2020.02.22 Investing with Preteens Continues

They agreed! They both agreed on the same company when I pitched them individually. Today’s choices were Planet Fitness (PLNT), ResMed (RMD), Wal-Mart (WMT) and Zoetis (ZTS). All four were recent recommendations from our newsletters but, since I know the WMT business better than the other three, I likely gave the most detailed explanation of WMT. The explanation may have swayed my daughter, my son just knows WMT from our supply runs during recent camping trips.

I really like WMT because I still see the impact of Sam Walton’s approach to the business almost 30 years after he published his book in 1992 (the same year as he died). Sam was not shy about his tactics: he studied the best operators in the retail space and turned a lone Ben Franklin’s franchise into the world leader in business revenue. In Made in America, Sam admitted he blatantly copied the warehouse wholesale shopping idea of Costco/Price Club. Sam recounted he spent time in jail in Brazil because he didn’t speak Portuguese and could not explain why he was on the floor measuring the distance between display fixtures. Sam’s friends from 3G Capital bailed him out the next day.

Without the founder and patriarch, WMT has continued to evolve and thrive as consumer behavior changes. WMT is now a leader in online retail after adapting tactics employed by Amazon.com. Similar to the wholesale channel expansion, WMT was not the first mover in online shopping but leveraging its impressive logistics capabilities and scale WMT has quickly become the number two competitor in the online retail space. Like Amazon, WMT offers free shipping for members and space on its site for smaller businesses to sell their own products.

With such adaptability and displaying such competitive prowess, I am confident WMT will be a long-term position in my children’s portfolios. Hopefully these children will not need to sell the companies we buy for at least 50 years, and WMT is a business I am confident will be outperforming other retailers for many decades.

2021.02.22 Two Covered-Call Contracts Closed as the Market Resets

Today has been a rough trading day for investors, like us, who have seen significant growth in their portfolios thanks to asset-light technology companies. Two of our covered-call options have closed on standing limit orders. First, Our last Appian (APPN) option contract closed when I was slow to reset our limit order this morning. We sold a call option (strike: $310; expiration: 19MAR2021) against our APPN shares on 19JAN2021 for $229.30 and it closed on our standing limit order of $1 per share to net $128.61. Had I been more quick to adjust our limit order, I may have save another $25-50. I will definitely sell more covered-call options against our APPN shares to generate income as I work to trim the position.

The other covered-call closed today was on our Cloudflare (NET) shares. This position was established just last Thursday when I sold this contract (strike: $90; expiration: 16FEB2021) to roll out a previous covered-call position. I have yet to roll out this position as NET is also plummeting today and I prefer to sell call on up days. Our position in NET is now under water – just one of the few in our portfolio. I may sell a call at lower strike price but we have many possibilities with a stock priced so favorably for options trading relative to our portfolio size.  

2021.02.19 Closed a Call Option Contract Position and a Put Option Contract Expired, OTM

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.

2021.02.19 Closed Two Covered Call Positions

Today, options expiration day for February, we closed two covered-call option positions. Our Appian (APPN) covered-call had been threatening to expire in-the-money for the last few weeks and our Fastly (FSLY) covered-call expires next week but was severely depreciated by the drastic fall in FSLY shares after Wednesday’s earnings report.

Our APPN covered-call (strike: $220; expiration: 19FEB2021) was initiated on 17DEC2020 when APPN traded for $152 per share. Our stake in APPN has appreciated significantly – to the second largest allocation of our portfolio. My intention was to use an out-of-the-money covered-call to trim our position. As you can see from the below chart, APPN shares have been extremely volatile. To the point that we almost had a significant taxable event. After crunching the numbers, we would have been better off buying back the option for well over $2,000 to avoid short-term tax incidence.

