It was another pretty calm day: the VIX moved up a tiny bit but so did the market. It gives me the feeling that tomorrow the market will drop a bit and the VIX will continue moving up. Hopefully I am wrong but it's hard to imagine that all the inflationary and geo-political tensions are already priced into the market. I am still very much bearish.
So what's my trade for today?
#AMZN (#Amazon) finally split (read about stock splits below) so now it's affordable to trade on smaller accounts. The IVR is very high, which means the premium it pays is also very high. I am bullish on the stock but given the overall market condition I decided to stay neutral with a delta neutral strangle.
The stats
Trade Type: Short Strangle
Strike: $107 / 144
Expiry: 15 Jul
Delta: 0.3
IV Rank: 68.9
Premium: $2.76
Cap Req: $1248
Annualised Prof at Expiry: 207.%
IMPORTANT: we can all learn loads by keeping an eye on older trades. Today I closed one trade and adjusted two:
https://www.tycoonitos.com/community/market-comments/market-comments-20220601
https://www.tycoonitos.com/community/market-comments/market-comments-20220520
https://www.tycoonitos.com/community/market-comments/market-comments-20220524
It's a winner :)
Closed at $3.68 for an annualised profit of 52%.
Not the biggest win ever but I wanted to take some risk off my portfolio.
Rolled down the call side to $117 for $0.53 credit.
Total credit: $4.38
I certainly got this wrong, so I rolled down the call side again to $120 for $0.40 credit.
Total credit: $3.85
Rolled down the call side to $125 for $0.27 credit.
Total credit: $3.45
Rolled down the call side to $130 for $0.42 credit.
Total credit: $3.18
So what's a stock split?
I give you two scenarios:
The stock price is too high. Let's say $200. The decision makers may decide to split the price 1:2 meaning that moving forward, every 1 share is now converted to 2 shares at the price of $100.
The stock price is too low. It's obviously the opposite. E.g. the price drops to $5 so they may decide to split the price 10:1. In other words, 10 stocks will be converted to 1 at the price of $50.
Why is this good?
Because it's good to maintain liquidity. A very cheap stock or a very expensive stock doesn't normally have the desired liquidity.