Author: Bryan Halliday

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

We waited to sell a covered call on GM with earnings this week and that worked out as the stock has jumped up a bit. Sell to open:  GM June 21st (monthly) 49.00 strike call Credit:  0.53 – this order has filled We added a 1×2 call spread to our 100 shares of WBA as follows: Buy to open: WBA July 19th (monthly) 20.00 strike call (ratio of 1) Sell to open: WBA July 19th (monthly) 22.50 strike call (ratio of 2) Debit: 0.18 – this order has filled This is done against 100 shares of stock which leaves everything covered. We exited a lot of our SPY protective positions last week. We closed 3 of the 4 contracts owned. That was certainly the right call as the values have plummeted further on this SPY bounce. We are adding 1 of those 3 back on today. We exited this for 3.90 credit and can re-enter for 1.73 debit. While it is not a highly probable spread, it has potential if another down draft takes place in the near future. Buy to open: SPY May 17th (monthly) 490.00 strike put Sell to open: SPY May 17th (monthly) 460.00 strike put Debit: 1.73 – this order has filled Max risk = 1.73 or $173.00 per spread Max reward = 28.27 or $2,827.00 per spread This still has a low probability of success but will provide some insurance against a bigger market downturn.

Hello Investors,

First, a very important update to make sure that all positions in AMGN were closed on Friday. If not closed, then one would now have a -100 share short stock position. Short stock has an enormous amount of undefined risk. Not an acceptable position to continue holding long-term in our view. So, we would emphasize the importance of our discussion today on options expiration and how exercise/assignments are handled.

All positions in AMGN should have been closed on Friday. If any stock was delivered due to the trader not closing the option position, then an exit would be in order.

With April monthly expiration now having passed, we went on a covered call selling spree as follows:

Sell to open:  Z May 17th (monthly) 50.00 strike call
Credit: 0.54 – this order has filled

Sell to open:  BKR June 21st (monthly) 36.00 strike call
Credit: 0.31 – this order has filled

Sell to open:  CVX June 21st (monthly) 175.00 strike call
Credit: 0.90 – this order has filled

Sell to open:  DIS June 21st (monthly) 130.00 strike call
Credit: 0.85 – this order has filled

Sell to open:  CVS June 21st (monthly) 80.00 strike call
Credit: 0.32 – this order has filled

Sell to open:  SNOW July 19th (monthly) 210.00 strike call
Credit: 1.47 – this order has filled

We have exited 3 of the 4 spreads we own in SPY. The market is down sharply the last few sessions. We feel this is an opportunity to get out at a smaller loss overall on our hedges. Exited both (2 contracts) of the SPY 490/460 put spread Sell to close: SPY May 17th (monthly) 490.00 strike put (2 contracts) Buy to close: SPY May 17th (monthly) 460.00 strike put (2 contracts) Credit: 3.90 – this order has filled Exited only 1 of 2 contracts of the SPY 485/465 put spread Sell to close: SPY May 17th (monthly) 485.00 strike put (1 contract) Buy to close: SPY May 17th (monthly) 465.00 strike put (1 contract) Credit: 2.50 – this order has filled We don’t likely need to make any adjustments today through expiration. The three (3) we are watching most closely are shown below. DELL April 19th (monthly) 120.00 strike call As long as the stock finishes below 120/share, the calls will expire for a profit. GM April 19th (monthly) 43.00 strike call As long as the stock finishes below 43/share, the calls will expire for a profit. AMGN April 19th (monthly) 270.00/267.50 bear put spread As long as the stock finishes below 267.50/share, the puts will both exercise and offset (same day substitution). No adjustment is required and the result will be a max profit in the spread. If the stock rebounds above 267.50/share today, then we will need to exit the trade.