On Friday three of our cash-covered put option contracts expired out-of-the-money. Instead of closing these positions early to access the collateral required to maintain them I let the contracts expire to save a bit of cash and force myself to maintain a larger effective cash balance. The price of the underlying securities for these contracts were all well above their respective contract’s strike price so there was little chance of execution.
On November 24th I sold a put option contract on Flugent Genetics Inc. (FLGT; strike: $30; expiration: 18DEC2020) for $65, before commission, when the strike was 78% of the market price ($38.66). FLGT appreciated significantly over the 27 days we held the position. Shares of FLGT closed on Friday around $43 per share or 43% above the strike price. We kept the full $64.3 premium, 2.1% of the strike or 29% on an annual basis.
On December 3rd we sold another put option contract on Fastly (FSLY; strike: $72; expiration: 18DEC2020) when FSLY shares traded for $83.39; the strike was 86% of the market price. FSLY shares surged to close around $102 when our contract expired – 42% above our strike price. We kept the entire $104.30 premium which was 1.4% of the collateral needed for the trade over the 15 days the trade was active or 35.2% on an annual basis.
On December 9th we sold a put option contract on Unity Software (U; strike: $130; expiration: 18DEC2020) when shares traded for $155.42; strike/market: 84%. Over the nine days the position was active, U shares dipped to $145 but recovered to close on Friday at $157.77; our contact there for expired out-of-the-money, worthless. We kept the full $134.3 premium; a quick 1% on the $13,000 required to collateralize the trade or 41.9% on an annual basis.
The most interesting action of the day related to our Tesla (TSLA) position. I may recently discuss TSLA more than any other position of ours as its value has exploded over 2020. We began the position in 2016 for effectively $40 per share as 0.5% of our portfolio; now I have trimmed to keep the position no greater than 2% of the portfolio.
The radio hosts discussing TSLA this morning noted shares have appreciated 70% since the index managers at Standard and Poor’s confirmed they’d add TSLA to the S&P500 index today, December 21, 2020. Not many days have seen a more volatile market for TSLA shares than Friday. I did not realize our limit order to sell three shares of TSLA had been filled at $690 near the close until late last night. As you can see below, the share price of TSLA had fallen consistently on Friday (to roughly $636 around 3:40 PM) before appreciating drastically at the close to rest at $695.
Source: MarketWatch.com
Source: MarketWatch.com
Last night I established five limit orders to each sell two shares of TSLA at prices increasing about ten percent between orders. After opening down about six percent today, I placed another sell order for two shares at $680. I’d rather sell now in case we are at the market top as passive funds that track the S&P 500 than hold out to sell at a price we may never see. If TSLA does rally to $1,040, the price of my most ambitious limit order, we’d lose $720 on the difference in our sale prices and I can live with that. In fact, if today’s order for $680 is filled, I may place another limit order around $700 tomorrow.