BUD

Daily Trading 4/16/21

Daily Trades

In all of my complaining yesterday about the dearth of decent trading opportunities, I apparently overlooked that two trades took profits–Sony (SONY) and Constellation Brands (STZ). I won’t complain about that.

Today we opened up positions on Splunk (SPLK) and Roku (ROKU). I am not in love with either of these trades (particularly not the Roku one), but money on the sidelines makes no money. They’re both trades with expirations selected to sneak in right before earnings, hoping there will be a stabilization of the stocks (or price appreciation) prior to earnings.

In our eternal battle with Peleton (PTON), it has lived to fight another day. I was going to stand pat and take on the stock today, but when it slid to around $116 in the late afternoon I changed my mind on that and rolled it out another week at the $118 strike to pick up another $240 in premium. This lowers our cost basis to $111.20 per share and gives us another week for PTON to maybe close above $118. The reason I waffled was because, though the at-the-money covered call would have brought in around $800, it would had us holding long stock during earnings. If I went to weekly covered calls to try to get the stock called away before then, those were only paying around $220 a week. If we are going to make similar premium with rolling the put a week compared to taking on the stock and selling a covered call, I’ll stick with the put for now, particularly because I am not bullish on PTON.

We should have 100 shares of BUD being called away today. There was no good reason to roll out that in-the-money covered call as we still have 100 shares with a covered call expiring 4/30. We can find another home for that capital if volatility returns after earnings. I’ll have to do a breakdown video on this BUD saga once the second lot is gone. It’s a great lesson in how sometimes taking on the stock can be more profitable (when done infrequently and on the right tickers), but also how over-trading can make you less profitable than being patient.

Communitea Trade Update: Oh Lordy Fisker (FSR) is sinking. It’s down to around $13 per share and we’re holding the $12.50 strike. This is why I don’t like EV stocks, but this is a great example for a learning exercise as a Communitea trade. You may remember our last Communitea trade ($17.50 put on SUMO) did take on heat as well before recovering and making us a nice profit. Will Fisker do the same? Who knows, but we will be patient for now and adjust if we must. I will admit I did double up on the position this afternoon when I could get $120 premium for a second contract, which brings up my average premium per contract to $100 and lowers my cost basis to an even $11.50 per share. If it keeps sinking I may look at selling a contract or two at the $10 strike, but we are nowhere near that territory yet. For now we’ll just calmly wait on this one.

Daily Trading 4/15/21

Daily Trades

Happy Tax Day to all of you who have procrastinated. If you’re trading options like we are, you may want to consider having the government keep the refund as there’s no way to garnish our trades for taxes. Therefore we tend to owe money at the end of the year and forfeiting your return to pay towards that is one way to avoid that bill. Normally it wouldn’t matter, but if you owe too much my understanding is the IRS makes you file taxes quarterly. I’d personally like to avoid that. Now there are some great ways to make money trading options and shelter the proceeds from taxation, but that’s a whole other aspect of our trade strategy that I’m ultimately going to make a course on.

Had a long chat with Tim today about our new favorite topic–how there’s next to nothing worth trading. To put it in perspective on how bad it is, I had two orders out today: one for the $140 strike of JP Morgan Chase (JPM), and one on freaking Nio (NIO). I was only asking for $120 for the $140 strike of JPM but never got filled. Nio is one of my least favorite stocks in the world, but I shouldn’t gripe because the $28 strike paid $81.

I had read an article about how the last several months there has been consistent selling off leading to the day of monthly options expiration. That day is tomorrow and disappointingly I didn’t see any significant selling off. How long will the volatility gods make us wait?

Speaking of tomorrow being the expiration for the April monthly options, it will be an interesting day of note. It’s looking almost certain that 100 shares of our Budweiser (BUD) stock will get called away at the $65 strike (it’s trading over $67 all of a sudden).

More intriguing is how we have come down to the wire on Peleton (PTON). We are at the $118 strike and it’s currently around $119. If PTON stays north of $118 we’ll keep our premium and finally be free of this position. If it sinks below $118, but above $113.64, we’ll gladly take on the stock above our cost basis. If it looks like it will fall below $113.64, we’ll be rolling it again. With so little tradable tickers, at least we have something to look forward to.

Communitea Trade Update: Fisker is down in the ballpark of $13.50, which is only a buck above our strike price. Since it’s such a cheap ticker I may size up this position tomorrow, as the second contract would bring in something like $105 dollars, averaging my premium on this trade to $92.50 per contract and lowering my break-even point a tinge. Not exactly sure where FSR plans to find support, but we’ll be finding out.

Daily Trading 4/7/21

Daily Trades

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.

Daily Trading 3/11/21

Daily Trades

Today was another day that wasn’t filled with chills or thrills, after the last two weeks that may actually be a good thing. As predicted we took Merck (MRK) and Starbucks (SBUX) off the board for profit. The tech rally ran hot enough today that we were able to book profits on Microsoft (MSFT) and one of our two PayPal (PYPL) trades, both at around 53% of max profit.

The reason I bring this up is I had intention of riding all these positions longer to eke out more premium, but as the 10 Rules of Easy Trading state, don’t get greedy. With how fickle the market is being I don’t trust it not to cough up a good amount of these gains if left these open the next few days, so I’ll gladly take a few less dollars (while staying in our specified margin range), to take money off the table.

We did manage to put a trade on for Abbott Laboratories (ABT), which is a ticker we’ve watched for a bit now. This is certainly not a prime candidate to sell a put on (not bottoming out in recent range and paying just under 1% premium on capital “invested”), but with Merck coming off the board we are light in Health/Pharma positions and I didn’t see other great trading opportunities on our Health/Pharma watchlist.

Rolling has been the name of the game lately. We have Apple (AAPL) at $127.50 and it’s pretty well blown through that strike price. By rolling at the same strike to April it made us an extra $200 dollars in capital. Now even below our strike, that position sits at a net profit and we have a month for AAPL to hopefully climb over $127.50.

We also had 100 shares of Budweiser (BUD) at the $62 strike for a covered call that looked to be in danger of being called away. We were able to roll it to April 1st and up to the $63 strike for a small net credit. This gives us another $100 of headroom to grow and adds premium to our trade. At some point when the dust settles our our current BUD saga I’m going to make a video breakdown of it, as I think it’s a great case study in how a lot of things can go wrong with a trade and we may still be okay by being patient and sticking with the system.