As anticipated the market moved down a bit, which normally means that the volatility moves up.
As I mention nowadays pretty much every day, I am being extra careful so today I selected a stock that almost everybody in the world knows and have their products. But before we get to it's worth take a quick look at the natural gas situation.
I had a look at the #UNG ( #UnitedStatesNaturalGas ) and seemed pretty attractive on the daily chart for a $22 call but...
... then I looked at the weekly chart too and I immediately chickened out for a couple of reasons. First, if the price went up to $40 (like in the second half of 2018) than the trader must have significant cash reserves in their account to wait for the price to come back down. Second, the war with Russia poses a massive risk in both oil and gas. I don't like the unpredictable nature of the situation.
Last year I made a fair bit of money trading UNG when the price was around the current level, however the volatility was significantly higher and I could sell the $30 call and still collect a fair bit of premium. This time the May $30 call would only fetch $0.13, which is not worth it given the risk, the fees and the capital required.
So what's my today's selection?
#INTC ( #Intel ). I don't think that this company needs to be introduced to anyone. They are investing billions into new chip factories to have better capacity to meet the ever increasing demand so the long-term prospect of this company is quite bright. Today the stock dropped by $0.82 so I thought it's a good time to sell some naked put.
Is this the best timing? I highly doubt it but I look at this trade as a run-to-safety given the strong performance and market stake of this company.
The stats
Trade Type: Short Put
Strike: $47.5
Expiry: 20 May
Delta: 26
IV Rank: 41.2
Premium: $1.19
Cap Req: $638
Annualised Prof at Expiry: 133%
As always, I am curious to know your thoughts.
At some stage the chip stocks will go up and Intel is probably the biggest name out there. So I keep this position alive and sell a call after the earnings.
Rolled to March $42.50 for $0.12 credit.
Total Credit: $1.77
The stock is finally moving the right direction but it's still far from my desired range.
Rolled to Jan $42.50p/36c for $0.34 credit.
Total credit: $1.65.
My unfortunate fate with this position continues so I had to roll it to Nov for $0.43 credit.
Total credit: $1.31
Rolled down the call side to $37.50 for $0.24 credit.
Total credit: $0.88.
Major chip shortages, new factories, government subsidies...
How on earth is this stock keep going down?
Well, very soon it will be time to go bullish on it.
This dog is really testing me :)
Rolled to Sep $42.50 / 40 for $0.57 credit.
Total credit: $0.64.
Not a nice position at this point.
Who would have thought that this paper is going to give me such a massive grief.
Rolled to Aug $42.50/45.50 straddle, which consumed nearly all of my credit in this trade.
Total credit: $0.07.
How low can this drop? :)
Rolled down the call side to $42.50 for $0.20 credit.
Total credit: $3.69
Went inverted again to collect more premium by rolling down the call side to $45 for $0.71.
Total credit: $3.49.
So the break even is at $47.50-$3.49 = $44.01.
The current price is at $43.39.
Eventually I will come out on top :)
Finally a nice upwards movement but I still have to stay in the trade.
Rolled to July $47.50 / 47.50 for $0.15 credit.
Total credit: $2.78
I was hoping that I won't have to roll this trade to June but having only a couple of days left, I had no other options.
I rolled to June $47.50 / 45 (inverted strangle). Unfortunately the monthly strikes are $2.50 apart from each other so I couldn't really roll the put side down.
But the good news is that the roll gave me $0.91 credit so the total credit is $2.63.
What it means is that if the stock goes back between $45 and $47.50 then we can get out of this trade with $0.13 profit, which is insignificant, but much better than losing money.
Break even on the south side: 47.50 - 2.63 = $44.87.
Rolled down the call side to $46.50, so my strangle is inverted by $1.
Total credit: $1.72
This trade has not worked out so far so I decided to sell a $48 call so the naked put now became a $47.5 / 48 strangle.
Total credit: $1.50