DGI Adventure 09-09-16 Sold Cash Secured Put – Interactive Brokers Group, Inc (IBKR) – $33.00 strike – Oct 21 Expiration

This trade was actually executed on Tuesday 09/06/16. I didn’t get a chance to write about it until today.

I went through my whole core philosophies blah blah blah and investment thesis process when I first initiated a position in IBKR back in July.

That put expired worthless a few weeks ago, and this trade is just re-initiating that position. The purpose of this post is really just to record the trade.

In the meantime, I have updated the portfolio and income tracker back at the mothership to reflect this position.

Dividend Cycle

Ex Div was 8/30/16. Like I said, I didn’t get assigned on the last one, so I wasn’t a shareholder, and I don’t get a payout (it hits bank accounts next week).

That’s one of the bummers about using short puts for long equity exposure; you don’t get all of the benefits of a pure long strategy.

But you know what? IBKR pays kind of a puny dividend anyway ($0.10/share). The premium I received for selling this put is worth nearly a year and a half of dividends, and I only have to hold the position for half of a normal quarter. Take that long only equity strategies!

Investment

SPL (Strike Price Logic)

So I think this kind of confirms my theory that put selling around earnings “volatility” isn’t that lucrative. My last trade (same strike price) was sold on a big drop after some bad earnings headlines. I did fine on that and all, but not great considering how much movement there was in the stock that day.

Granted, this time around, I have an extra 15 days of duration, but for those extra days I get an extra 1% of downside protection and nearly 2% more annualized yield which seems about right. That tells me that all the volatility on earnings day back in July didn’t really goose the reaction in the derivatives the way you might expect.

But then everyone is positioned around earnings…so maybe you shouldn’t expect it?

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