Today we had a whole lot of rolling going on as the problem child trades came up just enough to manage. Apple (AAPL) poked above $127.50 today and we were able to close that trade at a profit. I had forgotten I had set a $200 buyback on that option so I was surprised to hear the ding of it closing. If I had revisited that running order I would have probably been a bit more greedy and knocked it down to $100 or even $50, but it’s good to be out of the position I suppose.
With Budweiser (BUD) slipping a bit today I was able to kick a $64 strike covered call out to the end of the month and up to $65 for a small net credit. This contract had been the definition of over-trading a position and I will have a full write-up on this BUD saga once I am finally rid of the long stock. It’s a great case study in why over-trading not only causes you grief, but can cause inferior returns.
The only remaining problem child has been Peleton (PTON). This was trading in the ballpark of $145 per share (after a healthy slide) when we entered the $120 strike. It had fallen through that and more and we’ve been rolling the $120 strike week by week for the better part of a month. The rule is to keep the original strike when rolling out if you are bullish the stock will cross it again. This was a sensible move with Apple, which it clearly crossed $127.50 today, but I am not confident that Peleton will cross $120 in the immediate term. Today it reached $115 and I was able to roll it out to next week and down to the $118 strike for a net credit of $17 or so. This puts our cost basis on PTON at just shy of $114, so if it is still trading north of $114 by next Friday (4/16) I will take on the stock and start writing the $114 calls which should pay upwards of $700 for the May contract. We’ve pretty much gotten this ticker to a manageable place without losing money, my only concern is if we take on the stock and the thing craps the bed again on earnings. We’ll have to revisit this next week, suffice to say we were able to manage this position to a better place today.
Allocation is around 17%, which is actually misleadingly high as I have an Amazon (AMZN) spread and contracts on Ford (F), US Steel (X), and Yeti (YETI) that could all close at any point now, I’ve just been milking them for lack of better prospects. If all those close, we’ll be approaching 90% unallocated capital, which should basically be a crime. The problem is volatility on the stocks we track is low and earnings is looming for most companies. I’ve taken to dumpster diving for trades on a daily basis. Today I opened a position on Novavax (NVAX) with a 5/7 expiry at the $120 strike. Due to the slippage in that weekly chain I can’t tell how bad the heartburn on that is at the moment, but good trades are so lacking I’d entertain sizing that up if it goes against us.
Communitea Trade Update: We are in a place where we can be taking profits in SUMO (it’s hit about half of our $63 premium), but I’m going to wait a few more trading days most likely. We have decided on the next trade–if we can get $80 premium out of the $12.50 strike of Fisker (FSR) on the 5/21 expiration. So if you’d like to make the trade with us, get that order in for tomorrow. Remember, these aren’t meant to be blue chip companies, it’s meant to be a learning experience we are all in together that offers out-sized premium for inexpensive tickers. These tickers have out-sized premium because they carry more risk.
