What are you buying today?

[lnofeisone]

Started to buy more serious UNG put positions. Trash security in an overextended natural gas market. I'm also using the cover of the economist as my "do the opposite" proxy. 

[Gregmal]

Been picking at SPCE Jan 2023 $10 puts

[Gregmal]

also grabbed another 300 CLPR March 7.5 calls

[BG2008]

1 hour ago, Gregmal said:

also grabbed another 300 CLPR March 7.5 calls

What price? 

[Gregmal]

8 minutes ago, BG2008 said:

What price? 

1.39-1.42

[BG2008]

2 minutes ago, Gregmal said:

1.39-1.42

Good price.  I've paid more than that on average.  

[Gregmal]

2 minutes ago, BG2008 said:

Good price.  I've paid more than that on average.  

Yea shares have been strange lately. Definitely feel like theres a seller putting a lid on them here. Was picking up 3000-5000 share lots the other week and whereas normally you'd clear out the current bid/ask, was getting a lot of iceberg asks. Speculatively, if someone wants to unload in size on a semi illiquid name, I'll step out and let them drive down the price and then hit the options as they come in. Its always fascinated me here how with CLPR you can watch 10,000-20,000 total shares trade slowly over an entire session, but for modest premiums you can pick up the same sized(or much larger) positions via the options in one quick swoop. Gonna be interesting as we get closer to March to see if anything comes about when its clear those shares have to be delivered. I've got most of the outstanding 5s and well, some dudes I know....own a lot of the 7.5s

[aws]

MARA puts, specifically Jan $40 puts. It's hard to short anything in the crypto space, but the more products that are available for the average investor the less it makes sense to own the ones that trade at massive premiums like MARA. 

 

Even with crypto at all time highs, the value of the crypto they hold is a little over $3 per share, and mining equipment installed that cost about $1 per share, and another $1 per share of equipment on the way over the next year or so. Mining revenue has gotten a big boost from the China bans, but how much can $1 per share of equipment really make? Even if it made 200% annual returns for a couple of years that's peanuts compared to the share price now, and in this type of business they are constantly coming out with new devices that are more efficient which drive down the value of the older ones. They got a pretty good deal buying a lot of miners before the big spike in bitcoin, but they will have to buy new ones at market price. They are half a commodity business, half a bitcoin investment fund, but both parts trade for 1000% of replacement cost and with many more investment opportunities that premium shouldn't last forever. But it's far from a sure thing since I'm sure you could make many similar arguments about meme stocks and GME put buyers haven't done very well either.

[Spekulatius]

21 minutes ago, aws said:

MARA puts, specifically Jan $40 puts. It's hard to short anything in the crypto space, but the more products that are available for the average investor the less it makes sense to own the ones that trade at massive premiums like MARA. 

 

Even with crypto at all time highs, the value of the crypto they hold is a little over $3 per share, and mining equipment installed that cost about $1 per share, and another $1 per share of equipment on the way over the next year or so. Mining revenue has gotten a big boost from the China bans, but how much can $1 per share of equipment really make? Even if it made 200% annual returns for a couple of years that's peanuts compared to the share price now, and in this type of business they are constantly coming out with new devices that are more efficient which drive down the value of the older ones. They got a pretty good deal buying a lot of miners before the big spike in bitcoin, but they will have to buy new ones at market price. They are half a commodity business, half a bitcoin investment fund, but both parts trade for 1000% of replacement cost and with many more investment opportunities that premium shouldn't last forever. But it's far from a sure thing since I'm sure you could make many similar arguments about meme stocks and GME put buyers haven't done very well either.

MARA does look extremely scummy. Headquarter in Las Vegas already says something as there are a lot of fraudulent  companies located in NV. The Chairman Okamoto also feels very promotional and has an unimpressive track record.

 

$40 January puts are north if $4 with the stock at $54 so fairly expensive.

[aws]

Oh he's outrageous. He used the bump in the price to award himself Elon Musk style tranches of free shares when the stock hit various market cap hurdles. 1.5 years ago the company had like $10 million of assets, and with the crypto hype near the end of last year they were able to issue about $500 million of stock to the public at inflated prices, and because they did that the chairman awarded himself about $100 million worth of free stock. My numbers may be off a bit, but that's the gist of what happened. Pure looting by him personally while cashing in on the hype.

 

Yeah, the puts are expensive. It's tough to find a date/strike that feels very good with such a high IV, but this is where I've settled.

