3/8/2020 Plan: We are still in the midst of a high volatility regime, with the VIX closing at 41.94 last Friday 3/6/2020 and the march VIX future up to 36.10. There is no harm in sitting out the market this week, waiting for the markets to stabilize. This week’s trade is a specific example of taking advantage of high volatility to get into names we want to hold for the long term. It may be hard to believe, but we were selling covered calls in Disney at the 143 level just one month ago! This week, with a long term high in implied volatility, we look to get long Disney at an incredible discount to recent levels.
3/8/2020 Plan (continued): With Disney ending on Friday at 115.27, we sell a far out of the money put about 1 month out. Spreads were wide at the close, so expect some change on the fill. If the market is up strong Monday, we may increase the strike as well.
- We sell the 9 APR DIS 85 put for 1.09 (at the midpoint, 0.84 at the bid)
- Intent is to hold until expiration or remove for 0.10 on a strong move up. Quite happy to take the shares at 85 if assigned as a long term hold or wheel candidate.
- Prices are as of market close 3/6/2020, actual fill and strikes may differ depending on Monday open, post will be updated accordingly
- All trades are for educational purposes and do not constitute advice
3/9/2020 Entry: We sold the 9 Apr DIS 80 put for 1.40 This is 5 points below our goal and we took in an extra 0.31 credit. At market close on 3/9, this was still more than $25 OTM. If DIS goes down to 80, we’ll take ownership of the shares.
4/10/2020 Exit: The put expired worthless, well out of the money with DIS closing on Friday above $105/share. One could take the position off at any time for 0.05 to 0.10 to limit exposure and free up margin. $140 credit for approximately a 1 month hold.
