I closed a long call.

music selection:  “Hoochie Mama” — One-Eyed Doll

Prior to coronavirus, I was making some long bets via long date calls.  I was trying to knock a few out of the park with limited capital at risk.  I have exited those positions now.  The last was a long call at the 30 strike in STM (21JAN2020 expiry).  I got in at 5.85 a share on 7FEB2020 with two contracts, putting 1,170 capital at risk.

That trade quickly turned against me when the market tanked.  I had the courage of my conviction that it would be back.  It could actually soar from here but I’m glad to just take a small profit and deleverage myself to the tune of $1,320.   I sold today for 6.60 a share.  That is good for a 13% return over 166 days, or 28% annualized.  I’m pretty fortunate to have been “wrong” and still made away with 150 in short term gains.  I have updated my going tally for positions closed in July for the month end Transparency post.

Going forward, I expect to roll some but not all of my NLY covered calls, letting the rest be called away with a 50 cent capital gain built in to raise cash and continue deleveraging.  For the bulk of NLY shares, I hope to catch the share price on a pullback that coincides with expiry so I can roll “up and out”.  I will be letting 200 shares of GDXJ go on 21AUG2020 as they are deeply in the money and not likely to be worth rolling.  This will raise 9,600 in cash with 400 going to profit.  That will still leave me with about 20,000 in margin loan, that I hope to extinguish with trading profits above my budget over the rest of the year.  That includes rolling VXX long dated puts, and cashing in strategically when the market flashes the right signal on long dated puts that I hold as hedges.  LYFT and XOM hedges are currently in the money.  On any big spikes in vol, I’ll likely take some more deeply out of the money long dated short puts on capital efficient companies I’d be glad to own at a discount to raise more cash with limited margin impact.

Devour your prey raptors!

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