Fastly (FSLY) shares have continued its decline after disclosing it lost significant business from TicTok due to regulatory concerns and potential sanctions against TicTok’s parent ByteDance. Analysts on the FSLY questioned the ease at which FSLY customers can discontinue their patronage.
As FSLY shares are still more than three times what we paid for them, but about half of the value for which they traded only two weeks ago. Wild ride. I decided to roll down one of the put options we had sold (expiry 15January2021; strike $65). To buy back the outstanding option (expiry 15January2021, strike $65) I paid $825.69 for a net loss of $176.40 or 2.7% of the capital at risk ($6,500). The lower-strike put option contract generated $379.30 and if shares are distributed, we’ll save $1,000 on our cost basis.
Our options inventory is currently dominated by FSLY. We have three short positions in FSLY puts and a short position in a FSLY call. See the below chart. The covered call and one of the put contracts expire in two weeks from this Friday. The other two puts expire in December and January.
FSLY’s volatility has been difficult for our option performance. After the sharp decline of FSLY shares following the company’s second-quarter conference call, I made about $1,380 selling options which seems to have led to overconfidence. Since September 9th, I have written and subsequently closed four covered call option contracts and three cash-covered put contracts. And lost almost $5,000.
Chart clipped from MarketWatch.com on 10/29/2020.
Closing the covered calls hurt as FSLY shares moved from $82 on September 10th to $128 on October 13th (to the tune of $2,125). The remedy proved more harmful than the malady. First, I closed call options that by now would likely have expired worthless. Moreover, to offset the cost to close my call options, I wrote a put option that ultimately cost $2,400 after FSLY shares fell from $128 (two weeks ago) to $67.85 (as I type this note).
All I can say is hopefully my wife is busy at work today and does not read this post after I send it to her.