[SafetyinNumbers]

On 10/14/2021 at 10:58 AM, SafetyinNumbers said:

Added to ACD.TO Accord Financial

 

Its not a very liquid stock so the risk is if you buy it, it might go up. 
 

Reported $0.65 in H121, should be stronger in H222 and even stronger next year as they grow the balance sheet and pick up operating leverage. Management is targeting a 15% ROE vs 13.3% last quarter. Book value is $10.70 vs the stock price of $8.17. 
 

 

Added some more to ACD.TO and to IOU.V.

 

IOU Financial is a fast growing fintech asset light small business lender.

 

Historically and unsurprisingly, loans growth is high and loans perform well coming out of a recession. I don’t think people are paying attention to the illiquid names because they are illiquid. Seems like a source of alpha to me.
 

 

[Red Lion]

Opened a new position in SAM yesterday at $520. Would be happy to keep adding to this initial position if the price continues into free fall. 

 

This is one of those companies I've watched for years, and never pulled the trigger because the valuation was so high. It's not cheap by any means, but regardless of the short term ups and downs, I think this one is well positioned in the craft brew segment (and seltzer too) with good margins, ROIC, long term tailwinds, and (hopefully) pricing power. 

 

I think a rollup type strategy could be very effective here with high multiple, strong balance sheet, and lots of privately held subscale craft brewers as potential targets.  

[Value_Added]

54 minutes ago, RedLion said:

Opened a new position in SAM yesterday at $520. Would be happy to keep adding to this initial position if the price continues into free fall. 

 

This is one of those companies I've watched for years, and never pulled the trigger because the valuation was so high. It's not cheap by any means, but regardless of the short term ups and downs, I think this one is well positioned in the craft brew segment (and seltzer too) with good margins, ROIC, long term tailwinds, and (hopefully) pricing power. 

 

I think a rollup type strategy could be very effective here with high multiple, strong balance sheet, and lots of privately held subscale craft brewers as potential targets.  

 

Did you take a look at writing any long term put options?  I’ve been eyeing them but still feel it’s a bit expensive at the adjusted cost basis if put the stock.  Thought I’d mention it because currently, an ATM put with an expiration in January 24 would yield approximately a 15% CAGR and if you got put the stock, would drop your basis to $372/share.  Point being, if you like it at $500/share, $372 offers a much larger margin of safety.

 

Edited October 21, 2021 by Value_Added

[Red Lion]

49 minutes ago, Value_Added said:

 

Did you take a look at writing any long term put options?  I’ve been eyeing them but still feel it’s a bit expensive at the adjusted cost basis if put the stock.  Thought I’d mention it because currently, an ATM put with an expiration in January 24 would yield approximately a 15% CAGR and if you got put the stock, would drop your basis to $372/share.  Point being, if you like it at $500/share, $372 offers a much larger margin of safety.

 

 

That's an excellent recommendation, thank you so much. I will look into this option, although at >$500 the position sizing is a bit high for my portfolio even on one contract. 

[Gregmal]

12 minutes ago, RedLion said:

 

That's an excellent recommendation, thank you so much. I will look into this option, although at >$500 the position sizing is a bit high for my portfolio even on one contract. 

 

Why not hit the $350s? You'd take in over $50 a share.

[ERICOPOLY]

7 hours ago, Value_Added said:

 

Did you take a look at writing any long term put options?  I’ve been eyeing them but still feel it’s a bit expensive at the adjusted cost basis if put the stock.  Thought I’d mention it because currently, an ATM put with an expiration in January 24 would yield approximately a 15% CAGR and if you got put the stock, would drop your basis to $372/share.  Point being, if you like it at $500/share, $372 offers a much larger margin of safety.

 

 

Long term put options (that you write) are taxed as short term capital gains no matter how long you are tied up in the contract.  So why not instead own the shares and write covered calls?

Edited October 22, 2021 by ERICOPOLY

[Value_Added]

23 minutes ago, ERICOPOLY said:

 

Long term put options (that you write) are taxed as short term capital gains no matter how long you are tied up in the contract.  So why not instead own the shares and write covered calls?

I’ve seen your options strategies throughout the forum and I’m not quite up to snuff in understanding them and the pros/cons that come with them.  I write puts on stocks I want to own if the adjusted basis is my target buy price or lower (and they have over 15% CAGR for the time my money is tied up).  I exit stocks by writing calls at the price I want to exit.  Pretty basic I know but it works for my strategy.  I’m always open to expanding deeper into options but this is all I feel comfortable with now.  Care to explain the above strategy like I’m 5?  Not trying to hijack the thread anymore than I’ve done so feel free to instant message me if you’re up for the challenge of helping me understand.

