Three new trades for the week.

music selection:  “Dysfunctional Hours” — Nuclear Blast Allstars

weigh-in:  222.2 +0.6

First the expired positions. Short puts in AXP and ABBV expired out of the money over the weekend. AXP earned $225 at the rate of about 3% over 40 days or 24% annualized. ABBV earned me $206 which was good for about 2% over 26 days or 31% annualized. A bull call spread on the cube (QQQ) earned $276 on $1,224 at risk good for 23% over 40 days or 206% annualized. Finally a covered call in GDXJ resulted in shares being called away. The calls generated $150 and yielded 14% annualized. I picked up an additional $400 in short term capital gains on the shares, good for 25% annualized.

I’m taking a leveraged position in a regional banks ETF (KRE).  With shares trading at 38.77, I bought the 20 strike 21JAN2022 calls for 18.70 a share. I paid 7 cents a share in time value  and have a little more than 2 to 1 leverage in this position. I have 3 contracts. My thesis is the regional banks are simpler than the mega banks, have no trading desks with “London Whale” risks, and are actually quite profitable. At the same time, they have not recovered from the March corona market turmoil, are cheap, hated, and importantly, in an uptrend. I think the shares can rise 50% from here meaning I could double my money.

With ABBV and AXP expired an opportunity to re-establish positions presented itself. I didn’t like the risk/reward setup in ABBV and I’m saying goodbye.  With AXP, I found good annualized return with some downside protection. Shares were at 97.92 and I sold the 96 strike put with 2OCT2020 expiry for 3.10 a share. The trade will be in force for about 40 days and yields an expected 29.47% annualized.  Since I’m out of the money, I have some downside protection against a downward move in stock price. Breakeven is at a price 4.97% below today’s market price.

Finally, I like home builders in the current environment. There is a shortage of inventory nationwide and interest rates are at historic lows. So I opened a bull call spread at the 75/77.5 strikes on DR Horton (DHI) for 1.345 a spread (14 spreads). I have 1,883 capital at risk and look to earn 1,617 or 86% (1,011% annualized) if share price rises as much as 1.71% over the next 54 days. Break even is at 76.35 with shares currently trading for 76.20. I like my chances with the market making new all time highs daily.

Devour your prey raptors!