July Expiration, and a Sale
Investors are being challenged with some of the strangest stretches in market history.
On the surface, the market looks to be in great position. Stock indexes are hitting or are near record highs, but there is a lot of commotion below the surface. As it stands, roughly 40% of all stocks within the S&P 500 are below their 200-day moving average, which typically indicates bear market action. However, technology has been incredibly strong, especially the mega-cap stocks like AAPL, MSFT, AMZN, etc. And 40% of the S&P 500 is comprised of technology stocks, hence the current 17.6% return in 2021.
So, it should not be a surprise that as the majority of the market has weakened in July, we are going to unfortunately take some losses this month. In fact, we haven’t experienced an expiration cycle like July since the start of Covid well over a year and a half ago.
For months now, we’ve seen the majority of our positions called way, reaping max profits. Month after month profits ranging from 5-20% had become the norm. However, this month we finally had some positions go sideways.
Below is where we stand with each position.
Let’s start with GPRO, which broke our stop today, and because of that, we are going to stick to the plan and exit the position.
To do so, you need to:
Buy to Close the GPRO July 13 Call
Sell GPRO Stock
After this adjustment, we will no longer own a GPRO position.
MRO – Bought stock at 13.60 and sold the July 14 call for $0.69.
With the stock trading at 12.52, we will walk away with our profit of $69 per covered call; however, we are down $108 on the stock position.
Should the stock close below 14 Friday (likely) you do not need to adjust this position and come Monday, once the call has expired, we will likely sell the stock and move on to better opportunities.
SGMS – Bought stock at 76.55 and sold the July 75 call for $4.80.
With the stock trading at 65, we will walk away with our profit of $480 per covered call; however, we are down $1,155 on the stock position.
Should the stock close below 75 today (likely) you do not need to adjust this position and come Monday, once the call has expired, we will sell the stock and move on to better opportunities.
Stepping back, while losing money on these three July positions isn’t terribly fun, we have been on an “epic run,” and without an occasional loss, there can’t be the returns that we have been able to capture for nearly a year and a half straight.