DGI Adventure 12-16-16 QUADRUPLE WITCHING!!! – Options Expiry Discussion


It’s that time again! Index futures, index options, stock futures and stock options are all expiring today..

Happy quadruple witching everyone! Loyal readers know, of course, that this means a day of reckoning for the wizards’ ongoing ROTH competition. Expect a thorough update on that soon (hint…I think Mrs. Wizard is going to kick my ass for the second quarter in a row).

Anyway, for most normal people who don’t have investment contests with their spouse, quadruple witching day is all about the expiries.

We don’t play around in the futures market, but we certainly play around with options, and we have five positions expiring today, which should free up $19,100 in cash for future trades.

Let’s talk about that.

SPY (mini) PUT – $195 strike

I sold this put waaaaaay back in June the day after a bunch of racists in Britain decided to commit economic seppuku and leave the European Union. The result of that vote was unexpected, and Mr. Market doesn’t like surprises.

I hope my counterparty got a lot of peace of mind out of the insurance policy I sold him/her. I got $71.45 of cold hard cash. I think it was a fair trade.

Barring a 14% drop in the S&P500 today, this position will expire worthless.

SPY (mini) PUT – $190 strike

Second verse…same as the first! That was a fun day in June wasn’t it?

Considering a 16% drop in the S&P500 is even less likely than a 14% drop, this position should expire worthless.

WMT PUT – $67.50 strike

This contract is a little more “normal” in terms of the typical duration of my options trading. I sold the put last month right after WMT announced earnings, which apparently “disappointed” the robots. The share price recovered almost immediately after, and has spent virtually no time below $70 since.

The current share price is only within 5% of this strike, so even though it will almost certainly expire worthless today…I will keep an eye out for more WMT put opportunities, as I think it’s still very much “within range”.

MSFT PUT – $55 strike

Also sold just about a month ago, this share price similarly recovered immediately after I sold the contract and has hardly looked back.

In the post accompanying that trade, I revisited my MSFT investment thesis, and I put the “fair value” at $66. Shares closed yesterday at $62.58, so technically it’s still in range, but there isn’t much margin of safety. The LNKD acquisition is going to stretch the balance sheet for at least a couple of quarters, and it’s not like it’s going to be very accretive to cash flow. You don’t buy a social network for earnings…you buy a social network because you’re trying to take over the world.

I’m in favor of world domination, but I plan to be picky about my entry price…

GRC CALL – $30 strike

After several different attempts, I finally got assigned 100 shares of GRC at $25/share. Then a bunch of racists in America committed economic seppuku and elected a bouffanted retard to be the president.

I mentioned already that Mr. Market doesn’t like surprises (and the bouffanted retard winning the election was certainly a surprise). But I guess Mr. Market likes the American Industrial Sector’s chances with a protectionist POTUS more than he dislikes surprises. GRC shares were up over 20% a mere 5 days after the election.

I couldn’t help myself, so I sold this call about a month ago, figuring I would take a 150% annualized gain if it were being offered (max profit of $575.41 on $2,500 in a 56 day round trip)

Shares would have to fall nearly 8% from yesterdays close of $32.50 for this contract to end up out of the money. Since I don’t expect that to happen, I will say goodbye to GRC for a while. Yes I left some money on the table. No I don’t regret it, and I’m not rolling the position out.

I like the stock, and it’s probably back to being “fairly” valued now, but the options market is kind of thin, so I’m not sure if I’ll remain as active as I was trading its options.

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