Rolling three trades and opening a new one.
music selection: “Anybody Listening?” — Queensryche
weigh-in: 204.8 (0.2)
A written put in ON Semiconductor (ON) expired out of the money over the weekend. The stock has fat premiums like something that is highly volatile even though the stock has been trading flat for quite some time. I think the stock has a great runway ahead of it and I’d be glad to own at 22 so I am writing puts at that strike. I sold ON190517P00022000 for 80 cents a share. The trade will be in force for 26 days and yields an expected 51.05% on an annualized basis while enjoying 5.90% downside protection against a decline in share price. This is a spectacular trade with for such low risk.
A covered call in Dolby (DLB) expired out of the money over the weekend. I am writing a fresh covered call to continue earning income while I wait on the next distribution. I sold DLB190517C00065000 for 1.34 a share. The trade will be in force for 26 days and yields an expected 28.99% against my 64.88 cost basis. This is a sold company with low risk and I feel very lucky to be earning almost 29% on something that is solid.
A covered call in Blackstone (BX) finished in the money over the weekend and shares were called away. I collected an extra 279 in short term capital gains on top of my options premium for my effort. I have two trades in BX as a replacement.
First is another covered call with a short time horizon. I sold BX190531C00039500 for 93 cents a share. I picked up shares at 39.73 using a combo order. The trade will be in force for 40 days and yields an expected 16.08% annualized, assuming shares are called away. If shares are not called away, the annualized yield on the options would be 21.36%. That is a good return for a high probability trade.
I also opened a longer duration bull call spread in BX. The company is converting from an MLP structure to a C corporation. In my estimation, this is going to unlock a lot of value. A lot of institutional investors would have loved to own BX over the years but were prohibited from purchasing shares in an MLP. Brisk new demand is going to push the share price up. I am taking a conservative approach and buying a bull call spread that is already in the money. I bought BX190920C00038000 for 2.62 a share. At the same time, I sold BX190920C00039000 for 2.03 a share. That is a net debit of 59 cents per spread. So long as shares decline less than 73 cents between now and expiry in September, I will earn 1.00 per share. That is a 69% return or 168% annualized. I will close early if the spread trades below 30 cents or I can sell for 95 cents prior to expiry.