Adjusting Hedges

Closed two hedges, opened two more.

music selection: “Becoming” — Sneaker Pimps

Since 2018, I have been accumulating some small long put positions in companies I think have too much debt, structural problems, or litigation exposure.  Today, I adjusted some of those positions.

On 28FEB2019, I bought the 15JAN2021 expiry 27 put in THC for 7.45 a share. I sold today for 10.60. The trade was in force for 420 days and earned 42% or 37% annualized.

On 20SEP2018, I bought the 15JAN2021 expiry 20 put in SC for 4.00 a share. I sold today for 8.60. The trade was in force for 581 days and earned 130% or 115% annualized.

I also bet against two restaurant chains with dangerous levels of debt, thin margins, and serious COVID-19 problems. The chains will reopen soon but with 6 foot social distancing still in place.   I think the market is pricing in full recovery but this will be a time of negative earnings. These two have already nearly maxed out their borrowing limits and more pain is coming.

First is Darden (DRI). I bought the 15JAN2021 expiry 55 put at 9.80 a share. I also bet against Dave & Busters (PLAY) by buying the 15JAN2021 expiry 10 put at 3.70 a share (3 contracts).

All together, I raised about 700 dollars while booking 1,235 in profits. That income means a lot while my portfolio remains beaten up by COVID-19.  It is not likely I will trade on Monday. I am still waiting for the S&P to break above its 200 day moving average to get back into the VXX game.

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