Hello Investors,
Lets start with a new trade idea that has a nearly 8 to 1 reward to risk ratio! We did well to exit our diagonal spread in QQQ last week. The stock did shoot higher. We are going back to a bearish trade idea. However, we are giving ourselves a lot of time and this trade really pans if there is a market swoon in the March/April time period.
Buy to open: QQQ April 16th (monthly) 300.00 strike puts (ratio of 1)
Sell to open: QQQ April 16th (monthly) 270.00 strike puts (ratio of 2)
Buy to open: QQQ April 16th (monthly) 240.00 strike puts (ratio of 1)
Debit: 3.42
Max risk = 3.42 or $342.00 per spread; Max reward = 26.58 or $2,658.00 per spread
We rolled out 1 of 2 covered calls in DELL. We will likely do the exact same roll later today on the other contract.
Buy to close: DELL Dec 18th (monthly) 75.00 strike call
Sell to open: DELL Jan 15th (monthly) 80.00 strike call
Credit: 0.42
We bought back our GM short puts.
Buy to close: GM Dec 18th (monthly) 42.50 strike put
Debit: 1.20
We rolled out our DVN covered call.
Buy to close: DVN Dec 18th (monthly) 15.00 strike call
Sell to open: DVN Feb 19th (monthly) 20.00 strike call
Debit: 0.57
After all was said and done, we ended up with a loss of -1.99 or -$199 for the December cycle in our covered calls. That is not bad at all, given the thousands of dollars in gains we experienced in the underlying stocks. We have a few that we rolled forward to January (ABBV & DIS) that we may still end up taking a loss on but overall, we managed them well. So, while we didn’t achieve our usual positive income for the month. We managed the risks and held onto our stock holdings!
Have a great weekend!