On Friday we closed our most profitable trade to since I’ve begun proposition trading in early 2020. The pandemic has been devastating to airlines and Hawaiian Holdings (HA), the parent company for Hawaiian Airlines was no exception. HA has been a recommendation in our newsletters for several years. And once the pandemic is not such a impediment to vacation travel and travel between the Hawaiian islands I expect HA to return to 2019 levels of revenue and profitability.
On 15OCT2020, to capitalize on the market aversion to travel, I bought three contracts of a long-dated HA call option (strike $12; expiration: 20JAN2023) for roughly $6.40 per share. I set a limit order to sell two of the HA contracts for $15 per share, and this sell order was filled Friday. We netted $1,698.10 for a 131.5% return over 127 days. Put differently, we paid $1931.95 for three contracts, cleared $2,989.05 for a profit of $1,050 and still own the right to buy shares of HA at $12.00 until 20JAN2023 (HA trades for $26.31 after another significant move during today’s trading session).
To round out Friday’s transactions, an Appian (APPN) put option contract we sold on 5FEB2021, in the midst of APPN’s highs, to balance out our exposure to the two APPN covered call option contracts we held at the time. Our APPN put (strike: $170; expiration: 19FEB2021) expired worthless – and just in time. APPN has been pounded over the past two sessions and is now trading around $185. The put option contract for APPN with the nearest date of expiration and a strike of $170 now trades for more than $8 per share.
The expired put was held to mitigate the cost to repurchase the APPN covered call (strike: $220; expiration: 19FEB2020) which I expected to expire in the money. What a difference a day or two makes. The market is now 16% from our closed covered-call’s strike and less than nine percent above the put’s strike.