SONY

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 4/1/21

Daily Trades

It was a strong end to the short trading week as several more positions took profits. Remember, Good Friday is tomorrow and the markets are closed. I think this probably influenced a lot of the trading the last two days with many of the active traders probably taking an even shorter week, or the week off entirely. Didn’t seem like there was a ton of selling pressure, which allowed the prices on most stocks to climb a bit.

Our closed positions today included Nike (NKE), Prudential (PRU), Qualcomm (QCOM), Disney (DIS), and Western Digital (WDC). All of those trades except Prudential had been on less than a week.

An interesting thing happened this morning with our current position on Sony. As a matter of course, I always put a buy-to-close order on all the puts we sell right after they get filled. This is so I don’t need to close out winners, they close themselves. That’s why I use the phrase “took profits” all the time, because these trades take profits and close themselves at our target returns. I highly recommend employing this practice yourself as it saves a lot of time and can actually lead to you making sure to book winners before they slip away (for time in force use “GTC” or good till canceled for these buyback orders).

This morning I logged on to find our brokerage had canceled our running buyback on Sony, which hadn’t taken profits yet. There was an error about a company reorganization and the option position was gone from trading platform. A few hours later a new option appears for Sony that was suddenly with an open loss, while this trade was profitable before vaporizing. It appears that yesterday Sony changed their ticker symbol from SNE to SONY and our option had to be re-issued. Since it was a brand new option under a new ticker, the brokerage wasn’t counting the credit we originally received when opening the trade on the old ticker (SNE), and since we have to buy the option to close it out, it was inaccurately stating that the position was down $100 when it was really up about $50 or so. I figured I’d bring this up because it’s a rare occurrence but it’s not impossible you might run into something like it. Don’t be afraid to reach out to your broker if you see things you don’t understand in your account. In this case it was pretty clear to me what happened as the ticker was different, but if I didn’t understand I’d certainly call it in and make them earn that commission money holding my hand.

Our biggest problem at the moment is allocation, we are dipping below 20% with today’s closures (and having put on no new positions). I am expecting that after the holiday the selling will come back into the market and we will find some opportunities to deploy capital. On the plus side we will finally be in a place to start trading May expirations next week so it will be a very exciting time to be alive.

Communitea Trade Update: The run-up of the last two days has been very kind to our beleaguered SUMO trade. It has gone from a $100 or so paper loss to slightly in the green in the course of a week. This is why it’s often best to just put these trades on and walk away from them until they get closer to expiration. Riding the ups and downs can be unnecessarily stressful. I do believe SUMO will retreat next week (like many if not most stocks), but hopefully not return to our strike before expiration on 4/16. As we’re closing in on the last two weeks of the contract we will be insulated a bit from volatility’s impact on the ticker and price will be the main driver of our position. If SUMO can be at or above $18.50 by next Friday we can probably take this off, but stay tuned.