Monday Trades.

music selection:  “Fire” (live) — Bruce Springsteen

weigh-in:  203.2 (1.8)

I closed some positions early.  First, Annaly (NLY) took it on the nose when the yield curve inverted.  With the lower strike out of the money, I elected to cut my losses and sold the 9/10 call spread for 12.6 cents a share.  I booked a short term loss of 1,465.  My short puts in CAKE were assigned early.  I closed out the assigned shares and long puts this morning.  I collected (net) 221 in profit on 2260 capital at risk over 14 days.  That is a return of 9.78% or 255% annualized.

I decided to close out my position in Acuity Brands (AYI) at 125.33 a share.  I originally purchased 43 shares on 21JAN2019 for 116.15 per share.  The trade was in force for 210 days and earned 7.9% or 13.74% annualized.  I deployed most of the recovered funds to close out 152 shares of my VXX short.  Shares were originally shorted on 30JAN2019 at 38.57 per share.  I closed those shares out at 26.59 per share for 37.79% gain over 201 days or 68.63% annualized.  I continue to selectively close out long positions to raise cash and reduce leverage in anticipation of great deals in the distressed debt space when the credit markets finally roll over.  The recent yield curve inversion is the harbinger of doom and/or opportunity.

Short call positions in MO, MIC, and ON expired out of the money over the weekend.  I sold ON191018C00022000 for 12 cents a share.  The trade will be in force for 61 days and yields an expected 3.26% annualized.  Likewise, I sold MO191018C00055000 for 5 cents a share.  The trade will be in force for 61 days and yields a minuscule expected 0.54% on an annualized basis.  I have been unable to get a bid on covered calls for Macquarie (MIC) and may try a later expiry tomorrow if my ask does not clear the market by close.  I am writing covered calls until I am called away on several names in an attempt to exit the positions gracefully while raising cash to have ready for the turning of the credit cycle and the many great opportunities to buy distressed bonds at a steep discount.  WY, CCJ, SXC, and IP are all subject to the same treatment until I am called away.

In addition to the above trades, I continue to position my go-forward trades as market neutral with a bull call spread, a bear put spread, and a calendar spread each week.  These are all net debit spreads with less than 2,500 in capital put at risk for each trade.  I expect to turn a respectable profit in any market condition while I wait for the recession and the opportunity to ambush my distressed debt prey.

I bought the BRK-B 200 strike calendar spread with 20SEP2019 and 20DEC2019 expiries.  I sold BRKB190920P00200000 for 2.924 a share and simultaneously bought (using a combo order) BRKB191220P00200000 for 4.14 a share.  The net debit is 1.216 a share and is expected to be in force for about 33 days.  If the underlying price remains the same as it is today and volatility is unchanged, the long put will be worth 3.74 at expiry of the short put.  That is good for an annualized return of 2,295% over 33 days.

I bought the MTCH 75/80 bull call spread with 20SEP2019 expiry for a net debit of 3.5078 per share.  Shares are currently 83 and so long as they do not fall below 80 by expiry (33 days), the maximum spread price of 5 dollars per share will be earned.  That is an expected annualized return of 471% over the 33 days in force.

Finally, I bought the CONN 21/22 bear put spread with 20SEP2019 expiry for a net debit of 68.46 cents per share.  Shares are currently at 19.84 and so long as they rise to less than 21 by the expiry (33 days), the full value of 1.00 per share will be realized on the spread.  That is good for an expected annualized return of 509% over the 33 days in force.

Devour your prey raptors!

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Market neutral trading with returns up to 2,295%

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