Closed 2 positions today: MCD (McDonalds) and DEO (Diaego)
The MCD trade was closing the call spread I had added in addition to my "standard" put-spread. I'm still holding the put spread.
The call spread was opened for a credit of $0.33/c and closed for a debit of $0.078.
Duration 43 days
77% capture (after commissions)
42% rate of return (annualized)
5% Return on Equity
DEO: (no further positions remain, will re-establish on the next bad-news or down market day)
Bull Put spread:
Opened for a credit of $0.75/c
Closed for a debit of $0.25/c
61% capture (after commissions)
Today's move: I closed a spread on YUM brand foods. I've talked in length about YUM before. So I'll just cut to the chase:
April $65/60 bull put spread (closed with the opposite bear spread)
Position open: Dec 18th 2014
Position closed: Jan 22th, 2015
Duration: 35 days
opened for a credit of $0.88/c
closed for a debit of $0.38/c
51% capture of premiums (after commissions)
11% Return on Equity
116% Rate of Return
I don't have "the brick" today on this trade... I was running out the door to a gig when I saw the opportunity.
With the Swiss Central Bank deciding to un-cap the exchange rate from the Swiss Franc vs. the Euro, there was a trememdous pop in the value of the Swiss Franc, and corelating crash in the value of the swiss stock market. Relatively speaking valuations stayed the same, but it doesn't look good if you're a Swiss national with all of your holdings in Francs.
On that news, FX brokers (foreign exchange brokers) might have had a client or 12 who had been over-leveraged and the resulting changes in exchange rates might have incurred margin calls and/or delinquent accounts requiring the FX broker to eat the loss.
As a result, IBKR (Interactive Brokers) was sympathetically down 25% from the previous day in pre-market trading.
Interactive Brokers however has a very strict margin policy: If you're a client (which I am) and you do something that falls afoul of their margin requirements, they automatically and mercilessly liquidate your account positions until you are compliant. Thus, they have very little risk of having a loss in this type of situation.
So on no fundamental change to the company, I added to my position for about $4.50 cheaper than the previous close.
Trading during the day snapped back up to almost where it was the day before... Market sentiment did make it close a little bit down from the previous, but all within a reasonable range.
IBRK is an interesting play in rough markets. Clients often trade MORE during market slides so their revenues go UP from the increased trading activity.
My position of IBRK was originally only 100 shares. I now have 200 with an average price of $27.2625. As of Friday close, it's $28.05 So I'm looking at a whopping unrealized gain of $155.50 USD.
As usual, I'm going to start writing covered calls on this position 1 month out, $1-2 higher than my average price. With the hopes lowering my cost basis and never being assigned.
If calls look like they will be assigned, I might roll up and away, or I might just take the assignment and write some new naked puts to re-aquire the position.
The only downside of owning them as a non-US person: the IRS does have sticky fingers and holds on to 15% of the dividend.
The price of oil is still falling like a stone, but my heart is NOT made of stone. I have started dabbling in oily and oil correlated positions. The price of oil may very well have a few more percent of downside to go, but even the Saudis said they will start to panic at $40 per barrel.
Here's my trading brick of the day:
1st up: USO - United States Oil fund. It's an ETF that's pegged to the price of oil. I purchased 100 shares and sold a covered call to lower my cost basis.
Average price: $17.60 (including commissions). Hopefully oil will stabilize soon and this will bounce up a bit. Not before my calls expire worthless though!
Currently I'm long 200 shares of USO with a covered call with a $21 strike and another (opened today) with a $18 strike. My average cost on USO is $18.80. (Not yet adjusted for call premium)
2nd up: SNDK - Sandisk. The company that makes memory cards and solid-state hard-drives for computers.
I've traded this on and off over the years and today they revised their quarterly guidance DOWN by 4% but the stock plunged 14%. That seems like just "a bit" of an over-reaction to me, so I opened 2 positions on 2 different months. Very juicy premium because of the bad news.
3rd: Disney - Closed a successful position.
74% Rate of return
14% return on capital
Position open 70 days.
4th: CPG - Cresent point energy
This is a position I recently entered sadly before the oil price implosion. My average price on the stock is $35.50 so I sold 2 lousy covered calls for $38 each. I'm chipping away at my cost basis and the dividends haven't been cut (yet) and that pays another $46 monthly on my 200 shares.
So I'm still grinding out gains, one day at a time.
Today was ugly if you're a long-only investor. Unless you had already gone to mostly cash and are now starting to buy into some choice picks. Even the hardened energy/oil bears are now changing their tune saying "it can't go any lower" and surprise surprise, it does.
But enough of my 2-cents worth which nobody cares about. Here's the brick for today's trades:
1st move of the day: NEW position
ZMH - A healthcare company that makes replacement hips and such.
2 contracts, JUNE expiry on a $100/95 bull put spread
$0.74 credit ($74) per contract
ROC 17% (for worthless expiry)
ROR 37% (for worthless expiry)
Max loss $426 per contract
If necessary, I'll take assignment if it's in the range at expiry.
2nd move of the day: rolling the front month of a calendar spread
rolling trade in progress. Rolled out to the next quarterly for a $1.70 credit per contract. So far, I'm still in perfect shape with the stock price being very close to my strike. If it goes up, I'll start adding a bit of risked capital. However at this point, now that I have paid for the position, my additional risk is exactly $0 because my long and short puts are the same strike.
3rd move: MDA - A Canadian Aerospace company
3 contracts, APRIL expiry on a $86/82 bull put spread
$0.60 credit per contract
Max loss $340 per contract
Again, this one I wouldn't mind owning, so I'll take assignment at expiry if it's in range.