Sold long-dated puts on T, MCK, PTON.

music selection: “I Can See Clearly Now” — Jimmy Cliff

On 26APR2019, I bought a long-dated put in MCK for 10.00 a share. The thesis was that McKesson is dangerously exposed to opioid epidemic litigation.  Their CEO made a boneheaded move on an earnings call and told the public that he wasn’t concerned about the litigation because they were making so much money off opioids that it would barely dent profits. That’s just asking for punitive damages. Three hundred and seventy days later and the stock continues to climb. I’m throwing in the towel to recover some cash. I sold today for 6.10 a share booking a loss of 390 dollars.

On 28MAR2019, I bought three long-dated puts on T for 3.07 a share. The thesis was that AT&T overpaid for Dish and took on too much debt. At the same time, the cell phone market is essentially saturated and growth can only come from gaining market share. This was being expressed at the time the trade was opened in price wars that were compressing margins. Four hundred and four days later, the market is telling me I got the thesis wrong on T and I’m selling. I got 2.64 a share this morning, booking a loss of 129 dollars.

On 24OCT2019, I bought two long-dated puts on PTON for 6.60 a share. My thesis was that the company was embroiled in scandal surrounding copyright infringement on the music it used and that there was no moat for their overpriced product. Competitors were already beginning to enter the market at much lower price points. This trade was looking good for awhile but COVID-19 has turned PTON into a market darling. With people cooped up and unable to go to the gym, sales soared. I gave up today at 4.05 a share, booking a loss of 510 dollars.

These three moves raised 2,212 in cash. I am keeping long-dated put hedges open in DRI (down 175), LYFT (up 1,030), PLAY (up 90), UBER (up 216), and RAD (up 50). I am on the lookout for more companies with declining sales, deteriorating balance sheets, excessive debt, and terminal exposure to COVID-19. I’ll add more long-dated puts for defense as I find them.