1/31/2021 Plan:
This week we look at a few ideas, including a put spread in Johnson & Johnson (Ticker: JNJ)
1/31/2021 Plan (continued):
- JNJ – Sell February 26th 150/145 put spread for 0.54
- DOW – Sell March 5th 45 put for 0.74 (can spread with 40 put)
- IBKR – Sell Feb 19 35 put for 0.45+
- JPM – Sell Feb 26 115 put for 1.30
- Prices are as of market close 1/29/2021, 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
1/31/2021 Commentary:
Implied volatility is high across the market with the sell off last week, increasing the premiums in puts and offering one extra money to sell puts and put spreads.
Johnson and Johnson dropped after earnings and this put spread assumes we won’t drop another $13 in the next month.
We offer three different put sales in three different names to consider. Brokerages weren’t popular last week after disallowing trades in GME and other names and as a result Interactive Brokers (Ticker IBKR) had a huge jump in IV. We look to sell a put WAY below its current trading price of 61.19. These prices won’t last long and I would consider selling a put as high as the 50 strike.
There are LOTS of good put sales out there, feel free to contact us if you need help selecting good strikes for a good risk/reward.
Reach out with any questions on this or any other trade!
2/1/2021 Entry/Update:
Sold the March 5th DOW 45 put for 0.68
Sold the Feb 19 IBKR 40 put for 0.40. Then placed an open order for a put spread for 0.10 for the 45/40. This results in a put 1×2 for a 0.30 credit. Basically if we get assigned on the initial 40 put we sold, we’ll also take in a $5 credit for the put spread we bought, getting us in effectively at 34.70 (40 strike minus 5 minus 0.30 of net premium). This can be a bit confusing, so feel free to reach out. The original recommendation of selling a put in this range is still valid.
I went out in time with the Johnson and Johnson play – March 12 150/145, filled between 0.52 and 0.62 depending on timing. The duration is a bit longer than I’d normally prefer, but it remains outside the straddle for that week. Ok to skip this trade if you’d prefer to wait for other opportunities or get in if the market dips later this week.
I did not sell a JPM put, the prices weren’t sufficient.
2/7/2021 Update:
The DOW Put is down to only 0.13 (at the mid point), that’s a great return in just a week. For most traders, I would recommend simply closing the position to free up capital given 4 weeks is a long time for just 0.13. I’ll personally probably close it this week when I have the chance.
The IBKR 1×2 (or simple put) is basically worthless as IBKR also took off last week. This expires next week, I’ll just leave it on, but if you want to close it to reallocate margin, that works, too.
The JNJ decayed some, now worth about 0.35. As it is still a few weeks from closing, we’ll leave it on with no planned changes this week.
2/14/2021 Update:
The DOW put is down to about 0.09. I didn’t get a chance to take it off, again feel free to do so at any time to free up margin.
No change to the IBKR 1×2 – still effectively worthless.
The JNJ put spreads are down to 0.16 and can be closed now to book a nice profit or held to squeeze a bit more. Note that with almost 4 weeks left this will decay pretty slowly. I may simple take it off and re-allocate to other trades.
2/21/2021 Update/Partial Close:
The DOW put remains essentially worthless – take it off whenever you like or wait for expiration next week.
The IBKR 1×2 expired worthless, allowing us to take in a full credit of $30. If you just sold the put, you made $40.
JNJ put spreads are down to 0.12 at the midpoint. They are about $13 out of the money and low risk, but we still have 3 weeks, a long time to decay – we decayed 0.04 in a week. Feel free to remove if you need the capital for other trades.
2/28/2021 Update:
The DOW put expires this week if you still haven’t taken it off. It is about $14 OTM and Very low probability to be in the money at the end of the week. Having said that, volatility has picked up in the market place and we should reduce our exposure and this is an easy close.
The JNJ put spreads are still profitable and can also be taken off at your leisure. While they are about $10 OTM, JNH also can move ($4 on Friday), so do keep an eye on the spreads to avoid turning a winner into a loser.
3/7/2021 Update:
The DOW put expired worthless this week, brining in an additional $68 of profit per put sold to our accounts. Which is nice.
The JNJ put spreads are at 0.19 and expire this week. Please make sure to take them off if they are any where close to ITM and you can’t take on the shares. These are solidly profitable and a good candidate to take off to harvest some profits if you are struggling elsewhere in your portfolio.
3/14/2021 Close:
The JNJ put spreads expired worthless at the end of the week, bringing in 0.57 per spread, adding to our profits for the year.
Reach out with any questions on this or any other trade!
