August Expiration and Closing Several Trades
Today is the expiration of five of our covered call positions, and I’m not going to sugar coat it, it was a choppy month for the market, and our trades. Importantly, we are going to exit several positions today.
Take for example Nutanix (NTNX) … the stock was trading at 38 four days ago and our trade was in great shape, and then the stock dropped to 33 yesterday. Similarly, F and SNAP were right at our original buy prices on Monday, yet have given up a bunch of ground in the last handful of days. Such is the tedious trading of 2021 as one day a stock looks great, and the next it falls apart.
Let’s start with the LB/VSCO/BBWI/BBWI1 ice cream headache. Because this option is soooo illiquid I’ve been “probing” the options market for the last two weeks with my orders trying to get a good buy price to close our BBWI1 option. However, the market maker is NOT getting me a price anywhere close to fair value, so I have not recommended we exit the trade.
Because of this, I reached out to my broker and they confirmed what I believe will be the case with this position on expiration … essentially the BBWI1 call we are short is in-the-money and because of that our VSCO and BBWI stocks will be called away after the close of trade this afternoon, and we will be left without a position on Monday. Essentially, we are going to let this situation play itself out.
Taking this a step further, I had an associate reach out to their broker as well to confirm this situation, and because I’m a touch OCD, I also called the Options Clearing Corporation (OCC). All agree that we don’t need to act today.
That being said, if for some reason this is not the case, we will act very quickly on Monday morning.
Let’s move on to the more “basic” trades, some of which we are going to exit today.
Nutanix (NTNX) - Sell NTNX Stock, and Buy to Close the August 40 Call.
NTNX was hit on a downgrade yesterday, ahead of earnings on 9/1. While it’s possible the stock will bounce back, the market has been weak enough recently that I don’t want to roll this position, and will move this capital to fresher ideas.
Ford (F) – Sell F Stock, and Buy to Close the August 15 Call.
F, along with GM, and countless cyclical stocks, has been under heavy pressure this week. While I doubt F will fall dramatically from these levels, much like NTNX, I want to move this capital to better ideas.
Marvell (MRVL) bought stock at 55.25 and sold the August 55 call for $2.30.
With the stock trading at 59.50, we will walk away with our profit of $205 per covered call, or a yield of 3.87%. You do not need to adjust this position and come Monday we will not have a stock or option position in MRVL.
Snap (SNAP) – Sell SNAP Stock and Buy to Close the August 78 Call.
SNAP stock has been a roller coaster since its big earnings breakout. And while it wouldn’t shock me to see the stock soar again, much like NTNX and F, I’m going to move this capital to fresher ideas.
Stepping back, exiting some of our positions today instead of Monday could be a wise choice, or a mistake. We won’t know until Monday. However, given the recent market choppiness, I am going to sell NTNX, F and SNAP today.