New Trades With Yields Up To 265%

Two new bullish trades.

music selection:  “Even Though I Say” — Saint Asonia

weigh-in:  217.2 +0.2 (quarantine 15 is really getting to me.)

First up is an out of the money short put on American Express (AXP). AXP is a great stock to own for the long term and I will not be upset about the assignment at a great price as I would write covered calls against the position. With shares trading just under 94 dollars, I sold the 85 strike AXP200821P00085000 for 2.25 a share. The trade will be in force for 40 days and yields an expected 24.15% annualized while retaining 11.80% downside protection. Eighty-five would be an excellent entry price in the unlikely event of assignment. Historically high volatility allows for superior returns with greatly reduced risk in quality names.

My second trade is a pure momentum play. I opened a bull call spread in Invesco QQQ Trust (QQQ). With the Nasdaq hitting all-time highs, it is clear an uptrend is in place. And with the Fed providing unprecedented levels of monetary stimulus, I feel good about betting on the “cube”. With shares trading at about 267, I bought the 245/250 bull call spread with 21AUG2020 expiry. I paid 4.08 per share on the spread. The spread enjoys 6.36% downside protection. Should that not be exceeded, the full profit of 276 dollars (3 spreads) will be earned on 1,224 capital at risk. That is good for 23% over 40 days or 265% annualized.

With the uptrend and monetary stimulus, I’m net bullish. I’m still buying long-dated puts on struggling names when I find deals. And I’m looking for tasty “pairs trading” opportunities that would let me position market-neutral while capturing some reversion to mean.

Devour your prey raptors!