Source: Questrade, accessed 19FEB2021, 1:20 PM ET

Our stake in APPN is equally divided into two tax lots dating 20March2020 ($43.81 per share) and 30April2020 ($45.94 per share). Were our shares distributed by the covered-call on a FIFO basis we’d create a short-term tax liability of $18,169. Assuming a long-term capital gain would be taxed at 15% we’d owe about $2,700 but a short-term capital gain taxed at an assumed marginal tax rate of 25% would result a $4,500 tax liability. The 25% rate is chosen as a low estimate to inform the repurchase decision. The option contract was trading for $1,100 yesterday which would have been a bargain compared to the short-term tax liability.

Luckily for me, APPN fell significantly today (down 3% at the open and as far as down 12%, but now around -3% as I type). Our option was closed at the open of trading on my standing limit order of $2 per share. The limit order was set in December not long after we opened the covered-call position. Over the course of 64 days we netted $348.60 on the covered call despite the impressive run APPN experienced since mid-January.

The FSLY covered-call (strike: $135; expiration 26FEB2021) was initiated on 19JAN2021 when FSLY traded for $95. With a margin of 42% between the market and strike price and about 5 weeks to expiration, we netted $210.61 on the trade when we closed it for $3.69 earlier today. Though we could have saved the purchase cost by waiting a week I thought it best to close while the ask stood at $0.03 to enable us to sell another covered-call FSLY shares rebound next week.

Source: Questrade, accessed 19FEB2021, 1:20 PM ET

FSLY is another candidate to trim via covered-call. Our cost basis for all 200 shares is less than $23 per share and to avoid short-term capital gain tax rates we’d need to wait until 23April2021 for the one-year anniversary of our FSLY position. After this week’s steep decline I’ll wait for FSLY shares to rebound before establishing another FSLY covered-call but now we’ll be ready to do so and it only cost us four dollars. I’d love to find another trade like this one that pays us $210.61 because FSLY did not appreciate 42% in 31 days.

2021.02.18 Rolled a NET Call Out One Day Before Expiration

This morning Cloudflare (NET) traded down with the rest of the market and, after a significant drop in NET share prices, our covered call option contract (strike: $90; expiration: 19FEB2021) was closed for just $18.69. Sure, we could have waited until the option expired tomorrow but within a few minutes I sold another call contract (strike: $90; expiration: 26FEB2021) for $124.30.

The contract I closed was intended to generate quick revenue. On 10FEB2021 I bought 100 shares of NET just to write a covered call contracts on the shares. Each NET share cost $89.38 and I sold the call that expired in 8 trading days for $511.29. Had our shares been distributed through the call option, the profit would be almost $5.73 per share or 6.5% in 8 days.

Our effective cost basis for the NET shares is now reduced by the value of the first call option, or $84.27 per share. To cumulate the two option trades and the position in the underlying NET shares, if our shares are distributed by our position in the second contract, we’d earn about $700 in 16 days on $8,938 – or nearly 8%. If our shares are not distributed on 26FEB, our effective share price will be about $83 when we entered the position closer to $90.

I really like NET but I am concerned about the recent appreciation in share value. Fastly, a NET competitor, is trading down about 12% after reporting earnings after yesterday’s close. Both are very promising companies but both are up more than 200% in the past twelve months.

2021.02.11 CRWD Put Option Contract Closed

Today our short position in a Crowdstrike Holdings Inc (CRWD) put option contract (strike: $170; expiration: 19MAR2021) was closed on a standing limit order. We like the prospects for CRWD’s future, but we’ve earned 75% of the premium we received just 16 days ago with 6 weeks until the option contract expires. This contract netted $313.61. Collateral of $17,000 was required to maintain the CRWD position so we earned 1.6% for exposure to it; 42.1% on an annualized basis.

2021.02.08 MTCH Put Option Contract Closed

Today I closed our short position in a Match.com put option contract (MTCH; strike: $130; expiration: 19FEB2021). With just two weeks to expiration MTCH was threatening new highs if not pushing through them and our short-dated contract was able to be closed for just $10.69. I could have waited to let the contract expire but, before checking my available cash balance, I made a trade that took my available cash down to 10.1%. For the low, low price of $10 another 1.6% of our portfolio moves to the available cash column.

