Only one trade this week.
music selection: “Love/Hate Heartbreak” — Halestorm
weigh-in: 203.4 +0.6
First things first, a position in TCH (Bear Put Spread) moved strongly against me. The company is still a dog but the market loves some recent moves to spin off a division and raise cash. I went from my spread being well in the money to it being well out of the money. I sold my long put for what I could get (71 cents – paid 2.9531) and booked a 7,851 short term capital loss. I have left the well out of the money short put ride. Unless the price goes over 12% in the wrong direction (against the trend!) in 39 days, I will earn 7,886, thereby turning a near complete loss into a narrow gain.
I attempted a Bear Put Spread in Ford (F) today. I was not able to get an attractive fill. I also attempted a Bull Call Spread in Quest Diagnostics (DGX) and could not get a fill there either. I report these “failures” to make an important point. You want to have enough passive income from dividends, distributions, and interest in early retirement that you can afford to NOT trade. Some times the market isn’t offering up anything attractive. If you have to reach and make a bad trade to put food on the table, I promise that will end badly for you. Sometimes, you best trade is NO trade.
As for HSBC, I sold HSBC191101P00039000 for 1.542 per share and simultaneously bought (using a combo order) HSBC191220P00039000 for 1.832 per share. The net debit on the spread is 29 cents and the trade is expected to be in force around 49 days. The CBOE options calculator estimates that if market conditions and the pricing of the underlying remain unchanged, the long put will be worth about 1.37 at the expiration of the short put. That is a 372% return in 47 days or about 2,774% annualized. I will likely close a few days before the expiration of the short put to reduce risk and maximize profits.
Devour your prey raptors!