ADM expired out of the money over the weekend.
music selection: “Nightmare” — Avenged Sevenfold
weigh-in: 209.6 +2.8 – way too much turkey dinner!
ADM has been badly underperforming for me. I feel like I have stranded capital so I’m looking to exit the position gracefully. I am selling a near the money covered call that will result in a short term capital loss if exercised. I still believe in the long term prospects for this company as roughly a billion people will enter the global middle class in India and China over the next decade and they will surely use more grains. But I have to look after today too.
I sold ADM180105C00040000 for 48 cents a share. The expected return is 10.95% over 40 days. I will take a short term loss of 5 dollars a share if exercised. That will bring the cumulative loss on the trade including all premiums and distributions collected to 4.62%. It is unfortunate but I hope to get this capital back to performing shortly. I can also use the capital loss for tax purposes next year as I expect to have a much higher budgetary burden to provide for income tax provision.
There are no other trades today and I am following UVXY closely as I have until the 30th to exit the trade in my tIRA account. I should be able to eek out a small profit.
Devour your prey raptors!
That last I think earnings move from ADM messed up my position as well. I’m still sitting on a small profit thanks to selling premium on both sides, but it’s not where I’d like it to be considering I’ve been trading around the shares since July.
Seems like tech stocks and bitcoin are the only things consistently going up.
I take that as a warning. Also, I lack confidence in the current US government in a way I didn’t back in 2009, so I need to hedge myself from selling at a bottom.
I’m thinking long and hard about buying 2 years of collar protection on my SPY holdings. With ATM long puts and short calls allowing for up to 21% appreciation in that timeframe, the cost would be about 3.5% per year. The odds of not profiting in 2 years are historically slim, and my future FIRE would not be set back a couple years if a correction hits in that time.
I’m also considering the replacement of my long UVXY puts with limited-risk spreads.
Maybe it’s the tax bill or maybe it’s the holiday orgy of waste-spending, but I’m looking at the downsides today.
I feel you. The current rally, I think, still has legs through 2019 and maybe 2020. The tipping point will be when the Fed pushes the yield on 2 yr T over the 10 yr T (inverted yield curve). There is no more sure indicator of a top and coming recession. But while we can probably expect a long lived rally, it will come with lots of volatility along the way. It is important to either be hedged or watching your stops!
It is looking good for a small pofit on your UVXY puts.
I got Lucky with ADM, only selling puts at strike 40 and never being exercised. Thought about writing soem new ones when i noticed it trading at 39 but i am trying to reduce my leverage so thought better of it. Good move until now ..
I thought I was going to get out today at 5.75 but it never cleared. I am also looking to trim net exposure.