The MTCH position was active for 53 days. On 17DEC2021, when we initiated the MTCH put contract position, MTCH shares closed at $148.75; shares trade around $162 today – up nearly 9%. Our contract position earned 3.1% on the $13,000 collateral required to hold the option contract position, or 21.6% on an annual basis.  Though our position did not perform as well as the underlying shares, our collateral was 14% less than the capital required to purchase 100 shares on 17DEC2020. MTCH has had a remarkable year (we had 100 shares of MTCH assigned to our portfolio at $77.50 per share on 21FEB2020).

We’ll continue to watch MTCH for opportunities to sell put option contracts or take a long position. I don’t usually write contracts that require more than $13,000 so if MTCH continues to appreciate we may need a different method to assume exposure to MTCH.

2021.02.05 Closed a PINS Put Option Contract

Today I decided to close a put option contract on Pinterest (PINS; strike: $50; expiration: 19FEB2021). Option prices typically take a significant fall on Mondays but this option contract was closed for $2.69. I did not plan to close the PINS contract before expiration but I can look through the couch cushions to find the three dollars required to reclaim the collateral.

We’ll write another put on PINS when the opportunity presents itself. Our kids own shares in their own portfolios and I’d like to add it to our main portfolio, too.

This trade breaks the recent trend of very short-term positions because we established the short on the PINS put option contract on December 17th, 2020. Since the last week of January, PINS shares have appreciated sharply including rising about five percent as I type this trade summary. Over the 50 day holding period, we earned $136.61 on the $5,000 required for collateral; 2.7% or 19.9% on an annual basis.

Source: MarketWatch.com

2021.02.03 Repurchase of a NET Put Option Contract

Yesterday our first two Cloudflare put option contracts (strike: $60; expiration: 19MAR2021) were purchased to close on a standing limit order. Cloudflare (NET) is highly recommended by our newsletter service because it is well positioned to grow as more information and content is shared online. Since October 2020, NET has doubled so option prices are attractive. Cautious to a quick reversal, I positioned this option contract position to only be in the money if the NET share price fell 26%.

Source: MarketWatch.com

The contract was due to expire in a bit more than 6 weeks, but our limit order purchased to close the position for $151.37. By my calculation that purchase price reflects a 10% annualized return, my standard threshold for closing limit orders. Over the eight days of holding the position we earned 1.1% of the $12,000 collateral required to hold the cash-covered put option position ($127.25); 48.4% on an annual basis.

 Since February began (today is 4FEB), I have closed four option contract positions and this NET position was the longest-held position – it was active for just 8 days. We have seen significant valuation growth in the markets over the past week and I am happy to have closed these positions for modest gains (roughly $590 on collateral of $44,750). As markets continue to move ever-higher, our portfolio is at a record high and I’d like to have more liquidity (today’s available cash was roughly 13% of the portfolio); the NET position liquidation liberated almost 1.5% of our portfolio.

2021.02.02 Closed Put Option Contracts for NEE and DIS

Yesterday our initial limit orders to repurchase recently established short positions in put option contracts on NextEra Energy (NEE; strike: $72.50; expiration: 19MAR2021) and the Walt Disney Company (DIS; strike: $140; expiration: 16APR2021) were filled, and our positions were closed.

These two positions were initiated, along with the subject of my most recent post (an APPL put option position), on January 29th – one of the most volatile days since October 2020. The market has had a remarkable run since October closed. Our portfolio is up 21% since the first trading day in November 2020. Over the same period, the S&P 500 is up 16% and the NASDAQ Composite Index has advanced almost 25%. On Friday, January 29th, the S&P 500 fell as much as 2.2% and closed down 1.9%. That day the NASDAQ’s fall was more severe, down as much as 2.6% and closing down 2.0%.

