Weekly Newsletter   Challenge account


Market gapped down on Covid fear, new trades, and adjustments for 12/21/2020

The stock market gapped down more than 2% on renewed fear of the new strain of Covid. That is, what the media are telling us. I don’t think this is the reason for selling. The market was quite over-extended and some sort of a pullback was needed. That is what has happened this morning. Since the opening, the market has rallied up erasing almost all losses so far. Will it continue tomorrow? Not sure. We have to wait and see.

On one hand, I welcome this pullback as I still have a trade against IWM (a covered call) which has run away from me so much that I am not able to roll it for credit and I am already too far away in time. I decided to wait and attempt to roll after some time is gone.

But I had a few trades that needed adjustments.
 

The trade, that needed an adjustment was a strangle against TSN (Tyson Foods):

cherries Roll 1 TSN Jan 15 (monthly) 65p/72.5c strangle to Jan 29 64p/68c for 0.50 credit
 

Our 65 put in TSN strangle got in the money as the stock continued dropping. We decided to roll the strangle lower to keep the price of the stock between the two legs. I was not able to roll everything as one trade (the options were mispriced and I couldn’t find a good price that would execute), so first, I closed the call side for 0.21 debit, then rolled the call side lower for 0.20 debit, and then I added a call side for 0.91 credit. Overall, this adjustment lowered our put side down and we collected additional 0.50 credit.
 

TSN
 

Last week, we got assigned 100 shares on our PPL strangle when our put side ended in the money. We bought 100 shares of PPL at $27 a share. Today, we sold a covered call:
 

fish STO 1 PPL Jan 15 (monthly) 27 covered call for 0.47 credit

Last week our puts ended in the money and we were assigned to 100 shares of PPL at 27 a share. In this account (fish ) we now hold 124 shares of PPL. We now will be selling covered calls against this position until we get assigned and sell the shares (the wheel strategy).
 

PPL
 

We used the collected credit to buy shares of stocks we like to accumulate. We bought one share of the ICSH fund and one share of AT&T stock:
 

fish BTO 1 T shares @ 29.06 debit
fish BTO 1 ISCH shares @ 50.51 debit

We generated income selling covered calls in this account and we reinvested this income and bought 1 share of AT&T and 1 share of the ICSH fund. The ICSH fund serves as a savings account to us. It holds value relatively well during selloffs and it pays a nice dividend (currently the dividend yield is 1.60%).
 

T and ICSH
 

We also opened new trades replacing expired trades from the last week:
 

cherries STO 1 SNOW Dec 24 Iron Condor 295/300/365/370 for 0.70 credit
cherries BTO 1 ICSH shares @ 50.51 debit
cherries BTO 1 T shares @ 29.00 debit

This morning we sold another Iron Condor against SNOW stock and collected $70 credit. We reinvested the credit and bought 1 stock of ISCH (our capital reserves ETF) and one share of AT&T (T) which we are accumulating to reach 100 shares.

Since the markets are selling off (finally) we will be waiting before we open more trades for the panic to settle down. This selling may just be a dip to buy.

SNOW @ $333.92
 

SNOW
 





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