Today I am writing to catch up on two past due investing journal entries and record today’s transactions. With the election next week the markets may provide opportunities. I’ve been trying to close option positions to liberate capital. Fastly (FSLY) has again moved substantially and as a result we’ve recorded our most expensive loss to date.
RedFin
On Friday, I bought a RedFin (RDFN) option to close our short position in a put contract (expiry: 20NOV2020, strike price: $40). We originally sold the contract on 18SEP2020 for $314.30 and closed it by paying $150.69. Over 35 days we earned 4.1% on the $4,000 at risk, 42.7% on an annualized basis, but I chose to close the position to free capital; we had about a month till expiration and had already earned half the premium.
Square
Yesterday I bought our short contract on a Square (SQ) call option (expiry: 13NOV2020, strike: $220) and sold another call option contract with a lower $200 strike price at the same expiration. In an earlier post I wrote about rolling out and up this position (to $220) when SQ at appreciated rapidly; SQ has now reversed and the $200 strike call sold for about $215 with three weeks to expiration.
Closing the SQ call, $220 strike, netted $510.60 over 13 days – this is after, of course, after losing $477.39 on the previous SQ covered call. The new, lower strike, covered call does not add any additional time to our position but gives an opportunity to earn another $140 on the underlying shares.
Fastly
Oh, Fastly (FSLY). FSLY had another 30% move, downward, this time followed by a subsequent 10% fall. This afternoon FSLY was trading within 5% of a strike for a put option contract we sold (expiry: 15JAN2021, strike: $70) so I closed it and sold another contract with the same expiration and a lower strike price, $65. We lost $310.71 on the original contract.
Another short FSLY put contract, written to offset the cost to roll up and out a covered call, has backfired when shares of FSLY fell from $120 to $74 in a few days. The strike was $100 and it expired four weeks after I sold it, 30OCT2020, but that was two weeks too long! After paying to close the position this afternoon, we lost $2,366.39 on the contract. That’s about 10% of our option premium profit, this year. This one hurt.
I wrote another FSLY put contract to offset the cost (expiry: 13NOV2020, strike: $55). If shares are allocated, I’ll save $45 per share compared to the $100 strike contract, which is twice the loss on the $100 strike contract.