It was a busy Monday.

music selection:  “Don’t Forget Me (When I’m Gone)” — Glass Tiger

weigh-in:  209.0 n/c – I’m happy to “break even” during the eating holidays.

First a little housekeeping.  Bull Call Spreads in BAH and DIS expired over the weekend for their maximum profit of 22% and 34% annualized, respectively.  Shares of ON and MO were called away, raising funds.  Covered calls in SXC and IP expired out of the money.  I harvested capital gains in a synthetic long position in ROKU at the 55 strike.  That cleared 16,909 in profit and consumes the remainder of my carry over capital losses from the 2018 tax year.

I finally got a fill on a covered call for Cameco (CCJ).  I sold CCJ200619C00011000 for 28 cents a share.  The trade will be in force for 180 days and yields an expected 5.16% annualized.  The intent here is to exit this position gracefully over time to continue raising cash.  With my old CC in IP expired, I sold IP200117C00047500 for more income and the intent of exiting to raise cash.   I collected 38 cents per share.  The trade will be in force for 26 days and yields 11.23% annualized.  I also sold a new covered call in SXC by selling SXC200320C00007500 for 15 cents a share.  The trade will be in force for 89 days and yields an expected 8.20% annualized.

This week, I’m going long a gaming (casinos) company and shorting a mall based retailer.  My bear put spread is in Abercrombie and Fitch (ANF).  They are dependent on shopping mall traffic and all reports is Christmas mall traffic is down year over year.  I expect them to struggle or at least not knock it out of the park and zoom past my margin of safety by being in the money.  I opened the 21FEB2020 expiry spread with 19 and 20 strikes.  My net debit is 85 cents per share.  The trade will be in force for about 61 days and enjoys 13.98% protection against a gain in share price.  Otherwise, the spread will earn about 18% or 106% annualized.

My long bet is on MGM.  The casino company has a chart that is in a strong uptrend as the economy is humming and vacationers are spending money.  Once again, I am using the 21FEB2020 expiries.  This time my strikes are 30 and 31 for the bull call spread.  I got a net debit of 83 cents per share and downside protection of 7.44% by being in the money.  Unless shares fall by more than that amount, the full profit of 20 percent will be earned in 61 days or 123 percent annualized.

I expect to do well by betting on a company that is killing it while betting against one that is struggling.  Like the Hunger Games, I like the “odds be ‘ere in my favor”.  I have a little more housekeeping after the first of the year as I will have a small amount of positive cash on hand.  I hope to deploy that to strategically start closing, for a profit, my short of volatility tracking ticker VXX.  The contango play has been working out for me but will eventually reverse.  I plan to close my short “too soon” rather and risk being “too late.”

Devour your prey raptors!

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Market neutral trades with yields up to 123%

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2 thoughts on “Market neutral trades with yields up to 123%

  • December 24, 2019 at 2:14 am
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    Where are you putting the cash that is being raised?

    Reply
    • December 24, 2019 at 2:22 am
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      It is just “cash” in brokerage for now. After first of year (tax considerations) it will reduce my short exposure to VXX. It isn’t worth my trouble to buy short term treasuries for a week or so.

      Reply

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