Monday Trades With Yields Up To 42.25%

Three trades in the last seven days.

music selection:  “Slaved” — Autovein

weigh-in:  219.0 +0.8

My covered calls in NLY were set to expire in the money on Friday. So on Thursday, I rolled out 54 of 69 calls to a later strike and the same 6.5 strike. I let 1,500 shares be called away to raise cash and reduce my concentration in NLY. I got a net credit of 8 cents a share for the 11SEP2020 expiry. With the trade-in force for 40 days the expected annualized return is 12.15% against my cost basis of 6.00. NLY currently trades at 7.55 so it is unlikely I will be able to continue rolling out far enough to collect the next quarterly distribution. I’m holding on in hopes any pullback occurs close to my expiry so I can roll “up and out”. Should the price continue to rally between now and expiry, I will likely let the remaining shares be called away rather than settle for 12% annualized returns in a 30-40% market for selling options.

I deployed the cash raised from the NLY trade into deep in the money SLV calls. I like the chart for silver and think the metal is due for a rally that reduces the gold to silver ratio, which is historically out of whack. With SLV at 21.67, I bought the 11 strike 21JAN2022 expiry call for 11.20 a share. I paid about 53 cents in time value and gained roughly 2:1 leverage to the price of SLV. I bought 9 contracts. As of Friday’s close, the position was up 765 dollars or 7.59%.

Finally, my short puts in ITB expired out of the money over the weekend. I still like the fundamentals for home construction (shortage of inventory, Millenials entering key home-buying age, low-interest rates), and I think the ticker still has room to run. With the ticker at 52.22, I sold the 51.5 strike 28AUG2020 expiry puts for 1.55 a share (two contracts). The trade will be in force for about 26 days and enjoys 4.35% downside protection from a downward move in share price. The expected annualized return should I not be assigned is 42.25%.

Devour your prey raptors!