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Trade Alert 7/7/2020


Hello Investors,
Today we explored risk, reward and probabilities. We love the ThinkorSwim (TOS) platform for its risk graph tools. It is a great tool to learn how to build risk graphs. To analyze probabilities as it pertain to max gain, max risk, breakeven levels and much more. If you would like to learn the TOS platform, this should help you get up to speed.
As for trade changes, we only made one trade today. We sold a covered call in EEM shares. We own 100 shares and have sold an August 21st (monthly) 46.00 strike call for +0.37 credit.
Have a great week!

Posted on

Trade Alert 7/2/2020


Hello Investors,
We are entering into a very short-term trade in United Airlines (UAL). This is a put butterfly spread with a July 17th expiration. This is a low probability of success trade. Because of that, it has a big reward/risk ratio.
Buy to open: UAL July 17th (monthly) 32.00 strike puts (ratio of 1)
Sell to open: UAL July 17th (monthly) 27.00 strike puts (ratio of 2)
Buy to open: UAL July 17th (monthly) 22.00 strike puts (ratio of 1)

Limit debit: 0.70

Max risk = 0.70; Max reward = 4.30

Posted on

Trade Alert 6/30/2020

Hello Investors,
Today we discussed debit spread strategies. This is typically used as a directional trading strategy. As such there is risk to theta (time decay) if the trade is not moving in your direction. However, it often creates a good risk/reward ratio. It allows you to profit from an upside move with less risk if the stock were to move against you. In this case, we took a trade in Pinterest (PINS) as shown below.

Buy to open: Aug 21st (monthly) 21.00 strike callsSell to open: Aug 21st (monthly) 26.00 strike callsDebit: 1.95Max risk = 1.95; Max reward = 3.05
In addition, we added our final 20 shares of BRK.B shares. Berkshire Hathaway has detailed this price level as where they are buying back their own shares. It is our opinion that they are likely actively buying as we speak. At around 1x book value is historically where you want to be aggressively buying BRK shares.
Bought 20 shares of BRK/B at 177.07 per share.
Markets are closed on Friday for Independence Day Holiday. Have a great long weekend!

Posted on

Trade Alert 6/25/2020


Hello Investors,
A couple of adjustments today:
We own shares of TMUS. A large investor (softbank from Japan) is selling their stake. As existing shareholders, we have the option to buy 0.05 shares per share owned at 103/share. We are contacting our broker to get more information and likely exercise that right. In a nutshell, for every 100 shares owned, you will be able to buy 5 more shares at 103/share.
We bought 30 more shares of EFA at 61.04 per share. That brings us up to 60 shares overall.
In addition, we sold an OTM “strangle” in GM. We have been selling naked puts or 1×2 put spreads over the past few months. We own 100 shares. This will order will create a covered call/naked put overall. We suspect there is a high probability both options will expire and we will make the credit. However, we are prepared to own 200 shares overall as well.
Sold to open: GM July 17th (monthly) 29.00 strike calls
Sold to open: GM July 17th (monthly) 23.50 strike puts.
The order filled at +0.90 credit.
Have a great weekend!

Posted on

Trade Alert #2 6/23/2020


Hello Investors,
We made a variety of adjustments this morning. A couple more quick updates.
We used the income from CVX (naked put) to buy 2 more shares of the stock at 91.93/share.
We got filled on our DELL covered calls for +1.15 and +0.65 in income.
The July LB covered call is pending and if it does NOT get filled today. We will try again tomorrow around the same prices.
The latest moves are now updated on the trading journal.
Have a great week!

Posted on

Trade Alert 6/23/2020


Hello Investors,
We had a busy day today. We discussed relative strength/weakness by using an important market inflection point as the starting date. We discussed IPO and secondary offerings. We also made a variety of adjustments. The details are all shown below:
We bought 10 more shares of EFA at 62.55/share
We bought 32 more shares of BAC at 25.20/share
Sold BAC July 17th (monthly) 29.00 strike calls for +0.24 x 2 contracts
We sold CVX Aug 21st (monthly) 80.00 strike puts for +2.25 (must be willing to own 100 shares)
We sold DIS Aug 21st (monthly) 140.00 strike calls for +0.90 (used the income to buy 1 more share at 116.30)
We sold LB Aug 21st (monthly) 20.00 strike calls for +0.55
We bought 1 contract of the XLK Sep 18th (monthly) 102.00 strike put for -5.06 (gives us 2 contracts total now)
We sold 2 contracts of the XLK July 17th (monthly) 95.00 strike puts for +0.81
We have the following pending orders:
Attempting to sell 1 contract of the LB July 17th (monthly) 16.50 call for +0.65
Attempting to sell 1 contract of the DELL Aug 21st (monthly) 57.50 call for +0.65
Attempting to sell 1 contract of the DELL Aug 21st (monthly) 55.00 call for +1.15
Have a great week!

Posted on

Trade Alert 6/19/2020


Hello Investors,
Today we had a discussion on exercise/assignments around options expiration.  There is not much happening with our June 19th (monthly) options expiration trades. That is great news as we should be able to allow all of the “income” strategies to expire for a full profit of the credit received. We did get our early and re-sell a “naked put” in BAC for July. This is only a good strategy if someone were willing to buy 100 shares of the stock in July.
Sold to open: BAC July 17th (monthly) 24.00 strike puts
Credit: 1.01
Have a great weekend!

Posted on

Trade Alert 6/10/2020


Hello Investors,
We made a couple of adjustments today.
First, we rolled out and up on our current EEM covered call as follows:
Buy to close: EEM June 19th (monthly) 40 strike call
Sell to open: EEM June 30th (weekly) 43 strike call
Limit debit: 0.95
Second, we sold a short-term put against our September long put in XLK.
Sell to open: XLK June 19th (monthly) 96.00 strike put
Limit credit: 0.32
The FOMC meeting comes out today at 2:00 p.m. ET.
Have a great week!

Posted on

Trade Alert 6/9/2020


Hello Investors,
Today we had a discussion on the capital hierarchy structure. Senior debt (bonds) for example may still have a small value when a corporation goes through a bankruptcy. While common stock equity will nearly always be wiped out. That brings us to some very odd risk taking in the markets over the past couple of days. It speaks to some real greed kicking into markets. While those “animal spirits” might last a bit longer, it is not a great signal over an intermediate term when looking at “value” in the markets.
While we hadn’t originally planned on it, we entered a new XLK put trade. We discussed how we might trade for a major market “cup and handle” pattern. Our overall target is 92/share. We plan to hold this put but also sell short-term puts for income to reduce our cost and max risk. The details are as follows:
Buy to open: XLK Sep 18th (monthly) 102.00 puts
Limit debit: 5.65
Have a great week!

Posted on

Trade Alert 6/2/2020


Hello Investors,
Today we discussed the idea of “risk free rate of return”. While there is “risk” in all assets. U.S. Govt bonds are considered “risk free” and thus every bond in the market uses it as a benchmark. Then the comparison game begins as investors analyze what they can get from a Govt bond versus something with a larger risk profile like corporate bonds. Finally. that leads us to the idea of whether or not the Fed will eventually be a stock buyer. It is one step further and is very likely coming in the years ahead!
We bought 83 shares of LB at 16.45 to cover our short call and leave us in a small core position.
We also bought a 1×2 put spread in EFA. This is a broken wing butterfly with a nice probability profile. We collected a +0.04 credit for that trade.
Have a great week!
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