As you can see from the below graphs, the downward volatility did not last long. To prepare myself to take advantage of quick reversals such as this one, I set aggressive limit orders to repurchase and close the position. The NEE order netted just $48.61, but only $7,250 was required as collateral and we earned a 0.7% or 61.2% annually. The DIS trade netted a similar yield (0.8% over the four days and 74% on an annualized basis) but with almost twice as much collateral at risk we netted $113.61.

Source: MarketWatch.com

Source: MarketWatch.com

Both DIS and NEE are companies I sold to take realize a loss in mid-2020 with the intent to reestablish positions. DIS has not sold off further despite parks and cruises operating at minimal capacity, if at all, but actually, as a result of the company’s focus on streaming video content, the market now values DIS as it values Netflix – much, much higher relative to earnings. I sold 57.5 shares of DIS for $102.99 on May 7th and shares have only gone up since – trading around $177 today.

Expectations for NEE have acerated since the Biden Administration was elected in November. I sold 25 shares of NEE, before the 4 for 1 split, on 16MAR2020 for $199.88 per share ($49.97 adjusting for the split). Today NEE is trading around $83 per share; 66% higher than our exit price. Before calculating the tax benefit, the deft realization of the $1,900 capital loss and subsequent failure to reassume the position cost us $3,300. Combined with the DIS blunder, these transactions cost us roughly $7,600.

As I manage our cash position to prepare for higher interest rates and potential market corrections I will continue to write put option contracts to generate income and force my way into a lower cost basis for companies like DIS and NEE. Since March I have made $355 from selling put option contracts on DIS (four days has been the longest holding period of the four positions) and $335.83 from short positions in NEE put option contracts (three positions 37, 46, and 4 days in duration).

2021.02.01 Closed a Put Option Contract on AAPL

Apple (AAPL) is one of our largest holdings due to its remarkable performance – despite my modest initial investment in the largest of the big tech companies. Actually, now that I consider our kids’ education fund, we’ve held AAPL for almost a decade.

On Friday, I wrote three put option contracts, one each, on Disney, NextEra Energy, and AAPL. On the risk-off end to the week, AAPL closed at $131.96 after finishing Thursday’s trading session around $137. On down days I have taken advantage of volatility to sell insurance in the form of put option contracts. The APPL put contract (strike: $115; expiration 19MAR2021) sold for $297.30.

After markets rebound to start this new week, our AAPL put was just $10 above our initial limit order. Instead of waiting to see if our order would be filled later in the day, I cut bait and paid the extra ten dollars to close our position just two partial trading days after we opened it. Our return was 1.2% on the $11,500 required for collateral; 144.5% on an annualized basis.

With the three positions opened Friday, our available cash balance fell just below 10%. After closing our AAPL put contract our cash balance is much more comfortable above 11%. I plan to trim at least one of our high-flying tech investments but our cash will be constrained until either our covered-calls assign our shares or we see hit the anniversary date magically converts our short-term unrealized capital gain into a long-term unrealized capital gain.

This was not the first time I quickly opened and closed a put option contract on AAPL and I doubt it will be the last. I very much admire Apple’s business and plan to follow the business for many years. If we have an opportunity to make a quick return on its short-term price fluctuation.

Source: MarketWatch.com

2021.01.25 Closed Another Put Option Contract; this Time: LMND

Shortly after publishing my post about the closed contract for the FUBO contracts, our limit order to repurchase a put option contract (strike: $75; expiration: 19OCT2021) on insurance provider Lemonade (LMND) was filled. After selling the contract for $274.30 on January 15th our standing limit order purchased to close the short position for $115.69; we netted $158.61, or 2.1% of the $7,500 required as collateral, over the ten days the position was held.

More than two percent return is incredibly attractive considering the prevailing risk free rate. On a twelve-month basis the return on our LMND trade is roughly 77%. Why compare the LMND trade to the risk-free rate? LMND is highly volatile, new to public markets, and new to a market with well-established competitors.

