Author: Bryan Halliday

Hello Investors,

Today we took profits on our current short call position in SPY. The market has pivoted higher (making a higher daily high then yesterday). We see this reversal as further signal that markets aren’t quite ready to move lower. So, we will take profits on this position today and have less risk into its expiration tomorrow. The result is we have locked in 70% of the potential profit in the trade!

Buy to close: SPY May 8th (weekly) 293.00 strike calls (closes out the trade and locks-in most of the profit)

We will likely send another trade update tomorrow as the ABBV-AGN merger is set to close!

Have a nice day!

Hello Investors,

Today we had a long discussion of what companies are “worthy” of your money. An example of companies that are NOT like Chesapeake Energy and those that may be like Gilead! With that along with a nice setup, we sold a “naked put” to be willing to buy shares of GILD at 70/share. We also went back to the well to sell calls for income on SPY. The trades are as follows:

Sold a GILD June 19th (monthly) 70.00 strike put for +2.40 (only reasonable for those willing to buy 100 shares of stock)

Sold an SPY May 8th (weekly) 293.00 strike calls for +1.04 (only reasonable for those with a portfolio of stocks that are willing to “cap” some upside in the very short-term)

Have a great week!

Hello Investors,

We are moving forward with some income generation on our existing positions that don’t have “covered calls” as of yet. We added the following:

Sell to open: BAC May 15th (monthly) 26.00 strike calls for +0.25 (we own 200 shares and only had 1 contract sold previously)

Sell to open: DVN May 15th (monthly) 15.00 strike calls for +0.18 (we own 200 shares and only had 1 contract sold previously)

We have a good ’til canceled order for the following:

Sell to open: DELL June 19th (monthly) 50.00 strike calls for +0.70 (we own 200 shares and only had 1 contract sold previously)

Have a great weekend!

Hello Investors,

We made a couple of changes to the portfolio today. One we removed our short-term May 15th put butterfly in SPY. The trade appears likely to go through a tug of war for a period of time.

Sold the SPY May 15th (monthly) 275/255/235 put butterfly

In addition, we adjusted our BAC covered call by turning it into a short straddle. This adds some risk to the stock moving lower. However, it gives us a wider zone to land in for profits overall. This type of adjustment is only ideal for those willing to buy more shares of the stock.

Sold (naked) the BAC May 15th – 24.00 strike puts (making a promise to buy 100 shares or $2,400 worth of stock).

Have a great week!

Hello Investors,

We increased our buy price for the longer dated SPY put butterfly. We bumped it up to 4.90 debit and it remains a good ’til canceled order.

Buy to open: SPY Jan 15th, 2021 (monthly) 220.00 strike puts (ratio of 1)

Sell to open: SPY Jan 15th, 2021 (monthly) 170.00 strike puts (ratio of 2)

Buy to open: SPY Jan 15th, 2021 (monthly) 120.00 strike puts (ratio of 1)

Limit debit: 4.90

Max risk = 4.90

Max reward = 45.10

As detailed yesterday, although it is a low probability trade it makes for a nice hedge.

We also bought bought back 1 of the short DELL May 15th (monthly) 35.00 strike puts. That will convert our 1×2 put spread (1 leg naked) into a bear put spread for protection. We will be looking to sell another put down the road for income.

In addition, we started a new small position by buying 5 shares of Target (TGT) at 104.43. We were impressed by the earnings overall. They are competing online and in food delivery which will continue to be a growing trend overall.

Have a nice weekend!

Hello Investors,

Today we placed a “good ’til canceled” order on a new SPY trade. This trade has a very nice payoff because it is NOT highly probable. However, we think it makes sense for a few reasons. We have argued that the most likely outcome for stocks is a move higher long-term. We are quite proud of not having been super bearish during this recent push higher from the lows. We still place the probability of markets having “put in the low” as being pretty high (better than 50%).

