Lots of moves to report today.

music selection:  “In the Army Now” — Sabaton

weigh-in:  215.8 (1.2)

Spreads on SQ, MMM, DOV, and PYPL all finished in the money for the maximum return.  I booked 6,211 in profits on those four spreads.  Shares in NLY were called away.  I booked 592 in option premium earned as well as 1,776 in capital gains on the shares.  To replace part of the passive income lost from NLY, I bought more shares of PDI.

I also am making a speculative future income play with CLNY.  This company looks like a mess on paper but is under radical transformation under a new CEO.  The company started in the 80s as a vehicle to wind down the toxic assets of the savings and loan industry.  It is getting out of distress real estate (raising cash) and getting into a high margin “cloud” business.  The new CEO is a veteran of the cell phone tower business.  He is positioning the company to profit on a niche area of the cloud. Namely, what people are referring to as the “edge”.  In the Internet of Things there are many applications where milliseconds matter, such as autonomous vehicles.  You can’t wait for a signal to go from New York or Atlanta to Seattle and back.  So the processing gets moved to local “edge” locations.  CLNY is rolling up the distributed processing industry.  They are taking on partners for 80% of the capex requirements and retaining 20% of the profits.  They also earn a management fee.  The company has been growing 50% a quarter and expects to grow at 50% a year for quite some time.  It does not currently pay a distribution but is organized as a REIT and expects to pay around 3-4% “soon”.  The distribution should grow over time.  I bought about 10,000 dollars worth.

Finally, the trade of the week.  Kimberly Clark (KMB) is a large cap dividend aristocrat serving the consumer consumables sector with items like baby diapers.  It trades for 133.25 as of this writing.  I bought the 140/145 bear put spread for 4.50 a share.  The trade will be in force for about 26 days and enjoys 5.07% protection against a move up in price.  Should that not be breached, the full profit of 50 cents a share will be earned (on 900 shares) for 450 dollars in profit on 4,050 capital at risk.  That is good for 11% or 156^ annualized.

With a new strain of Coronavirus rocking the markets, it feels good to be adding income and a bearish spread.  I still believe the Fed is committed to a “melt up” in asset prices but remain convinced there will be lots of downside volatility along the way.  I prefer short term bearish positions to buying the dips in this environment.    There is one more Monday left in the year and I’ll have another bear put spread then.  I also have short puts in NLY that should expire safely out of the money, which will mark the end of my playing Annaly.  Shortly following that, I’ll have the annual Transparency update.

Devour your prey raptors!

Bear Put Spread on KMB with yield up to 156%

Never miss another opportunity to devour prey!

2 thoughts on “Bear Put Spread on KMB with yield up to 156%

  • December 22, 2020 at 3:18 am
    Permalink

    I’m looking at a February19 bear call spread on CCL at the 30/32.50 strikes. 7.2% in two months isn’t bad. The ‘rona will be raging through February and CCL is diluted, over leveraged, and fully valued at $21.

    Reply
    • December 23, 2020 at 5:01 pm
      Permalink

      Chris,

      That is an interesting play. Doesn’t fit my strategy right now. I want to be in the money on low volatility equity. High leverage equates to high volatility as earnings surprises are magnified. You are probably right about the current situation for CCL being dire through February. But the market may be forward looking. A surge in advance booking for the summer season when people will have been vaxxed could send shares soaring. Best of luck if you pull the trigger.

      Reply

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