LMND is highly recommended by my favorite stock-picking newsletter and, more importantly, this option contract’s strike price had a significant margin for error. When I entered the order to sell the contract on 15JAN2021, shares of LMND traded for $159.20 – more than twice our strike price. To spell out the proposition of the trade: LMND shares could be cut in half over the following two months and we still wouldn’t have shares distributed to us. Were shares distributed, our cost basis would have been $72.25. To classify this trade risk-free would be foolish but it is fair to deem option execution unlikely.

LMND has had a wild ride since joining the public markets this past summer; see the below chart. Shares of LMND briefly reached $95 in July following a strong initial month but did not cross $100 until mid-December – briefly falling as low as $44.11. After starting January near $130, LMND share soared to $188.30 before tumbling in January’s second week. Our put option contract was closed when LMND shares briefly flirted with $170 before closing at $151. We’ll likely sell another put contract for LMND in the near future if presented with such favorable terms.

Source: QuesTrade; Accessed: 25JAN2021

2021.01.25 FUBO Option Closed

One stock surging higher than PLTR in today’s early trading is FuboTV (FUBO). As luck would have it, we also had a short position in two put option contracts on FUBO (strike:$30; expiration: 19Feb2021). Though our limit order was due to buy to close at two dollars per share, our position closed for $333.37. Thank you, JP Morgan. With the close of our position we netted 3.1% on the $6,000 of collateral required to sell the contracts.

As I noted in an earlier post, we’ve sold and repurchased two other positions in FUBO during the 34 days we held the contracts closed this morning. FUBO has had a wild ride over the past six months, but it is a recommendation in one of my favorite newsletters so I plan to watch the stock for opportunities to enter a small position or sell cash-covered puts.

Source: QuesTrade; Accessed 10:20 AM on 25Jan2021

2021.01.22 PLTR Option Short Position in Put Option Closed

On Friday I closed a short position in two Planatir Technologies (PLTR) put option contracts (strike: $20; expiration: 19MAR20). With PLTR shares up again this morning, before the market opens, I would have earned more money by setting a lower limit order price to buy to close. When I checked the market Friday morning, PLTR traded at $26.78 but closed later at $32.58. The bid for our option was $1.62 in early trading on Friday but closed for $1 before trading ended.

Our limit order repurchased the option contracts for one dollar, each, plus commissions. We netted $157.25 or 3.9% of the $4,000 required for collateral after opening the position on Wednesday.

Shares seem to be rising as the market opens this morning, $37.13 when I clipped the below chart, but nearly $39 as I type this sentence. I expect more volatility in PLTR in the near future and I will continue to watch for opportunities like the one we closed Friday.

Source: MarketWatch.com

2021.01.21 Closed a PRLB Put Option Contract

Today our short position in Protolabs (PRLB) was closed on a standing limit order to purchase a closing contract. We sold quasi-insurance to PRLB shareholders on 30DEC2020 following a sharp reversal in PRLB share price. In the first 23 days of December 2020, PRLB soared from $138 to $188 (roughly). The following three trading days were not kind to PRLB which closed 29DEC2020 at $158.

Our cash-covered put option contract (strike: $115; expiration: 19FEB21) in the volatile PRLB market sold for $275. The premium yield ($2.75/$115) was about 25% on an annualized basis while the strike was 73% of the day’s closing price for PRLB. By closing the position a month early (for the low, low price of $40.69) we netted $233.61 or 85% of the premium in 22 days. The net was 1% of the collateral or 16.9% on an annual basis.

I really like PRLB’s business. They specialize in rapid manufacturing for prototypes and short-lead needs. Moving into 3D printing has expanded their business and provides confidence they’ll be able to maintain their value-added specialization through technological advances. I’d love to add them to our portfolio. Had our put option distributed shares to us, the cost basis would have been around $112 per share but today the shares trade close to $195. Closing this contract returns $11,500 to our available capital and the hunt continues for the next opportunity.

