I sold all of my PSEC shares at 5.09 today due to the recent market’s reaction to new information regarding the state of the economy and the Corona-virus. Although my minimum target of $5 was reached in a really short period of time – roughly 2 months from late April where I purchased it – I originally planned to sell it in the $6 to $6.5 for a mean reversion.
Either way, the position sizing was pretty small, so although I’m up over 30% (I bought in at 3.81), the capital gains aren’t substantial. With this sale, I’m just over 90% cash, with my only position being MRO.
I’m still looking to re-enter Boeing in the 90-140 range for a medium to longer term swing trade or investment. This time I’m thinking of implementing “The wheel” options trading strategy, where I sell cash secured puts, and when filled, sell covered calls until my shares are called away. In some sense, this is no longer a swing trade nor an investment, but a play on theta (time decay) for options.
I’m looking to do either a regular short on Facebook, or a covered short trade which reduces my risk and reward. I would normally like to short the indexes like SPY or QQQ instead, but my broker won’t let me short them right now. I also don’t like messing around with inverse ETFs, since they aren’t meant to be held for more than a couple days with all the volatility drag shenanigans.
The plan is to short FB at or near 240, with a hard stop loss 15 dollars above my entry (1% risk), and a minimum profit exit at 200. This gives us a risk reward of about 2.5:1 which is decent. I plan to exit my trade early if it quickly goes against me and the overall market moves higher. I also have a timed stop of 1 month since I don’t want to hold the short through the earnings report.
If I do the covered short strategy, I plan to sell the monthly 220 put for a 5 dollar premium, which gives me some protection if the stock moves up, but also caps my gains if the stock falls below 220.
I’ll post charts of FB this weekend if I take this trade.