Monday trades look tasty this week.
music selection: “Listen Like Thieves” — INXS
weigh-in: 205.0 n/c
I closed a couple positions early. The CVS 55 strike calendar was moving increasingly out of the money with the recent share rally. I closed on 9AUG2019 for a 28 dollar profit. On 929 at risk over 31 days, my annualized return was 35.49%. I also closed DIS early after disappointing results was weighing on the stock price. I made 91 dollars on 650 capital at risk over 28 days or 182.50% annualized.
I did a little buying and selling of core positions today as well. I sold AWP for 5.85, booking a 1,101 long term capital gain. I sold CHIX for 14.58, booking a 725 short term capital loss. And I sold NVDA for 153.16, for a 183 dollar short term capital loss. I redeployed the 20,226 into JQC, increasing my annual expected dividends, distributions, and interest to 26,616 or 106.46% of budget.
As per the playbook, I have a bullish spread, bearish spread, and neutral calendar spread today. The net change in positioning is roughly neutral. That is my plan for dealing with volatility and the inevitable crash as I raise money to deploy into distressed bonds.
For my bear put spread, I am betting against HTZ. The thesis is that HTZ is a play on the used car market as their balance sheet is highly leveraged and dependent on used car pricing. With subprime lending tightening up and millions of leases expiring, there is going to be a glut of used cars on the market. The car rental business is not a good place to be right now. I bought the 16/17 strike 18OCT2019 expiry bear put spread for 73.88 cents a share. So long as the share price falls, remains the same, or least gains less than 10.50% in the next 68 days the spread will be worth a 1.00. That is good for a 190% annualized gain.
For a high probability bullish call, I’m going with an in the money bull call spread on Booz Allen Hamilton (BAH). This deeply entrenched defense contractor has a powerful moat in that it has spent decades gaining deep access to classified information and security clearances. It is trusted to provide electronics and computing expertise to the US Military and is a critical supplier with a deep backlog. Global instability that drives the US stock market down actually benefits this company. I bought the 60/65 strikes 20DEC2019 bull call spread for 4.27 a share. So long as the shares remain the same, rise, or fall less than 10.24% before the expiry, the spread will be worth 5 dollars. Over 131 days that is good for 90% annualized.
Finally, I have a calendar spread in Novo Nordisk (NVO). The pharmaceutical company has a slow moving stock price that is ideal for calendar spreads that benefit from time decay. I bought the 50 strike put spread on the 20SEP2019 and 20DEC2019 expiries for 1.20 a share. I project the long put to be worth about 2.22 at the expiry of the shorter dated put for 776% annualized return over 40 days. This will require more watching than the bull call and bear put spreads and is likely to be closed early depending on what the shares are doing in the weeks ahead of the short dated expiry.
Devour your prey raptors!