However, if we are going back to test the lows then we may well be going substantially lower in price (again not the most probable outcome). This would be quite disappointing for a number of reasons. First, a move sharply lower probably means that something with Coronavirus has taken a turn for the worst. Second, that we are going to continue to stay invested in stocks which would likely go down sharply in value along with the markets. While we may all actively trade and do really well in that environment in other trading accounts. We use this Trading Mentors as an investment program where we look to cash flow and build assets.

So, we think it makes sense to have a big reward/smaller risk trade to capture profit and somewhat hedge/protect our accounts if things take a turn for the worst. We don’t do this type of trade often but feel that the risk/reward/probability mix justifies it for our account. We set the target of this big butterfly at a 50% market decline from the peak in the S&P 500 (170/share in SPY). The trade is as follows:

Buy to open: SPY Jan 15th, 2021 (monthly) 220.00 strike puts (ratio of 1)

We also sold a covered call in BAC that has filled.

Sell to open: BAC May 15th (monthly) 24.00 calls for +0.53 credit (we own 200 shares but only sold 1 contract so far)

Used the income to buy 2 more shares of BAC

Finally, we were filled in our short-term May SPY butterfly (only bought 1 contract) yesterday at our reduced 2.55 debit price.

Have a great week!

Hello Investors,

We had some orders get filled yesterday. We have also placed a couple of new orders.

We got filled on the following orders.

Sell to open: DIS May 15th (monthly) 120.00 strike calls for +0.65

Sell to open: DVN June 19th (monthly) 15.00 strike calls for +0.25

We have been filled on our EEM 1×3 call spread (against stock shares) for +0.20.

Buy to open: EEM May 15th (monthly) 36.50 calls (ratio of 1)

Sell to open: EEM May 15th (monthly) 38.00 calls (ratio of 3)

We did not get filled to buy the SPY May 15th 275/255/235 put butterfly yesterday. We replaced the order but have reduced our price to 2.55 debit. The markets have pivoted upward and if we can get our price then it represents a better risk/reward. This is a day order only. If it does NOT get filled then it will cancel automatically and we will reevaluate overall.

Have a great week!

Hello Investors,

We have placed a few orders most of which are currently pending orders only.

We have the following pending “good til canceled” orders.

Sell to open: DIS May 15th (monthly) 120.00 strike calls for +0.65

Sell to open: DVN June 19th (monthly) 15.00 strike calls for +0.25

We have been filled on our EEM 1×3 call spread (against stock shares).

Buy to open: EEM May 15th (monthly) 36.50 calls (ratio of 1)

Sell to open: EEM May 15th (monthly) 38.00 calls (ratio of 3)

We are trying to buy the SPY May 15th 275/255/235 put butterfly for 2.70 debit. This is a day order only.

Have a great week!

Hello Investors,

Things have worked out even better than expected in our SPY trade. Not only did we make money on the original short call trade. We also made some money taking a -50 share short position over the weekend (on the exercise/hedge). We are taking the profits made and reinvesting them into buying 1 share of SPY. In addition, we sold another short call (covered call) against our account. This is a very aggressive style of trade due to the uncovered (naked) risk.

Sold to open: SPY April 24th (weekly) 295.00 strike calls for +1.33

Bought to cover: SPY 50 shares (closed the stock position)

Bought 1 share of SPY with the gains.

Reminder we will have a live meeting tomorrow morning at 10:00 a.m. ET.

Hello Investors,

April options expiration has come to a close today. Most of our options expire over this weekend for a profit of the credit received. We had two trades to manage as detailed in today’s class (video available).

We closed up our 34/36 strike 1×2 call spread in EEM for a nice profit. We also bought back our short EEM 36.00 strike call in Fidelity for a small profit.

We hedged our SPY short call trade with 50 shares of long stock today. Since the market rallied at the end of the day to close just above the strike price, our option is “in-the-money” and will exercise over the weekend. We have 50 shares to cover the promise we made. The other 50 we left uncovered and it will be delivered to us as a short position over this weekend. So, on Monday we will have a -50 share short stock position. We may close that stock position and simply resell another OTM call? We will send updates on this trade at the first part of next week.

A really great expiration cycle, have a nice weekend!