Author: Bryan Halliday

We have reached the end of the old Trading Mentors program today with May (monthly) options expiration having arrived. Here is updates/adjustments to those trades before the close today. The two (2) positions we need to adjust/exit today are the covered call on NEM and the ratio spread on GOLD. The details for those adjustments are detailed below: We want to “roll-out” our covered calls in NEM as follows: Buy to close: NEM May 17th (monthly) 40.00 strike call Sell to open: NEM June 21st (monthly) 45.00 strike call Debit: 2.30 – order filled Buy to close: NEM May 17th (monthly) 42.50 strike call Sell to open: NEM June 21st (monthly) 45.00 strike call Credit: 0.10 – order filled Exited our GOLD 1×3 call spread and then sold covered calls against the rest of our stock. Sell to close: GOLD May 17th (monthly) 16.00 strike call (ratio of 1) Buy to close: GOLD May 17th (monthly) 17.00 strike call (ratio of 3) Debit: 0.44 – order filled Sold covered calls against the remainder of our stock that doesn’t have any. Sold to open: GOLD July 19th (monthly) 20.00 strike calls Credit: 0.23 – order filled The following covered calls are very likely to expire OTM for a profit: BRK-B May 17th (monthly) 440.00 calls DKNG May 17th (monthly) 50.00 calls MTCH May 17th (monthly) 42.50 calls OXY May 17th (monthly) 70.00 calls TMUS May 17th (monthly) 175.00 calls Z May 17th (monthly) 42.50 calls This will wrap up our old Trading Mentors program.

In our new program, we are taking our very first short-term trade. This is a lower probability strategy but we like the risk/reward/probability mix. Entered into a new very short-term QQQ put butterfly as follows: Buy to open:  QQQ May 24th (weekly) 453.00 strike put (ratio of 1) Sell to open:  QQQ May 24th (weekly) 445.00 strike put (ratio of 1) Buy to open:  QQQ May 24th (weekly) 437.00 strike put (ratio of 1) Debit: 1.52 Max risk = 1.52 or $152.00 per spread Max reward = 6.48 or $648.00 per spread

We made some hedges a couple of weeks ago on our GOLD position. We bought 300 more shares and sold the May 17th (monthly) 18.00 strike covered calls against those shares. That hedge has worked out well. Not because the stock made much, but the calls have lost most of their value and we can buy them back cheap. We are removing that hedge today. Sold: GOLD 300 shares we bought a couple of weeks ago Filled at 16.94 per share Buy to close: GOLD May 17th (monthly) 18.00 strike calls Debit: 0.06 In addition, we have a 1×6 ratio spread against our original 500 stock shares. Today, we bought back 3 of the May 17th – 17 strike short calls and rolled them into next month by selling June 21st – 18 strike calls in their place. Buy to close: GOLD May 17th (monthly) 17.00 strike calls Sold to open: GOLD June 21st (monthly) 18.00 strike calls Credit: 0.02 So, after all of the GOLD adjustments today. We are back to our original 500 shares. We own 1 contract long of the May 17th – 16.00 strike call. We have 3 contracts short of the May 17th 17.00 strike calls. And 3 contracts short of the June 21st 18.00 strike calls.

In the new Trading Mentors Program we have adjusted our INTC position as follows: We already sold a June 28 strike put “naked”. After buying the 30 strike put detailed below, we will then own a June 30/28 bear put spread. So, we have essentially converted our bullish short put into a bearish put spread. However, we are unlikely to maintain this all the way into expiration. Instead, if the stock declines further, we will be able to either a) take profits on this long put and get back to the short put position or b) sell another 28 strike put converting us into a 1×2 put spread. We think buying the put shown below increases our probability of making money/improving our position. Buy to open: INTC June 21st (monthly) 30.00 strike put Debit: 1.25 Max risk = 1.25 or $125.00 per contract

