11/5/2022 Plan:
This week we look at Lennar (Ticker: LEN) and a bearish play in SPY
11/5/2022 Plan (continued):
- LEN – Sell Dec 2 70/65 put spread for 0.47 OR
- LEN – Sell Dec 9 70/65 put spread for 0.52
- SPY – Sell Dec 2 404/408 call spread for 0.44
- Prices are as of market close 11/4/2022, 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
11/5/2022 Commentary:
Lennar is a home builder, not exactly an industry in favor right now, but this trade has quite a bit of room between the current stock price of nearly $80 and the short strike over the next few weeks. Depending on how the market opens on Monday I may push to December 9th.
The SPY trade is one I like to put on regularly in down markets. If SPY rallies a lot between now and December, the rest of my trades and long positions will do well. If not, I’ll have a few extra dollars of profit from this call spread.
Feel free to Reach out with questions on this or anything else!
11/7/2022 Entry:
Sold LEN Dec 9 70/65 put spreads for 0.60. Also sold SPY Dec 2 404/408 call spreads for 0.45
11/12/2022 Update:
The LEN put spreads are down to only 0.08. No harm in closing those for the quick win rather than waiting 4 more weeks. You could leave them on longer with LEN above $88 but don’t let it turn into a loser.
The SPY call spreads are Not doing well as we’d expect with a huge move up in the market. That’s ok and certainly an outcome we prepared for by sizing accordingly. The overall portfolio benefit outweighs the current loss of these spreads. I’ll likely leave them on for at least this week and we’ll see if the market slows down a bit. There are still about $5-$6 between the current SPY price and our short strike.
11/20/2022 Update:
The LEN put spreads are still doing well, with the short strike almost $15 away. The spreads are a bit wide, but one could get out for a decent profit at this point. I’ll personally be holding through much of this week, but if there is an opportunity to take it off cheaply, I will (say 0.05 or so).
The SPY call spreads are still against us with two more weeks to go. Recall that these were sized such that we should be ‘happy’ to take the loss as the significant gains in the rest of our portfolio should more than offset this. I will be holding on to mine for the time being, but one could close for a $60 loss per spread.
11/27/2022 Update:
With two weeks to go on the LEN put spreads, they are nearly worthless with wide spreads on the strikes (as of the time of this writing). One could even buy the 73 puts for about 0.10 to turn this into a downside protection play. I plan to leave these alone until expiration unless I can close for a few cents.
The SPY call spreads are still against us and close this week. One could close at any time for a smaller loss or see if SPY stays below 404 by the end of the week where this could turn into a winner. SPY is currently trading at 402.33, which means a small move can really impact this position a lot – holding it will expose you to more volatility in your account balance. I’ve sized these such that I will keep them on likely until Friday as the run-up across the market has more than offset what I’d lose on this trade.
12/5/2022 Update:
The LEN put spreads expire this week and are Very far OTM if you still have them on (I do – I didn’t get around to closing last week). You can close the short leg for 0.05 or if they stay far OTM, try and let them expire worthless. You can try and close the spread cheaply as well. Should be a nice solid win!
I closed many of my SPY call spreads on the 29th for 0.39 for a tiny win. With Jerome Powell speaking on Wednesday and that often being a market moving event, I simply decided to take the risk off and move on. The market did take off Wednesday, but it easily could have plummeted. I opted to remove the risk (and potential reward) to reduce volatility in my account balance. I also sent a text alert on Friday that if people still had the position on, the sell-off pre-market should offer a nice opportunity to get out for a win (as it turned out, it was a small loss as the market started clawing back). One last option was to roll the position. For example, I rolled some from last Friday to this Friday, increasing the strikes to 405/409 and adding 0.44 of premium. This was done in small size to give us a learning opportunity. One could even roll to the 405/408 spread for a small credit. That would have reduced the max loss (since we’re shrinking the strikes). I’ll continue to update the 405/409 roll for educational purposes.
12/11/2022 Close:
The LEN put spreads expired worthless and were not in any trouble last week. $60 profit per put spread sold, for a nice win.
The SPY call spreads that I rolled to last week also expired worthless. One reason I rolled was that the market felt a bit over extended to the upside and I thought (read – ‘guessed’) it would calm down a bit. In this case, I was right, and I was willing to extend the trade and risk to test that hypothesis. Note that I had also taken in an additional premium which meant my overall risk (compared to the original trade) had gone down. For these put spreads I rolled, I took in $45 plus another $44 of premium for a total of $89 per put spread sold against a total risk of $411. A return of 21.7% in just over a month. I’ll likely sell more call spreads further out in SPY, I still like having these on in down/sideways markets.
