade profitable. I sold SM170818C00022500 for 10 cents a share. The trade will be in force for a short 26 days. It yields 6.24% annualized. After this trade, I am down 19.73% in the trade since inception. I’ll need some stability in the market for WTI crude to make a full recovery.
Shares of CNNX were narrowly assigned over the weekend. I sold CNNX170818C00020000 for 55 cents a share. Like SM, the trade will be in force for only 26 days. It yields a tasty 38.61% annualized. The underlying yields over 5% but it is a 50/50 proposition at this point whether I will actually collect a distribution before being called away. The call yields are compensating me plenty well enough though.
Archer Daniels Midland (ADM) is another trade that has been disappointing. Shares moved against me almost immediately after opening a position and have been slow to recover. I sold ADM170901C00045000 for 15 cents a share. The trade will be in force for 40 days and yields a paltry 3.04%. All in, I am now only down 4.47% on the trade in total. A break even result is highly achievable.
EOG has been treating me pretty well. This is a best in class shale driller in the Permian Basin of west Texas. They should remain profitable down to a WTI crude price of 35 a barrel. I sold EOG170901C00095000 for 2.20 a share. This trade will be in force for 40 days and yields a desirable 21.13% annualized. This position is 6.79% in the green after accounting for options premiums received. I should be able to play this one profitably for months.
All together these four options trades yield a simple average annualized return of 17.25%. I think that is pretty good considering half the positions have moved against me and I’m still handily beating the long term average return of buy and hold index investors. It leaves me puzzled that so many people think indexing is the only rational strategy.
I’ll be taking a road trip vacation to the mountain west with my father, Lizard King Sr, next week. Further blog updates will be highly dependent on finding reliable Wi-Fi.
Devour your prey raptors!