1/19/2020 Plan: DIS – Sell 24 JAN 142/140 put spread for 0.30 credit
- We sell the 24 Jan Disney 142/140 put spread for 0.30 credit. Intent is to go to expiration, will remove early with a big move up on DIS. Ok with taking shares if DIS expires between 142/140.
- 3rd week in a row with this trade as DIS has been very range bound. Will not enter the week of earnings
- Prices are as of market close 1/17/2020, actual fill and strikes may differ depending on Tuesday open (Market closed on Monday), post will be updated accordingly
- All trades are for educational purposes and do not constitute advice
1/21/2020 Entry: Sold 24 Jan Disney 142/140 put spread for 0.32 credit
1/24/2020 Exit and path forward: Per the plan, OK with taking the shares, so on a dip down sold the 140 put for a 0.70 credit. DIS rallied later in the day and we take ownership of 100 shared. Total credits received 1.02 for an effective entry of 140.98. Note if you did not sell the put during the day, the effective entry is 141.68. We will sell calls until we are out of the position. With earnings on 2/4/2020, there should be a high probability exit that week writing a call near or even at the money depending on your risk tolerance.
1/27/2020 Entry: sold 1/31/2020 142 call for 0.37, receiving about 1/4% which is slightly above our target of 1%/month on wheel trades
1/31/2020 Exit: option expired worthless, capturing an additional 0.37 credit, total credits received 1.39.
2/2/2020 Plan: sell the 143 call for over $2.00. Earnings week
2/3/2020 Entry: sold the 143 call for $3.45 – a terrific fill.
2/7/2020 Exit: Closed the call for 0.01. After earnings, the position could have been taken off all week for a tidy profit and for those that Don’t want to consider a Long term hold, it is best to take it off. Example Thursday February 6th around noon, DIS was trading for 142.96 with the 143 call trading for 0.82. Close it all and we gain $3.45 for the call minus 0.82 to buy it back. Plus we gain 0.96 in capital appreciation
Results: $402 in premium. $96 in capital appreciation for $498 total. This is against a capital need of $14200 to hold the stock, $7100 on margin. 3.5% or 7.0% return depending on one’s use of margin for 2.5 weeks. An excellent return over the time period, although it does tie up a reasonable amount of capital. This type of trade, though, tends to work well for stocks where one is willing to hold long term – preference is for stronger companies that pay a dividend so that in a down turn, you are ‘paid’ to wait for the stock to recover.
