Hi everyone. I took 6 trades this week (1 of them I got out of for a loss already), and the other trades are still active. The tickers I traded are: MRO, MRK, PLTR, PTON, SQ, and TLIS. Charts on these trades are lower down in this post.
I sold covered calls ($11 strike expiring April 1st, 2021) on MRO when it was trading at $10.2 this week. Since these options are not that liquid (only 12 contracts traded Friday for example), I plan to make no changes to my MRO position until after those calls expire or get exercised on April 1st, 2021.
I finally took a trade in PLTR after watching it bleed for two weeks straight. It’s resting near a solid support level around 22, so I sold some puts that expire next week. I chose the 23 strike price because with the premium received from selling the put ($1.25), it brings me down to a cost basis of 21.75 if I get assigned. This is right near the support level of 22 previously mentioned.
Charts of MRO, MRK, PLTR, PTON, SQ, and TLIS below.
MRO daily chart below. I made this trade the day before earnings to hedge against possible downside. I’ve also circled the previous breakout level near $8.5.
My max gain is if the stock is at or above $11 (chart mistakenly says $11.7). The downside of selling covered calls is that all gains above $11.7 go to the call buyer. However, it does give me roughly 6-7% downside protection. This should help since I think the stock is a bit overextended, but I need to wait until March 31th to sell in order to have long term capital gains.
MRK daily chart below. I got out before my stop loss was hit, but still lost about 0.5% of my total account value on the trade. I bought at 74.6 and sold at 73.1. My original plan was to sell at 72.6 (stop loss) or hold until it hit 80.6. It had a nice risk/reward ratio, 1 to 3, but the trade didn’t work out this time.
PLTR daily chart below. I sold the 23 strike puts expiring next Friday for $1.25 each (breakeven at 21.75). I sold them when price was around 23 on Friday morning. I’m collecting ~$625 for the premium (sold 5 contracts), which is quite decent for one week if the puts expire worthless.
The preferred scenario is the stock stays in the 23-26 range by next Friday so I can sell another batch of weekly puts. I plan to only sell more puts if the price is no higher than 26 or 27 by next Friday. The worst case scenario is the stock plummets well below 20 by next Friday. If the stock reaches roughly ~$19, that will be a loss of roughly 1% of my account. Notable support levels are near 16 and 10.
PTON daily chart below.
I did a screener for 50 day low and above 200 day moving average, and PTON popped up. I like trading pullbacks on up trending stocks.
I sold one $115 strike put expiring next Friday for $5 premium. I sold it on the small dip at the beginning of the day on Friday. The contract is now worth about $2.4 after the 4.5% move upwards Friday.
SQ daily chart below.
I’ve been watching SQ’s extremely powerful uptrend for months now, and finally decided this pullback presented a good opportunity to buy. Since I expect the uptrend to resume rather quickly (<1 week), I decided buying shares instead of selling puts would be more profitable and with less risk.
TLIS daily chart below.
I threw in 100 shares at 18.41 for my Roth IRA account. I lose just over 1% of my account if the company goes to 0, so I didn’t use a stop loss this time. Baker Bros acquired shares at 16, and they usually do pretty well, so I thought it would be a decent trade.
I hope you enjoyed the longer and more detailed blog post this week! I think indexes will rise next week, which is why I took these bullish positions (long shares and short puts). Like always, let me know if you have any questions or want a chart reviewed.
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