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Three trades this week.

music selection:  “Rot” — Dry Kill Logic

weigh-in:  211.4 (0.2)

My covered call in NLY expired out of the money over the weekend. I wrote a new one at the 9 strike and 21MAY2021 expiry. I got pricing of 12 cents per share on 11 contracts. That is good for a 14.75% annualized return if it expires worthless. If shares are called, I will earn an extra 9 cents per share in capital gains. Otherwise, the underlying pays 9.93% a year in distributions.

My cash-secured put in PSEC expired out of the money over the weekend. I wrote a new one at the 8 strike and 21MAY2021 expiry. Pricing was 15 cents per share on 12 contracts. That is good for a 20.74% annualized return. Should I get assigned, I will write covered calls against the position while collecting the underlying distribution.

I have mostly been buying bear put spreads in the money. Today, I think I have something with a great market position and a nice uptrend that I’m buying a bull call spread at the money in. KB Homes (KBH) is the United State’s largest home builder. They make mostly starter homes, especially in their key markets of Florida and Texas. Housing inventory is at a historical low and homebuilders across the board are in a strong uptrend, KBH included. With shares trading at 49.56, I bought the 45/50 bull call spread for 3.248 per share across 15 spreads. The trade will be in force for about 33 days. I have 2.65% downside protection to my breakeven point. I need a gain of only 0.89% to earn the full profit on the spread of 53.9%, which is 597% annualized. Should shares trade at today’s price at expiry, my spread will be worth 1,968 in profit which is a 40.4% gain or 447% annualized. I have 4,872 dollars of capital at risk in the trade.