2021.01.20 Closed Put Option Short Position in EGOV

On the day a new president is sworn in and a new government takes power, our put option contract on the government software as a service provider was purchased to close. NIC Inc (EGOV) was a recommendation from one of the newsletters I follow so I sold two put option contracts on 18DEC2020 with a strike price ($25) just five percent below that day’s market price with 9-10 weeks to expiration (19FEB2021).

EGOV shares have performed well since mid-December, up ten percent, and our option contracts were closed on our standing limit order for $20 each. With five weeks to expiration, the market has granted us 80% of the premium for which we sold each contract, and there is not much to gain by holding the position. When I checked the market for these contracts earlier today, my limit order to buy two contracts at $20 were alone in their position as the highest offer to buy. Closing this position netted $157.25 or 3.1% of the collateral and 34.8% on an annual basis.

2021.01.19 Closed a Short Position in a NEE Cash-Covered Put Option

Today I decided to close our position in a NextEra Energy (NEE) cash-covered put contract. Forty-six days ago I initiated a short position in a NEE put option contract (strike: $67.50; expiration: 19MAR2021); selling the right to sell shares seven percent below the prevailing market price within the following 105 days for a premium of $215. Usually I prefer to sell contracts with strike prices at least 15% below the market, but I want to buy shares of NEE – badly. Well, not bad enough to buy shares out right due to recent market performance.

The value of the foremost renewable energy utility appreciated significantly as the market realized the Biden administration will be joined in governance by a democratic legislature. With nine weeks remaining before contract expiration the market only required $40 to close our position and I took its offer. NEE shares trade 19% above our strike today and the premium we paid to close the contract was just 3% of the strike. We netted $173.61 of the 46 days we held the position. Our return was 2.6% of the strike price or 20.4% on an annual basis.

If NEE ever has another down day, I will gladly sell another put option contract with an aggressive strike price and a long term to expiration.

2021.01.19 Closed a Covered Call Last Week

Last week I closed a covered-call position on Square (SQ). On Friday, January 15th, SQ shares traded around $234 and our strike price on the covered call was nearly 50% higher than the market (strike: $340) while the short position in the call option contract expires on February 19th.

We sold the call option contract for $200 on 21DEC2020, 26 days before closing this past Friday. The position netted $168.61 for selling the right to buy well above market. SQ shares have treaded water since we wrote the call. After maintaining the position for three weeks, the market has decided the call option contract is worth only 15% of what we were paid.

I like the exposure to SQ and we were lucky to acquire the position when we did. During the market reset in March I allowed a short position in a SQ put option contract to distribute shares. The market had taken SQ shares well below our $59 cost basis, but we’ve held the 100 shares for roughly ten months and, as of Friday, SQ has appreciated to almost three percent of our portfolio. For perspective only nine companies in our portfolio maintain a more valuable position.

We will write another covered-call option contract for SQ – again – well above the market. In Fall 2020 closing covered-call positions became quite expensive but this time I am ready. Were our shares of SQ to appreciate to be called away from us I would happily relinquish the shares and purchase a smaller stake in SQ. First, the strike for any covered call I write will be well, well above the market. Second, I’d like to pull back our exposure in SQ to be more inline with our exposure to other payment processers (PayPal, Visa, and MasterCard). Initially we had invested an equal amount in SQ’s more established competitors; PayPal is now 1.8% of the portfolio while exposure in MasterCard and Visa sum to 1.5%.

Payment processors are well positioned to benefit from the pandemic due to consumers’ aversion to cash and more frequent online shopping. Given the market outperformance for such pandemic darlings, especially SQ, trimming our position may well prove prudent. Note to self: wait for the market price of SQ to surge before initiating the next covered call.

One-Year performance of SQ shares noting our late-March entry point. Source: MarketWatch; accessed 19JAN2021.

Closed Put Option Contracts; EBS, FUBO, U

Yesterday two of our put option contracts closed on standing limit orders. Today another put option closed. We’ve avoided the steamroller again but must be vigilant of its presence.

