SIRI expired out of the money over the weekend.
music selection: “Crazy” — Seal
weigh-in: 202.4 +1.0 – doh!
My puts in Sirius XM (SIRI) expired safely out of the money over the weekend. I earned 552 for my trouble. This morning, I entered a limit order for SIRI180622P00006500 at 10 cents a share. That trade would have been in force for 40 days and yield an expected 14.04 annualized. Unfortunately, the order never cleared the market. I was unwilling to go lower and take on more risk for such a small amount of income.
I am in the process of dialing down my risk now that the yield on the 10 year Treasury has breached 3%. This removes about 15,000 in liability from my account. I have said it several times before and the best trade you can make is often times – no trade. It makes no sense to pick up pennies in front of a steam roller.
Being able to pass on trades while early retired requires a strategic fixed income allocation. Like I often discuss during Friday Fixed Income, I earn enough passive income to cover about 126% of my budget. This is critical to ensure I can wait out the markets if nothing attractive is on offer. Volatility is back near all time lows and option premiums are getting weaker. I may have to pass on several more trades before the big money starts rolling in again.
In the meantime, I will de-risk and raise cash. When the business cycle rolls over again, probably driven by inversion of the yield curve, I will be poised to strike. Premiums will be plump again (and further supported by higher interest rates). There will be attractive risk-reward setups in deeply discounted high yield bonds again. And there might be good opportunities for short trades as well. I am planning ahead to weather the storm.
Devour your prey raptors!