Staying market neutral.
music selection: “Rumors” — Timex Social Club
weigh-in: 209.0 +1.4
I am still trying to exit some old covered call trades gracefully. ON, IP, and MO are likely to be called away on the 20th. I am also closing some net debit trades early when I can secure most of the spread while taking risk off the table. To that end, I closed DHI bull call spread early today at 95 cents on the dollar. I earned 130 dollars on 820 in capital at risk. The trade was in force for 63 days and yielded 92% annualized.
My bullish spread this week is Delta Airlines (DAL). I traded DAL before around June. The company is transforming itself into a premium carrier that is preferred by business flyers. Margins and profits are up and planes are full. I bought DAL200320C00050000 for 8.342 per share and simultaneously sold (using a combo order) DAL200320C00052500 for 6.158 per share. The trade will be in force for about 96 days and has a net debit of 2.184 per share. The spread will be worth 2.50 per share at expiry unless shares fall by more than 7.46% (my downside protection.) That provides a yield of 14 percent or 55% annualized.
My bearish spread is in mall based retailer Dillard’s (DDS). Year over year mall traffic for the Christmas season to date is down. DDS is likely to feel some pain as a result. I sold DDS200221P00075000 for 10.273 per share while simultaneously buying DDS200221P00077500 for 12.173 per share. My net debit 1.90 per share (and most I can loose per spread is $190). The trade will be in force for 68 days and enjoys 7.98% downside protection while sporting a yield of 32% or 170% annualized.
It is the time of year to make some decisions that are driven by tax considerations. I have already moved 13,000 from tIRA to Roth to maximize my ACA subsidy. At the same time, I have some retained capital losses from last year related to the year end volatility event where I was caught over leveraged. I will be looking to use those up and exit the year a few hundred dollars over break even on capital gains/losses. This move will also raise additional cash and put me in a good position to capitalize when the credit markets turn and reveal tasty distressed bond opportunities.
Devour your prey raptors!