Author: Bryan Halliday

Hello Investors,

The financial sector is breaking out and continues to lead the markets higher. We have a trade breaking out in BAC and we want to adjust our current positions. We currently own 203 shares of stock. In addition, we currently have a 1×2 call spread and another short-term covered call that expires this week. The goal at this point is two part. A) make sure we retain our stock going forward. B) to possibly acquire more shares of the stock due to the change in trend. So, we are making the following adjustment:

Bought 100 shares of BAC at $25.47

Buy to close: BAC June 19th (monthly) 24.00 strike calls (ratio of 2)

Sell to close: BAC June 19th (monthly) 23.00 strike calls (ratio of 1)

Sell to open: BAC June 19th (monthly) 24.00 strike puts (ratio of 1)

Limit debit: 0.70

This adjustment assures us of owning our shares of stock going forward. We may also be able to increase that position size overall to 300 shares (on a pullback to 24/share or lower).

Have a great week!

Hello Investors,

Today we asked the following question:

A) Does the economy predict stock prices.

B) Do stock prices predict the economy.

We had a discussion on this point which helps to understand why stocks have been going up. And how important the future growth is to your investment returns.

We made two changes to the portfolio as follows:

We exited our QQQ July 17th (monthly) 225/215 bear put spread for 2.40 credit. The result is a loss of -0.55 or $55.00 per spread.

We bought 10 more shares of BRK.B at 178.85. We think that “value” is trading at a nice discount long-term especially at a premier business like Berkshire.

Have a great week!

Hello Investors,

Another quick trade update today. We closed our very short-term May 22nd (weekly) SPY short call position. We will enter into an August (monthly) SPY put butterfly with the 290/260/230 strikes. We included a video to describe this trade and our outlook. In addition, we have made a couple other tweaks as follows:

New Trade:

Buy to open: SPY August 21st (monthly) 290.00 strike puts (ratio of 1)

Sell to open: SPY August 21st (monthly) 260.00 strike puts (ratio of 2)

Buy to open: SPY August 21st (monthly) 230.00 strike puts (ratio of 1)

Limit debit: 3.50

Max risk = 3.50; Max reward = 26.50

Trade Exit:

Limit debit: 0.59

This will lock-in a profit and reduce our bullish exposure.

Trade Exit:

Sell: BAC 100 shares

We attempted to “roll-out” this short put hedge last week (Friday) and the order didn’t get filled. The stock has since jumped higher and we will exit the position today. We received a credit of +0.70 for the puts so this hedge worked out to a loss of -0.20 overall. However, when including what we made in the calls, the total income was positive on our BAC positions for May.

The video of our SPY butterfly is here:

Have a great weekend.

Hello Investors,

We entered into a bearish SPY trade yesterday. We have taken it off today near breakeven. The futures were -20 last night and the outlook was going as we had anticipated. However, that has reversed this morning. While the trade could still work, we don’t feel the setup that we saw has held.

Cancel the stop loss order and buy to close: SPY May 22nd (weekly) 293.00 calls order filled at 4.83 debit (small loss of -0.23)

We may send another update later today.

Hello Traders,

Today we are going to enter into a bearish market call. Specifically we are going to “sell to open” the SPY May 22nd (weekly) 293.00 strike calls for +4.60 credit. This trade has a lot of risk if the markets push sharply higher. So, we will place a stop loss on the trade to reduce loss potential. This trade is ideal for those with a large basket of stock portfolio. That is because this is a “naked” position but covered by the other stocks owned! The stop loss is as follows: “buy to close” the SPY May 22nd (weekly) 293.00 strike calls for 5.90 debit. If we are wrong then the loss potential is 1.30 or $130.00 per contract traded.

We got filled on the EEM June 19th – 40.00 strike covered calls today.

Have a nice week!

Hello Investors,

Today we had a discussion on option pricing. There are two parts, intrinsic and extrinsic value. With this discussion, we showed how our GILD trade is profitable even as the stock has moved against us. With that move, we have decided to “roll-down” our short strike puts. The details for this trade and others are as follows:

Buy to close: GILD June 19th (monthly) 70.00 strike puts

Sell to open: GILD June 19th (monthly) 67.50 strike puts

Limit debit: 0.75

This reduces our max reward from 2.40 to 1.65 overall. It also gives us the potential for a much better cost basis if we end up owning the stock at expiration

Sell short: T -100 shares of stock at 29.15

Buy to cover: T -100 shares of stock with a stop price of 30.60 as a good ’til canceled (GTC) order.