We still have covered call in our old Trading Mentors program. But this trade alert below will essentially close all of our shorter-term trades. We will continue to update the covered calls and wrap up the old program at May 17th options expiration. We are closing the call butterfly spread we own in SPY. It has moved up toward the 520/share price target. And we still have a couple of weeks until expiration. Which means it is highly likely to move away from this range. We would/could stay in if we feel that price will continue to come back to this 520/share range in the future. We suspect that a short-term top will be set soon and that another down leg will happen overall. However, while we feel confident about that outlook, the timing is hard to get right. Sell to close:  SPY May 17th (monthly) 510.00 strike call (ratio of 1) Buy to close: SPY May 17th (monthly) 520.00 strike call (ratio of 2) Sell to close:  SPY May 17th (monthly) 530.00 strike call (ratio of 1) Credit:  3.66 Profit of +1.25 or +$125.00 per spread traded

 

We are moving to Google Meet for our weekly meeting. We hope it all goes off flawlessly. Here is the meeting link going forward: Trading Mentors Monday, May 6 · 8:00 – 8:45am Time zone: Mountain Time Zone Google Meet joining info Video call link: https://meet.google.com/egf-buew-nvzFor those interested, the Berkshire Hathaway annual meeting is live on CNBC all day today. Enjoy!

 

We are wrapping up our old Trading Mentors and launching the new program. Today we are taking profits in the GLD put butterfly spread trade. This stock has hit a “buy signal” according to our bollinger band system. We think it makes sense to lock-in some gains and move on from the trade for now. Sell to close:  GLD Aug 16th (monthly) 210.00 strike put (ratio of 1) Buy to close: GLD Aug 16th (monthly) 200.00 strike put (ratio of 2) Sell to close:  GLD Aug 16th (monthly) 190.00 strike put (ratio of 1) Credit:  1.92 This locks-in a profit of +0.56 or +$56.00 per spread.

We are at the official launch of our Trading Mentors 2.0 program. Today, we entered into our first position. It is a short put position in Apache (APA). This is an energy company that is currently in a downward trend. We would not be surprised by a bit more downside in the near-term. In a short put position, we are making a promise to buy 100 shares of APA if the stock is below $27.50/share at June 21st expiration. If the stock is above 27.50/share, then the puts will expire worthless for a max gain of +$70.00. Our goal is more to acquire the stock as that is where the bigger upside potential is found. Sell to open: APA June 21st (monthly) 27.50 strike put Credit: 0.70 Max gain = 0.70 or $70.00 per contract Max risk = owning 100 shares of APA stock at a 26.80 cost basis We will need to have $2,680 available at June expiration if the put is being assigned.

We added 1 contract of the SPY 490-460 May put spread back on last week. We will take it off today before the FOMC meeting. We anticipate a decline in volatility in the options. It is entirely possible that the Fed meeting fuels a big drop in the markets. But, more times than not, it is not the driver of extended moves that market participants fear it will be. This is a classic known/unknown. We know the date, time and most of the details of the meeting. The unknown is of course the Fed could change course. We think that is unlikely right now. Sell to close:  SPY May 17th (monthly) 490.00 strike put Buy to close: SPY May 17th (monthly) 460.00 strike put Credit:  2.18 We re-entered this position for 1.73 debit and are exiting for 2.18 credit. A profit of +0.45 per spread. However, we did take a loss when we originally traded this spread a few weeks earlier.

We are adding a couple of trades to the mix today. The first is probably a little surprising, given that we have been quite negative on markets for the past few weeks. However, the VIX has rolled over sharply. The market didn’t hold at a lower swing high. There is a pretty solid chance the market has set a short-term bottom. While we would expect lower prices are still coming in the longer run. In the short-term, we want to take the best opportunities to profit. Buy to open:  SPY May 17th (monthly) 510.00 strike call (ratio of 1) Sell to open:  SPY May 17th (monthly) 520.00 strike call (ratio of 2) Buy to open:  SPY May 17th (monthly) 530.00 strike call (ratio of 1) Debit: 2.41 Max risk = 2.41 or $241.00 per spread Max reward = 7.59 or $759.00 per spread We are also buying a longer-dated put butterfly on Gold prices (GLD). We love trading these longer-dated spreads in GLD and have great success with it over time. Buy to open:  GLD Aug 16th (monthly) 210.00 strike put (ratio of 1) Sell to open:  GLD Aug 16th (monthly) 200.00 strike put (ratio of 2) Buy to open:  GLD Aug 16th (monthly) 190.00 strike put (ratio of 1) Debit: 1.36 Max risk = 1.36 or $136.00 per spread Max reward = 8.64 or $864.00 per spread