Bought a BPS in CLX.

music selection:  “Rock This Place” — The Fabulous Thunderbirds

weigh-in:  209.8 (1.6) – Nine consecutive weeks of progress and under 210#!  Highly recommend the thermogenic fat burner product “Burn XT”.  Best price found at Amazon.  Use smile.amazon.com to direct 1% of your purchase to charity.

The markets continue to march higher week after week.  We are probably approaching a blow off top – and then a 50% or more crash.  Similar to the late 90’s mania, inflows into ETFs are at record highs.  The business press reports record participation numbers by Americans in the markets.  As people come off the sidelines it adds fuel to the fire.  But once they are ALL in and there is no one left to buy, the only logical direction is down.  I’m trying to protect myself with in the money spreads that are split between bullish and bearish.  Today’s trade is bearish.

Clorox (CLX) is a dividend aristocrat and big stable consumer facing company.  Share price moves slowly and have been trading sideways to down year to date.  It looks like a fabulous candidate for an in the money bear put spread.  With shares trading at 187.92, I bought the 195/200 strikes bear put spread for 3.9542 per share (12 spreads.)  I have 4,745 in capital at risk in the trade with 3.77% downside protection before profits are threatened.  The trade should be in force for 26 days.  Should my downside protection not be breached in that time, the full profit of 1,255 will be realized.  That is good for 26.4% or 371% annualized.

I have five open spreads that are currently threatened.  Things in particular look really ugly for Altria (MO).  This spread was in a really good place until Biden announced a desire to regulate the amount of nicotine in tobacco products down to a level that is non-addictive.  Should this be realized, it could spell the end of smoking in America.  While that is in the best interest of public health, it is real kick in the teeth to tobacco investors.  I’ll be evaluating this week whether to close early and cut my losses or hold out for a rally in the 54 days left in the trade.

Devour your prey raptors!

Bear Put Spread Clorox (CLX) with yield up to 371%

Never miss another opportunity to devour prey!

5 thoughts on “Bear Put Spread Clorox (CLX) with yield up to 371%

  • April 26, 2021 at 4:18 pm
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    I think it’s more likely we’re in the middle of a typical post-recession bull market where earnings grow 20-40% for a couple of years and the market climbs the old wall of worry with a stiff tailwind of low rates and QE.

    Long UPRO and TQQQ, and selling CC’s on them at the 0.1 delta, but about to rotate into long calls on an extra-low-VIX day or when assigned. Up 10%+ in the past rather lackluster month, including my preferred/ junk bond allocation. Kicking myself for not recognizing the pattern and adopting this strategy a few months sooner.

    Like any strategy, leaning into risk will work until it doesn’t. At some point, the rules flip and more risk leads to lower returns rather than higher. It’s hard to reach that point when the personal savings rate is so high, inventories are so low, demand suppression is about to end within months, QE continues, interest rates are committed low for at least a year, unemployment is plummeting, etc.

    Reply
    • April 27, 2021 at 2:26 pm
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      I certainly hope you are right. A long expansion and weak correction are clearly better for the Average Joe than my prediction. Real people suffer when the markets crash, business shed employees, and wealth is destroyed.

      Reply
  • April 29, 2021 at 7:16 pm
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    I wish I had a take on the market forecast to contribute but I honestly have no clue.

    FWIW my portfolio has mostly bull put spreads I entered over the last 2-3 weeks and that close May 21st, with just a couple bear plays. Most of the put spreads start at 7-10% OTM. So I guess I am representing that the music isn’t likely to stop for at least the next couple weeks? But really I don’t have a lot of confidence, in fact I’m kind of scared. But: TINA/FOMO? I will probably enter June plays also in a similar vein if the market continues as it is.

    Oh — you covered this before but I can’t remember where/when… why do you often buy ITM bear put spreads instead of selling OTM bear call spreads? Thanks.

    Reply
    • April 29, 2021 at 11:01 pm
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      As far as bear put versus bear call, a net debit spread has defined risk. With a net credit spread, you can lose more than your original position size. It is just a risk management thing.

      Reply

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