Two new market neutral trades.

music selection:  “Beautiful Girl” — INXS

weigh-in:  207.0 (0.4)

I have one calendar spread left open (TOT) that I am looking to close.  I might squeak out a few dollars of profit today if I can catch a bid.  I continue to position my trades market neutral with one bull call spread and one bear put spread.  I am also buying my spreads well in the money.  The profit potential is lower this way but the probability of a profitable trade is much higher.  Bulls and bears both make money but hogs always get slaughtered is my motto.

First up is a bear put spread in Conn’s (CONN).  This is a discount retailer that is heavily dependent on extending unsecured credit to sub prime borrowers.  I expect them to be one of the larger victims when the credit cycle turns and I have a long dated put in my portfolio as a hedge.  Today, I’m adding a short term trade with the goal of generating income.  I sold CONN200117P00025000 for 3.85 a share and simultaneously bought (using a combo order) CONN200117P00026000 for 4.65 a share.  My net debit is 80 cents a share and likewise the most I can lose on a spread is 80 dollars.  The trade will be in force for 54 days and will be worth a dollar per spread at that time so long as the price does not move against me by  more than 16.44%.  This is a high probability trade with a nominal return of 25% or 169% annualized.

I also bought a bull call spread in Roku (ROKU). Roku is a leader in the cord cutting phenomenon.  They sell televisions and conversion devices that turn a set top into a streaming device.  The service is popular and generates a profitable subscription revenue stream.  Roku has been one of the big growth story stocks for more than a year.  I have two synthetic long spreads that are up 21,109 as of Friday’s close.  Today, I’m making a short term trade for income.  I bought ROKU200117C00140000 for 28.70 a share and simultaneously sold ROKU200117C00145000 for 25.20 a share.  My net debit is 3.50 per share and the most I can lose per spread is 350 dollars.  The trade enjoys 9.52% downside protection and will be in force for about 54 days.  The nominal expected return is 43% and the annualized expected return is 290%.

Devour your prey raptors!

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New trades with yields up to 290%

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