Oh, my! Is that any way to talk?
Life, as you know, is not a bowl of cherries. You can’t have your entertainment and your fine foods and your night on the town every day – no, sir. There are times when the drudgery of life takes precedence over its more inspiring moments, and suck as it may, there’s simply no getting around it.
We relate the foregoing because today’s letter is going to be a slight departure from the norm, composed as it is of a simple listing of former trades and their results or advice to close or otherwise repair them.
We apologize in advance for the tedium, and we’ll do our best to keep it lively. The truth is we had a great number of intestinal changes here at Normandy over the last three months and the recovery has taken us a tad longer than expected. That’s why this week we’re playing catch-up, and why we’ve had to curb some of the laugh-out-loud antics.
So bear with us.
Here we go…
- Our first trade was opened on the 23rd of February. We urged you at the time to buy the deep-in-the-money QQQ September 70 CALL for $39.87. At expiry, the index closed at $105.35, leaving you with just $35.35 for your troubles, a loss of 11% on the trade.
- Up next is our April 6th initiative, which asked you to consider the sale of KSS May 80 CALLs for $2.20 and purchase of EPI October 24 CALLs for $1.15. Total credit on the trade was $1.05.
We subsequently bought back the KSS options for $0.45, but sadly, the EPIs expired worthless, leaving us with a final profit of $0.60 on the deal.
- Next! A week later, on April 13th, we recommended the FAS October 150 CALL, which a short time later underwent a 4:1 split, giving us four October $37.50 CALLs in its place. And the result? No luck, whatsoever. The financials were weak, weak, weak, the options expired worthless and we lost our initial $5.00 investment.
- On May 11th we urged a pairing of TD Bank against IYF (the iShares U.S. Financials ETF). We bought the TD October 50 CALL and sold the IYF October 100 CALL for the same price, and, in the end, they both bit the dust, expiring worthless and leaving us even money on the trade.
- This one’s a little more complex, so follow along.
On the first of June we initiated a series of purchases and sales involving FXI that didn’t work out in the short term, but that, with a few small fixes, has since recovered nicely. The tally now looks like this –
a) We own 300 shares of FXI, bought at $44. The shares trade today for $38.05, meaning we’re down $1785, along with an initial debit of $213, that makes for a total in the minus column of $1998.
b) To aid in the recovery of the loss, on the first of September, we sold two FXI September 25th50 CALLs for $0.87 each. Our credit was $174, putting our total loss on the trade at $1824.
c) On September 15th we sold three FXI October 33.50 PUTs for $0.91 each, for a total credit of $2.73. They expired worthless for a 100% gain on the trade. As of this writing, we’ve therefore reduced our overall debit to $1551.
d) We’re also holding one long FXI January (2017) 51 CALL.
Our advice regarding this initiative is as follows. We’re going to continue patiently, as we believe there’s little reason to fear further weakness in the Chinese market over the near term. We’re also going to continue selling premium against the shares we own.
Here is how to play it and profit:
[mepr-rule id=”994″ ifallowed=”hide”][mepr-unauthorized-message][/mepr-rule]
[mepr-rule id=”203″ ifallowed=”show” description=”wall_street_elite_members_only”]
To that end, we recommend you consider the sale of three FXI December 31st 40 CALLs, going today for $0.37 each, for a further credit of $1.08.
And hang on tight, friends.
- On August 18th we sold the RSX November 18 CALL for $0.34 and purchased the RSX November 15 PUT for $0.74. Total outlay for the trade was $0.40 per pair and we’re disappointed to report that both options expired worthless. Loss of $40 on the trade.
- On the 22nd of September we advised a short straddle on Tyler Technologies Inc. (NYSE:TYL) in a trade that hasn’t yet fared well. We recommended the sale of the November 150 PUT and CALL for credits of $7.30 and $7.10 respectively. Total credit was $14.40. That means our breakeven on the trade was above $164.40 and below $135.60.
As of last Friday’s expiry, TYL closed at $174.20. We’re now short the shares, and with TYL sitting at $171.86, we’re underwater $746.
Action. What do we do?
Old joke: what’s the first line of every Brazilian cookbook?
Answer: “First of all, relax.”
As for the Tyler trade, ditto. In fact, we’re going to run a repeat here of the original trade in order to recoup our funds.
[mepr-rule id=”988″ ifallowed=”show” description=”executive_lounge_members_only”]
We advise you to consider selling another straddle; sell the TYL December 170 CALL and 170 PUT, trading for $7.20 and $3.40 respectively, for a total credit of $995.
Your new break-even levels for an expiry roughly three weeks out are, accordingly, 179.95 and $160.05.
- On September 29th, in a near mirror-image of the above trade, we recommended you sell the October 30th TSLA 270 CALLs for $4.95 and 230 PUTs for $6.65. Total credit was $11.60 per strangle, and the downside breakeven point was 218.40.
As it turns out, TSLA expired at $206.93, so we now own the shares. But with the stock trading for $217.75, we’re down a mere $65. We recommend you hold, but for those with aortic strain (or any undiagnosed bowell condition), please feel free to shut down here at near breakeven.
Wall Street Elite recommends you act on the FXI, TYL and TSLA trades as detailed above.
With kind regards,
Hugh L. O’Haynew