Today the market has opened down significantly; as I type this, today’s print is almost three percent less than yesterday’s. Square (SQ) has traded down about three percent taking the shares right back to where they closed this past Monday before jumping Tuesday (when we sold the call). In turn the call option (strike:$170; expiration: 9/25) depreciated roughly 45% from yesterday’s close as SQ fell this morning.
Chart Source: JPM Chase; accessed 10:00 AM 9/17/2020
Unfortunately, my closing limit order on our short position in a SQ call contract proved to be too aggressive. Executed at $73, $31 above the current market, we gifted 50% of our net to the market.
Exposed to the position for only two days we kept 45% of the call premium having sold the call for $134.3. The exposure returned 0.4% of the $17,000 redemption value (liquidation price of our shares had they been assigned) over the two days or 65% on an annualized basis.
Sixty-five percent in two days is not bad, perhaps we’ll be able to sell another SQ call next week if volatile trading persists.