Posted on April 17, 2020
We’ve got action on a few fronts today, fellow Jews, so hear ye! hear ye!
Before we get there, though, a word of warning.
Everyone and his brother is expecting the opening of the economy to juice the market. And it may happen. There’s nary been a moment so anticipated in all our lifetimes, and certainly no one is eager to put it off longer than necessary.
That said, it often happens that news of this sort is not met with an immediate and frenzied buying of equities.
Rather, the opposite is far more common.
We’re not stating anything definitive here. Just offering a warning. If we get the word this weekend that America is open for business – or even partially so – don’t expect buy orders galore at Monday’s open.
We’ll know better as the due date gets closer.
But for now, remain circumspect.
We start with our KR covered CALL initiative opened on March 16th in a report called Hashem’s Hammer Strikes.
The trade recommended you buy KR shares for $30.72 and sell the April 9th 32 CALLs for $0.97 – one CALL sold per 100 shares purchased. Total debit on the trade was $29.75.
Well, the CALL expired worthless OTM last Friday, and as of last night’s close, KR trades for $31.95, offering you a one month take of 7.4%.
We would sell another CALL, as we fully expect KR to rise in the months ahead, but we see that S&P futures are up 75 points before the open (and the Dow close to 700), so we’re going to recommend you sell your shares today.
We’re booking the trade with Thursday’s final price.
You’ll do better.
For those who want to take on a little more risk, feel free to sell the KR May 15th 32 CALL for $1.43, dropping your adjusted cost base for the shares down to a very tidy $28.32 and offering a voluptuous 13% should the shares be called away in a month.
Our UNG initiative, all the details of which can be found here, also expires today. We’re short the 22 PUT and therefore have to roll it out. It’s currently trading at $10.05. Buy it back and sell the January 22 PUT for $10.20. You gain two full quarters and add $0.15 to your existing $0.14 credit, for a total net credit of $0.29.
We move now to our Moelis trade of September 15th, from Champagne, Slaves and Adderall.
There, we urged you to sell the MC April 17th 34.25 PUT for $3.40 and buy the MC April 17th 29.25 PUT for $2.20, for a credit of $1.20 (strikes post-adjustment). With those funds, we recommended the purchase of the April 17th 39.25 CALL for $1.75. Total debit on the affair was $0.55.
With the stock at $29.41, we’re short of our goal, and the short 34.25 PUT requires action.
Buy it back for $7.00 and sell the October 16th 35 PUT for $7.30.
You add $0.30 to the pot, reducing your initial debit to $0.25.
We wrap up the repair work today with our KOL trade that arrived to you on November 7th. The missive was called Coal Finds its Voice, and it recommended you buy the KOL April 17th 12 CALL for $0.25 and sell the KOL April 17th 10 PUT for the same price (strikes are pre-split). Zero premium was the result.
7Today, our short PUT is in-the-money, so we’re rolling it out. Buy it back for $3.00 and sell the July 17th 10 PUT for the same $3.00.
That offers you another three months to get on side.
And with that, remember…
Alan B. Harvard