Author: Bryan Halliday

Hello Investors,

We are going to “roll up” one of our 2 short calls in DELL. We have a 55.00 and 57.50 strike covered calls against our 200 shares of stock. We are rolling up the 55.00 calls and leaving the 57.50 calls alone.

The details are as follows:

Bought to close: DELL Aug 21st (monthly) 55.00 strike calls

Sold to open: DELL Aug 21st (monthly) 65.00 strike calls

Limit debit: 4.75

Based on the original credit of +1.15 that is a loss of -3.60 in this covered call. However, we fully expect to make it back and then some over time at higher strike prices.

Happy Trading!

Hello Investors,

Today we had a discussion on calendar spreads and merger arbitrage. The Chevron (CVX) deal looks like a winner long-term. Our naked puts are likely to expire worthless in a few weeks but we may want to stick with that approach to the stock.

We added the following two positions.

Shorted 30 shares of QQQ stock with a stop loss above at 267.11 (good til canceled).

We entered into a call calendar spread in BAC.

Bought the Jan 15, 2021 – 26.00 strike calls

Sold the Aug 21, 2020 – 26.00 strike calls

Limit debit: 1.36

Have a great week!

Hello Investors,

We have gone back and forth with Robinhood support and we aren’t sure they know what they are doing haha. So, we are selling our TMUSR (rights offering) position today. The value is around 0.1000 or about $10.00 of value for every 100 TMUSR owned. These are rights offerings and are valued based on the ability to buy more shares at 103/share with the stock at roughly 105/share. So, it has 2.00 of intrinsic value x 5 shares = $10.00 of value.

Sell: TMUSR at current prices

Have a great weekend!

Hello Investors,

We are making a couple of adjustments to the portfolio.

We sold a covered call against our 100 shares of BRKB shares.

Sell to open: BRKB Aug 21st (monthly) 207.50 strike calls

Limit: 0.55 credit

We also added a 1×2 put spread to DELL. This is a mini hedge of sorts. The stock has extended higher in price. This will protect some of the gain in the stock if it pulls back toward 57/share at expiration. However, it does require us to buy 100 shares more of the stock if it falls sharply lower (we plan to simply exit the spread and not buy more shares). That sharp move lower seems unlikely at this point but is always a possibility. We see this as advantageous for a few reasons. If the stock goes higher then we make a little money back (0.45 credit). If it pulls back in price, then the 1×2 put spread goes up in value. In addition, the ITM covered calls would come back for us as well. So, we have a big advantage to the stock going down. We make a little bit if it goes higher or sideways from here to Aug 21st expiration.

Buy to open: DELL Aug 21st (monthly) 62.50 strike puts (ratio of 1)

Sell to open: DELL Aug 21st (monthly) 60.00 strike puts (ratio of 2)

Limit credit: 0.45

This is ideal for someone willing to own 100 shares more shares at 57.05 cost basis and would benefit from their ITM covered calls coming back down. We plan to exit this spread at expiration and not buy more shares. However, that is always a possibility with “naked” puts.

Have a great week!

Hello Investors,

A few changes today and a class on 1×2 put spreads and drawing risk graphs manually.

New Trades:

We decided to delay ownership of our additional BAC shares. We sold the 100 shares put to us over the weekend at 24.00 and sold an Aug 21st (monthly) 24.00 strike put for +1.05 in its place. We also sold some covered calls.

Sell: BAC 100 shares

Sold Aug 21st (monthly) 24.00 strike put x1

Sold Aug 21st (monthly) 27.50 strike call x2 (covered call)

We took profits on our PINS call spread for 3.20 credit. This locked in a profit of +1.30 per spread. We used that income to buy 5 shares of the stock. We also entered into a new 1×2 put spread in PINS to potentially acquire more stock.

Sold PINS Aug 2st (monthly) 21.00/26.00 call spread for +3.20 credit.

Have a great week!

Hello Investors,

Not much happening in the way of options expiration. Most of our trades will expire for a full profit of the credit received. We are taking ownership on another 100 shares of BAC this weekend from a naked put. We could buy that put back at a profit but we like the position. We are being “called out” of 100 shares of our LB stock. We bought those shares lower as a “trade” rather than increasing our investment size. That has worked out nicely.

We had planned two new “trades” to take today. XLE and QQQ. The trade in XLE we got filled on. We bought OTM speculative call butterfly spreads with September expiration. In the case of QQQ, the trade didn’t make sense so we decided to pass on it for now.

Buy to open: XLE Sep 18th (monthly) 40.00 strike calls (ratio of 1)

Hello Investors,

Today we took profits on 1/2 of our XLK trade (closed 1 of 2 contracts). We have an average cost of 4.38 per spread. We closed the position for 4.95 credit and a +0.57 profit. The other 1/2 position we want to have a breakeven stop loss and move out if it isn’t working as expected.

Sold to close: XLK Sep 18th (monthly) 102.00 strike put

Bought to close: XLK July 17th (monthly) 95.00 strike put

Credit: 4.95

We also had a couple of discussions. One was planned (long options vs spreads vs butterflies) and the one was unplanned (dividends).

We will be back on Friday for our Monthly Options Expiration class at the usual 10:00 a.m. ET.

Have a great week!

Hello Traders,

We debated this trade a bit over the weekend. The stock had a huge bullish engulfing candlestick on Friday. Today it is doing the “price overlap” minor dip that we think is an opportunity to take profits. It would be reasonable to take profits on 1/2 of the trade (if you have more than 1 contract) and let the other half run. We will discuss tomorrow.

Sell to close: UAL July 17th (monthly) 32.00 strike puts (ratio of 1)

Buy to close: UAL July 17th (monthly) 27.00 strike puts (ratio of 2)

Sell to close: UAL July 17th (monthly) 22.00 strike puts (ratio of 1)

Credit: 1.32

Profit of +0.62 or +88.5% return.

Hello Investors,

We started to build a small position in Merck (MRK). The stock is around breakeven at current levels and we have liquidated our 22 shares. We may come back to it again in the future. However, we are finding some other areas of the market that appear more attractive long-term.

Sold: MRK (22 shares)

Have a nice weekend!

Hello Investors,

We are placing a “cash covered” (naked) put trade to potentially add a high growth stock to the portfolio. We find Draftkings (DKNG) as a compelling investment opportunity. We believe that the potential for it to grow as states legalize betting is enormous. While states like California recently voted down a proposal, they need the revenue and it is coming sooner rather than later. We are taking a conservative approach to owning the stock.

#1- We are selling way OTM on the puts. That gives us a very low potential cost basis ($21.00/share) if we acquire the stock at expiration.

#2- We are selling a little longer dated option (November) to collect more premium. While that gives the stock more time to go down. It also compensates us for a position we don’t mind holding for multiple months.

We sold the November 20th (monthly) 25.00 strike puts for +4.00 credit.

Happy Trading!