We are targeting the stock to move down to around $26/share in the coming weeks

All orders placed yesterday filled with the exception of our covered call in EEM. We have moved that to a good ’til canceled (GTC) order for this week.

Have a great week!

Hello Investors,

The gap higher this morning was a little bit of a good news/bad news situation. It was great news for all of our positions with the exception of SPY. We followed the game plan we had laid out in our live class on Friday morning and took our position size down to 50 shares before the weekend. That made the trade a lower risk/reward. However, the gap higher left us with a losing 50 share short position in SPY. We closed out those 50 short shares this morning at a loss overall.

Here are the details:

We had originally sold the SPY 285.00 strike calls for +0.50 of income.

On Friday, we bought 20 shares at 284.60. We later bought another 30 shares at 285.10. That left us with 50 shares long and a short call that was going to have us selling 100 shares over the weekend. So, we were 50 of the 100 shares covered as planned. Over the weekend the executions took place and we ended up short -50 shares as expected. We bought those shares back this morning at 292.98. The total loss on this position was -$344.00.

With Moderna potentially finding a vaccine the markets gapped higher by 3% this morning. While that means that our hedge didn’t work out. Every other position seems to be flourishing. Our total portfolio values are up + by thousands. Our DIS position alone is up by more than $800! So, we want to take this gift and sell some more covered calls for income as follows:

We sold the DIS June 19th (monthly) 130.00 strike calls for +1.25 or +$125 we then used that income to buy 1 share at $119.27. Both orders have been filled.

We sold the LB June 19th (monthly) 16.50 strike calls for +0.25 or +$25 we then used that income to buy 2 shares at $12.37. Both orders have been filled.

We sold the DELL June 19th (monthly) 50.00 strike calls for +0.60 or +$60 we then used that income to buy 1 share at $43.89. Both orders have been filled.

We bought 10 more shares of BRK.B at $172.88 per share.

We have a “day order only” for the following pending trades:

Trying to sell 1 TMUS July 17th (monthly) 115.00 strike calls for +0.85

Trying to sell 1 DVN July 17th (monthly) 18.00 strike calls for +0.20

Hello Investors,

Options expiration for May has been a very good one. The covered call positions will all expire for a profit of the credit received. We did place a couple of orders as follows:

Sold to open: BAC May 29th (weekly) 24.00 strike calls

Credit: 0.17

We also placed an order to “roll-out” the short BAC puts from May 15th to May 29th expiration. It appears unlikely that will execute today so likely more covered calls will be coming next week.

Finally, if SPY is above 285/share then it will get us “short” the stock this weekend. We will probably only maintain a -50 share short position but will send updates early next week!

Have a great weekend!

Hello Traders,

We made a couple of new additions to the portfolio today. One we sold another “naked call” in SPY. Obviously we don’t see that as being uncovered because it is hedged (covered) by a large quantity of stocks we hold. However, the broker considers it naked because we don’t own a full 100 shares of SPY. While this isn’t a lot of income, it does give us the opportunity to make some profits and possibly even get “short” this market on Friday if SPY bounces up to that strike price.

In addition, we added a GM 1×2 put spread. We closed part of our position in GM a month or so ago. We replaced it with the XLY ETF. We have since taken profits on that XLY position. This is also our second 1×2 put spread in GM as the other expired for a full profit of the credit received. So, this has been a gift that keeps on giving!

Sold to open: SPY May 15th (monthly) 285 calls (this is only for those with a portfolio of stocks to protect it)

Limit credit: 0.51

Bought to open: GM June 19th (monthly) 17.00 strike puts (ratio of 1)

Hello Investors,

Today we had a discussion on technicals setups/scanning. Along with some sector research and analysis. We made a couple of June 19th (monthly) trades to get out ahead of next month’s expiration.

Sold to open: XLE – June 19th (monthly) 38.21 strike put

Bought to open: XLE – June 19th (monthly) 36.21 strike put

Limit credit: 0.80

Sold to open: ABBV – June 19th (monthly) 100.00 strike call

Limit credit: 0.60

We will also meet on Friday to finalize our May monthly option expiration trades.

Have a great week!