This week:
1) New trades in SBUX & WBA
2) Trade update: ABBV
3) Trade update: JNJ
New trades in SBUX & WBA
Volatility edged up this week, presenting some nice opportunities in Starbucks and Walgreens.
Both stocks have been horrible performers in 2022 - WBA is down 33% and SBUX is down almost 29% so far.
I own both stocks in my portfolio, but I’ve also generated $799 in options premium in WBA and $961 in SBUX, which somewhat offsets their poor performance.
This is why selling options is a good complement to a long-term buy and hold portfolio.
You sell put options, get assigned the shares at a discount and receive dividends and more options cashflow while holding the stock.
If you're buying the stock anyway, why not use all strategies at your disposal to earn income from the stock?
So this week I opened 3 positions:
1) I sold 1x SBUX $77.50 put expiring 16 Sep for $0.82
2) I sold 1x SBUX $77.50 put expiring 21 Sep for $1.76
3) I sold 1x WBA $35 put expiring 7 Oct for $1.12
Something I’m doing this time round is diversifying across time, with different expiration cycles.
This allows the market to move around between now and the different expiration dates, and I could potentially take profits along the way.
If you’re new, Circle 1 is the position - 1x WBA put at the $35 strike, which means I’m commiting to buy 100 shares of WBA at $35 come 7 Oct, if the share price is at or below $35.
Circle 2 is the current price of the option $1.11, and Circle 2 is the how much I received for the trade, $1.12.
This means this trade is currently showing a $1 profit - whoohoo!
Last week I was lamenting how my portfolio only had 2 positions left, this week that’s more than doubled.
One thing I’ve learnt over the years is to be patient and not force trades if nothing appears. Forcing trades is an surefire way to get stuck in bad positions.
Trade update: ABBV
ABBV is one of those trades that is kind of annoying where it’s not showing any clear direction, but instead waffling up and down. Last week it was a $40 loser, now it’s an $8 winner.
Neither situation is clear enough to make a decision. I’d almost rather it be a huge loser right now. At least I’d know to just roll it out.
In any case we have 12 days to go, which is around the point I really don’t like carrying positions in the portfolio if I don’t need to.
So here’s the plan - if ABBV dips convincingly below my $135 put strike (at least $133 & below), I will roll the trade out to October.
If I can lock in 25% of max profit on this trade (roughly $50), I’ll close the position and move on.
That isn’t ideal and way below my usual profit target of 50% - 75%, but remember this was a trio of trades with PG & KMB, both of which were already closed for a profit. So it will still work out overall as a package.
Trade update: JNJ
Quick update on JNJ - I sold a $160 put expiring on 16 September and received $1.45, it's currently trading at $1.35 for a small $10 profit.
My position towards this trade hasn't changed, I do want to get assigned on this stock and pick up 100 shares, so I will leave it until expiration on 16 September.
Of course if I can close it for maybe 20 cents or less, then it makes sense to do that and re-establish the trade instead, possibly at a lower strike price.
That’s it for this week! Volatility is higher this week, but nowhere near the highs of 2022. So I’m starting with stocks under $100 to ease into it - if we get a larger bout of volatility then we’ll start taking advantage of the increased premiums on other stocks.
I’ve also launched my course teaching how to sell options safely to generate cashflow with the founding batch and will be closing that shortly. So I’m also holding back on some of my portfolio capital to leave some available during our live trading sessions.
This article is for educational purposes only. This is my own portfolio which is being managed according to my goals and risk tolerance. Your situation is likely different and you should do your own due diligence before investing in stocks or options.