When Fastly (FSLY) crashed after its most recent conference call (they disclosed about ten percent of their revenue was from ByteDance whose TicTok app has faced significant regulatory risk) I saw our shares go from $120 to $90, roughly. When listening to the FSLY earnings conference call, I was convinced in the management team’s confidence. TicTok may have been a large portion of FSLY’s current business but with so much content moving to the cloud FSLY will have no shortage of customers.
In response to the market move, I sold two FSLY put options, one that expired in September the other in December. Today, after FSLY surged another 8.7% (as I type), the December put was purchased-to-close by a limit order I had entered. My account does not allow investing on margin so I like to free up capital once I’ve earned most of the premium (read: when I can repurchase a sold contract for less than a ten percent annualized yield – premium over strike price).
Specifics. The put was sold on August 6th for $1,099.28 with an expiration of December 18th, 2020 and a strike price of $70. At the time the market was trading FSLY for $85-90. By closing the contract for $125.04, we held the position for 64 days – closing the contract two months early. With $7,000 exposed to the trade and a net of $974.24 we returned 13.9% on the trade – 79.4% on an annualized basis.
This helps me deal with repurchasing those two FSLY calls yesterday at a steep loss.
We had two more puts close today (one actually while I was typing the above summary on the FSLY put contract). An Apple (AAPL) put contract I had sold a week ago when the market reacted to news of Trump’s having contracted the virus for $194.30 (strike: $95, expiration: 20NOV2020, the market was trading AAPL around $114) closed for my limit order price of $100.69. Apple is only trading around $116 as I type, but we closed $93.61 on the trade with $9,500 exposed for a mere seven days. A quick one percent return, over 51% annualized.
The third closed position this morning was a DataDog (DDOG) put contract I had sold this past Tuesday. We cleared $118.61 after buying it to close for $75.69. With $8,000 exposed to the trade on a $80 strike put contract, we earned 1.5% on the trade but, because the position was only open for three days, the annualized return was 180.4%. If memory serves, DDOG was one of the only companies I follow trading down, late in the session, on Tuesday and I was lucky to have my order filled. Today, DDOG is up by more than 10% as I type and the volatile market has bought our groceries for the week.
Source: MarketWatch