5/2/2021 Plan:
This week we return to Advanced Micro Devices (Ticker: AMD).
5/2/2021 Plan (continued):
- AMD – Sell June 4th 74/70 put spreads for 0.57
- RKT- Sell the May 21st 18 put for 0.23+*
- Prices are as of market close 4/30/2021, 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
5/2/2021 Commentary:
As we see in the chart, AMD has been pretty volatile with sharp moves up and down for the last several months. It has stayed above 74 throughout and our put spread assumes that will continue for another several weeks.
*The RKT put Includes earnings – do not trade unless you’ll take shares.
The main AMD trade is for a bit more than a month and a lot can happen in that timeframe – keep your overall risk in check and if you have enough positions on, use smaller size or pass.
Feel free to Reach out with questions on this or anything else!
5/3/2021 Entry:
Sold AMD May 21 73/71 for 0.25. Lots of spreads available – went earlier for lower strikes. Can also wait until the drop stops before entering. Adjust your strikes and duration to fit your preferred risk/reward and timeframe.
Sold RKT May 21 18 put for 0.21. Less than planned but happy to take shares at that level.
5/9/2021 Update:
The AMD put spreads have decayed some and are now worth 0.16 vs the 0.25 we sold them for originally. I plan to hold them through the week and try to capture more premium. AMD has moved quite a bit recently, so taking it off for a small profit now to reduce your portfolio volatility is fine.
RKT dropped quite a bit after earnings and we may be assigned on the shares. It is trading at 18.09 just above our strike price. As mentioned in the original write-up, we should only be selling puts on names that we’ll take ownership, so this isn’t a bad outcome. We have a couple more weeks before expiration.
5/15/2021 Update:
Last week we said that if you want to reduce volatility in your portfolio, you could close the AMD put spreads for a profit. If you didn’t, we certainly had that volatility! These expire this week and are currently $2 out of the money, but worth 0.44 at the midpoint for a paper loss. You can take the small loss Monday to make sure it doesn’t turn into a bigger one, or leave it on and try to capture some of the premium. I’m doing the latter, personally. I’m also willing to take some of the shares at the 73 level and sell calls against it. Another approach is to roll the put spread out. For example you could roll to the same strikes next week and pull in an additional 0.11 credit. It extends the trade 1 week, but reduces your exposure with the additional credit. You could also roll down to the 72/70 for breakeven.
The RKT puts are now in the money. Consistent with our trading philosophy, we only write puts in names that we’re ok taking shares. As we get towards Friday, if this put is still in the money, we can simply take the shares or roll the put.
5/23/2021 Update/Partial Close:
The AMD put spreads expired worthless taking in the full credit. There was a nice pop in the name when AMD announced a share buyback and that kept our put spreads safely out of the money.
The RKT puts expired in the money. As discussed, a few choices here. Take the shares and sell calls against it, or roll the puts. When I reviewed during my lunch break on Friday, there was a slight advantage to rolling the puts, so I kept the 18 strike and went to Jun 11, taking in an additional 0.37 credit. Specifically, I bought back the existing put for 1.08 and sold the new put at 1.45. This is an additional 2% for just 3 weeks, which is a nice return on the risk. As with other short put trades, we need to be willing to hold the shares and consider this a longer term position.
6/6/2021 Update:
Our RKT puts are currently worth 0.16 and can be closed for a profit at any time this week. They Do expire this week as a reminder. On our last put, we lost $87. We took in $1.45 for this put, so if it expires worthless, we’ll have a total profit of $58 over a 3% return in a little more than 1 month.
6/13/2021 Close:
Our RKT puts expired worthless, bringing in $145 per put we sold. As a reminder, we initially sold a put and took an $87 loss on it. This $145 win combines for a total profit of $58 over the two trades, a fine result!