[IceCreamMan]

46 minutes ago, ERICOPOLY said:

 

Long term put options (that you write) are taxed as short term capital gains no matter how long you are tied up in the contract.  So why not instead own the shares and write covered calls?

 

If you let the underlying shares get put you and then hold them for a year, the capital gains are long-term, right? So that would be a possibility.

[IceCreamMan]

4 minutes ago, IceCreamMan said:

 

If you let the underlying shares get put you and then hold them for a year, the capital gains are long-term, right? So that would be a possibility.

 

Oh, I guess that's only a possibility if the option expires ITM. You're probably thinking about cases where the option expires OTM, I see.

 

Anyway, I think you know what the real answer to your question "why not buy shares and write covered calls" is, Eric  

Edited October 22, 2021 by IceCreamMan

[ERICOPOLY]

14 minutes ago, IceCreamMan said:

 

Oh, I guess that's only a possibility if the option expires ITM. You're probably thinking about cases where the option expires OTM, I see.

 

Anyway, I think you know what the real answer to your question "why not buy shares and write covered calls" is, Eric  

 

Yes, cases where the option expires OTM but also when you get put the stock you restart the clock and need to hold yet another 12 months to get to long-term status.

 

Also, notice that at closing the stock SAM was $517 and the Jan 2024 $500 strike call was approximately $154 whereas the $500 strike put was approximately $125.  Taxes aside, you are risking less with the covered call strategy because $154 minus $17 (which is the amount in-the-money) is $137 and that differential is $12 greater than the $125 put premium. 

Edited October 22, 2021 by ERICOPOLY

[IceCreamMan]

4 minutes ago, ERICOPOLY said:

 

Yes, cases where the option expires OTM but also when you get put the option you restart the clock and need to hold yet another 12 months to get to long-term status.

 

Also, notice that at closing the stock SAM was $517 and the Jan 2024 $500 strike call was approximately $154 whereas the $500 strike put was approximately $125.  Taxes aside, you are risking less with the covered call strategy because $154 minus $17 (which is the amount in-the-money) is $137 and that differential is $12 greater than the $125 put premium. 

 

There are two reasons for this. First, it's not apples to apples because the $500 put is slightly OTM (3+% cushion) vs. the call that's already ITM (immediately at risk for the first 3+%). Second, selling the put is >100% leveraged position (cash credit for notional exposure; no cash outlay).

 

The leverage is what I was alluding to in my prior post. If you have a broker with a 1% margin rate it probably doesn't matter which way you put on the position, but if your broker charges more than 1% margin then the options market provides cheaper financing.

 

[ERICOPOLY]

19 minutes ago, IceCreamMan said:

 

There are two reasons for this. First, it's not apples to apples because the $500 put is slightly OTM (3+% cushion) vs. the call that's already ITM (immediately at risk for the first 3+%). Second, selling the put is >100% leveraged position (cash credit for notional exposure; no cash outlay).

 

The leverage is what I was alluding to in my prior post. If you have a broker with a 1% margin rate it probably doesn't matter which way you put on the position, but if your broker charges more than 1% margin then the options market provides cheaper financing.

 

1st point.

The option premiums are $154 for the calls vs $125 for the puts.  That differential is $29.  That $29 already takes into account the $17 that is in-the-money on the calls, and I'm saying there is an extra $12 to boot.

 

2nd point.

Yes, no margin cost with naked puts so the margin costs needs to be known.  However, if this is cash-covered puts the covered calls may be better unless you earn enough interest on your cash to meet or exceed $12.

Edited October 22, 2021 by ERICOPOLY

[IceCreamMan]

2 minutes ago, ERICOPOLY said:

1st point.

The option premiums are $154 for the calls vs $125 for the puts.  That differential is $29.  That $29 already takes into account the $17 that is in-the-money on the calls, and I'm saying there is an extra $12 to boot.

 

2nd point.

Yes, no margin cost with naked puts.  However, if this is cash-covered puts the covered calls may be better unless you earn enough interest on your cash to meet or exceed $12.

 

Yeah, it's the financing cost. I was assuming a margin account.

[JRM]

Adding to Altus Midstream (ALTM).  Moved up to $90 this week, then news broke yesterday of a merger with Eagle Claw.  Stupid move today on the news that really looks like insider were trading on earlier in the week.  Crazy stuff.

[dipod]

INTC. Seems like a big overreaction to their quarterly results.