It has not been a productive week for me. I have spent too much time reading news and much, much too much time inside my self-curated echo chamber on Twitter as we digest the election results. Now I have a few trades to summarize.
On November 5th I closed three short positions in put option contracts for a few of my favorite companies to write puts upon. If memory serves, the market was especially happy (bullish) to learn Joe Biden was soon to be the President-Elect but the Senate was likely to remain controlled by the Republican party. Markets love division between the Congress and the Executive branch of government. Division leads to less new legislation and businesses are more likely to continue operating under current laws. I believe these three were all executed on existing limit orders which I had established to aggressively close the positions.
The Above Charts via Questrade IQ Edge, accessed November 12, 2020
First, we took another loss on an Appian (APPN) contract (expiration 20NOV2020; strike: $60). We’d held it for 29 days and lost $56.39 to close the position. Had I held till expiration, we would have closed the contract at a profit because as I type (eight days before expiration) APPN trades above $90 per share. At least we’re still long 200 shares.
Second, we took profits on a Fastly (FSLY) contract due to expire January 15, 2021. This position was only open for a week, but we managed to close the position with an $88.61 profit on a trade that required $5,500 in collateral. A week later, FSLY is trading well above the strike, but I am glad to have closed out this FSLY put early due to my recent misadventures trading the company’s options.
Third, Square (SQ) also jumped on November 5th and we made another quick $88.61 (not a typo, just ironic) after selling this put option contract (expiration: 27NOV2020; strike: $130) having held it for just three days (well, if it closed at the open of trading, two). SQ jumped from $172 at 4NOV2020’s close to $177 at 5NOV2020’s open, but continued up to $204 and back down to $178 as I type. It’s been a wild ride for the purveyor of small-business payments so I am glad to have taken profits.
Chart via Questrade IQ Edge, accessed November 12, 2020
This Monday I wrote three put option contracts and two have already closed for small profits. Beyond Meat (BYND) was hammered by investors when McDonald’s revealed its plans to release a McPlant meatless burger offering. Competition from the world’s largest quick serve company may be troublesome for BYND but McDonald’s failed to disclose they were partnering with BYND in the McPlant venture. I sold a put contract (expiration: 20NOV2020; strike: $105) after BYND shares crashed then set a limit order which was quickly executed as shares rebounded following the partnership disclosure. We made almost $40 on $10,500 collateral within a couple of hours.
Chart via Questrade IQ Edge, accessed November 12, 2020
Another trade opened Monday closed this morning as Fastly (FSLY) shares remained volatile. The contract (expiration: 20NOV2020; strike $65) closed on a limit order set on Monday after I opened the position. It would have been nice to hold this one, it expires in just two weeks, but the trade closes to net $48.61 after just three days of exposure.
Screenshot clipped from JPM Securities, accessed November 12, 2020
For those keeping score at home. These five trades did sum to a net positive, but just barely. I mean, I couldn’t even pay for the meal we bought at Burger’s Priest on Monday (I did leave a 15% tip on a takeout order).
As a more general summary of this year’s trades, not considering the opportunity cost of buying assigned shares at the market price, I am still up $19,150.57. That’s a 12.1% return on the month-end cash balance of our portfolios. It’s been a slow week but the effort is still worth pursuing. I have held 260 distinct positions; 34 of which lost money; 54 have not returned the 15% I strive to achieve. Investing with options keeps me engaged in the markets and has also provided very lucrative entry points for a few positions we continue to hold (100 shares of SQ being one of them).
Going forward, and over the past month or so, loss mitigation is key. Twenty-three trades have lost more than $100 and four have lost more than $1,000.