Our Emergent BioSolutions (EBS) short position in a put option contract (strike: $65; expiration: 19FEB2021) was closed for $50.69, netting $148.61 or 2.3% of the $6,500 required for collateral. The position was held for 13 days. On 30DEC2020 EBS traded for $92.90 when we entered the order to sell this now-closed short position; today shares trade at $108.58 – up $5.20 from where it closed yesterday; when our position closed, EBS had appreciated almost 11% during the time we held the short position.

Later during yesterday’s trading period, a similar short position in two FuboTV (FUBO) put option contracts (strike: $22.50; expiration: 19FEB2021) were closed on our standing limit order. FUBO has been volatile over the past month as described in my most recent post. Yesterday, FUBO shares appreciated more than 10% and our short position was repurchased on our limit order. The position was open for twelve days and netted $477.24 or 10.6% of the collateral.

Today, our short position in a Unity (U) put option contract (strike: $110; expiration: 19FEB2021) was closed on a standing limit order as the market opened. Open for just one week, we initiated the short position in the U contract on 6JAN2021 when U traded around $139.03; today U traded for $150.67 not long after our option was repurchased to close, up roughly 8%. We netted $173.61 or 1.6% on the U contract.

2020.12.31 Rolling Out/Down and Trimming TSLA to End the Year

Today I trimmed another 2 shares of Tesla (TSLA) from our portfolio at $700 per share. TSLA was added to the S&P 500 ten days ago – which would require purchases by funds mandated to track the index. For much of 2020 TSLA has traded up due in part to speculation it would be added to the index. Efforts to front-run passive funds are complicated due to the timing between Standard and Poor’s announcement on November 16th and the actual dates of the trades made by S&P 500 tracking funds.

After trimming in August (ten shares at $350 and, later, five shares at $499), we have had four different limit orders executed to sell (two shares per order) at $625, $695, $650, and, today, $700. Had we not sold any of the TSLA shares we have held since 2016, the value of our TSLA stake would be 3.2% of our portfolio; after today’s sale TSLA is roughly 1.1% of our portfolio.

On December 22nd I took a small speculative position in fuboTV (FUBO), a company recommended last week my favorite newsletter. FUBO’s price activity has been spectacular over the past two weeks. FUBO has tripled since it began to trade on public markets in August but on December 22nd FUBO traded around $58 from roughly $10 in August. I sold two put option contracts (strike: $30; expiration: 19FEB2021) for $2.60 per share before commissions and taxes. My premium was about 8.7% on a strike price 52% below the market.

Then came the steamroller. After finishing December 22nd above $63 per share, FUBO crashed. As I type, nine days later, FUBO trades around $28.50. Unless we see a rebound in FUBO, we’ll own 200 shares for $27.40. See the below chart for FUBO up and down over the past month.

Source: Questrade

Unfortunately, earlier this week, after FUBO’s rough Christmas weekend, I sold two more put option contracts on FUBO (strike: $25; expiration: 15JAN2020) for $1.10 per share before commissions. FUBO was trading around $40 per share so my strike on the new contracts was almost 40% below the market. Today, I decided to roll the second position down to a strike price of $22.50 and out to 19FEB2021. The lower strike price reduces our capital held as collateral by $500 to $4,500. The longer time to expiration, five additional weeks, allowed us to recoup the cost to close the previous position at a loss.

“How much did we lose?” you ask. Seven and one half percent of the collateral. In three days. Ouch.

The new contracts sold for $3.90 per share, but I had to pay $2.95 per share close the contracts sold on Monday. Stay tuned, folks this is a wild one.

Through writing this summary, I’ve decided to add FUBO to my list of candidates for investment via long-dated call options. New to the public markets, we’re likely to see significant price volatility in FUBO shares. My broker only has December 2021 call options available but, if options dated two or three years in the future become available and FUBO continues to relinquish gains made since August, I’ll take a long look at the potential.