The markets were closed yesterday for the Christmas Holiday.
music selection: “The Banana Boat” — Harry Belafonte
weigh-in: 207.6 +0.4
First order of business today was to close the short position in AMG. Shares rose to 204.35 and I was stopped out with a 1,297 capital loss. That is 46.08% annualized. I still think shares are going down but a rising tide lifts all boats. It is simply a difficult market to be short in.
I’m in the process of increasing my standard position size from 10,000 to about 14,000. The portfolio has grown dramatically in my five years of FIRE and it is time to make that adjustment. Annualized returns have been falling for some time due to under investment. When the yield curve inverts, it will be time to cut exposure again.
I sold BX180202C00034500 for 26 cents a share. This trade will be in force for 39 days and yields an expected annualized return of 7.05%. I also sold BX180202P00032000 for 88 cents a share to convert the position to a strangle. That trade will also be in force for 39 days and yields an expected 25.74% annually while enjoying 3.83% downside protection. The combined position yields an expected simple average of 16.40% annualized.
I increased the number of put contracts on Micron (MU) by selling MU171229P00042000 for 2.35 a share. That trade will be my best performer out of today’s efforts. The trade will be in force for 39 days and yields an expected 52.37% annualized while enjoying 5.75% downside protection. A real winning proposition.
I converted Sirius XM (SIRI) to a strangle. Liquidity seems to be falling for these contracts and I needed to go a little further out to find fills. For calls I sold SIRI180216C00006000 for 7 cents a share. The trade will be in force for 53 days and yields an expected 8.03% annualized. There is room for 50 cents in capital appreciation as 5.50 strikes were not available on the monthly expiry requiring moving up to 6.00. I also sold SIRI180216P00005000 for 10 cents a share. That trade will be in force for 53 days and yields an expected 13.77% annualized while enjoying 10.42% downside protection. The combined strangle yields 10.90% annualized.
I was finally able to eek out a few pennies on a Penny Mac (PMT) covered call. Liquidity has dried up for these shares. I continue to hold the underlying because of the high yield while hoping for a return of options interest. I sold PMT180420C00017500 for 10 cents a share. The trade will be in force for 116 days and yields an expected 1.80% annualized. Risk of shares being called away seems very low with the current price at 16.62.
All together, the simple average of these options trades is an expected annualized return of 18.13%. That is about double the long term average of the S&P 500. I remain eligible to collect dividends on the shares held long for bonus return and have picked up eligibility for some upside capital appreciation in SIRI. The future looks bright.
Devour your prey raptors!