Multiple trades today.
music selection: “Quite Rightly So” — Procol Harum
weigh-in: 212.0 (2.6)
First a sale. I have held the 13 strike VXX put with 21JAN2022 expiry for 440 days. That one went deeply underwater because of Coronavirus. But today I was able to exit for a small profit. My original purchase price was $5.25 on 28 contracts, putting 14,700 of cash at risk. I sold today for 5.35, collecting 14,980. My profit of 280 dollars is good for 1.9% or 1.58% annualized. This has basically been dead money but I remained confident that contango would serve me right and turn a loser into a winner. I am not rolling the position as I think the bull market has short legs at this point and will exhibit a lot of volatility in the short term. Instead, I’m using the cash to buy more fixed income.
I bought 515 shares of the Nuveen Preferred Income Securities (JPS). I have owned this before and found it to be a stable place to earn low risk income. I paid 9.70 a share, putting 4,995.50 of capital at risk. That is a half allocation and I’ll be waiting for more cash before buying the other half. JPS pays 5.05 cents per month or 61 cents a year. Against my cost basis, it yields 6.25% and adds 312 dollars to my annual passive income. That income is now 10,572 and covers 48.94% of my budget.
Finally, the headline trade for the week. With shares of MCD trading at 228.53, I bought the 240/250 strikes bear put spread for 8.828 per share (5 spreads.) That puts 4,414 of capital at risk for about 47 days. The trade enjoys 5.02% downside protection from a move in share price against me. Should that not be breached, the full profit of 586 dollars will be earned at expiry. That is good for 13.3% or 103% annualized.
Devour your prey raptors!