2/28/2021 Plan:
A few trade ideas this week, including a put sale in Rocket Companies (Ticker: RKT)
2/28/2021 Plan (continued):
- RKT – Sell Mar 26 18 puts for 0.33
- BIG – Sell Mar 19 50/47.5 put spreads for 0.30
- DKNG – Sell Mar 19 52/50 for 0.27
- MSFT – Sell March 19th 210 put for 1.45
- Prices are as of market close 2/26/2021, actual fill and strikes may differ depending on Monday’s open, post will be updated accordingly.
- All trades are for educational purposes and do not constitute advice
2/28/2021 Commentary:
The market (SPX) fell about 2.5% last week and lots of names fell more. When the market becomes more volatile, it is ok to take a step back and wait for things to settle down a bit. I am recommending that our newer traders don’t put too much more (if any) additional risk on unless they are ok taking larger than normal losses. A 2.5% pullback really isn’t that much, but I’ve seen lots of panic from newer traders that have just seen the market go almost straight up since last March.
With the increase in volatility and lower prices in many names, it is a Great time to sell puts in names you would like to have long term for an investment. So outside of this week’s trades, consider “shopping” for some of your favorite names by selling puts.
One of this week’s trade ideas is in RKT. With real estate and refinances still pretty hot, we look to add shares in the company that runs Rocket Mortgage. RKT has never closed below 18 (note the IPO was in August of 2020) and we sell our puts at that level, looking to get almost 2% in less than a month.
The other trade ideas are straight forward put spreads in DKNG and BIG. When I mention Not putting on too much more risk, these are easy trades to ‘skip’ as we have a lot expiring already on March 19th.
The MSFT put is an example of adding shares for a company you’d hold long term. Note that you would need $21k to hold the shares.
Repeating myself a bit, but do be a bit cautious if you don’t have much experience with dips and increased volatility. I have put on more VIX and VXX as a bit of an overlay to my account and I also have some SPY put spreads (often 1x2s) to protect from a continued down turn. Reach out if you would like to hear more about some of those strategies.
Reach out with any questions on this or any other trade!
3/1/2021 Entry:
With a big rally the put spreads and MSFT puts we’re not available. I did go one week further and sold the April 1 19 puts in RKT for 0.30
3/7/2021 Update:
Wild week in RKT with a huge move up and then back down again. I actually sold some more puts when RKT went up at the 18 strike for 0.43. This is a clear case where implied volatility can have a huge impact on your positions. The 19 puts were Down money when RKT took off like, well, a rocket. Then RKT sold off and our puts started making money again. Implied Volatility is the reason. If this isn’t clear, reach out. The 19 puts are about 0.03 profitable. No change to this position for the week.
With the significant volatility last week, there were opportunities for the other trades, like:
- BIG – Mar 19 50/47.5 for 0.30
- DKNG – Mar 26 52/50 for 0.27
- MSFT – Mar 19 210 put for 1.48
While sometimes trades aren’t readily available on Monday, it is worth keeping an eye on some throughout the week, especially when markets are volatile. I’m a big proponent of scanning for put sales when the market drops (and IV increases) as you can get some great ‘deals’. The MSFT put is an example and it can already be closed for a nice profit. I suggest keeping a list of stocks and prices you’d be willing to buy them at and monitor during downturns to “go shopping”. At some point in the future, I’ll develop a tool and provide some recurring ideas. You can reach out if you’d like to beta test or have questions.
3/14/2021 Update:
What happened to our strike? You may have noticed that our 19 strike puts that we sold now show a strike price of 17.89! If you have never run into this before, it may have caused some confusion. The reason is that RKT had a special dividend of 1.11 and our strike price was reduced accordingly.
With RKT ending the week at 25.02 our puts remain pretty far out of the money and are worth about 0.14. If you need the margin, this is a trade you can take off to capture the profit and reallocate to another trade. I’m personally leaving it on.
If you ended up taking the BIG, DKNG, or MSFT trades they are all very profitable.
3/21/2021 Update:
The RKT puts are worth Very little right now, showing a 0/0.06 bid/ask spread with a couple weeks to go. Close whenever you’d like to free up margin and book the win!
The MSFT, BIG closed worthless (as these weren’t “alerted”, we won’t count the wins on our Results page, but savvy members picked these up and enjoyed the profit). DKNG will very likely expire worthless this week – I took mine off for 0.03 this past week.
3/27/2021 Update:
The DKNG put spreads expired worthless if you still had them on.
The RKT puts are looking great and should expire worthless. Take them off at any time – remember that the market is closed Friday, so take action on Thursday or before to book the win and free up margin.
4/4/2021 Close:
The RKT puts expired worthless, brining in the full $30 per put sold. A pretty straightforward play with a nice win adding to our 2021 profits.
Reach out with any questions on this or any other trade!
