The Hypothetical Trade Thread

[ownyourfuture]

Would have sold today at 9695.00 or about a 9% profit over two weeks.

Well done

 

[ownyourfuture]

A thread for posting hypothetical trades we'd like to make for any reason, perhaps just a gut feeling, & hopefully a detailed explanation why ?

*Posted April 18th*
My hypothetical trade for today, will be selling covered calls on 200 shares of First Solar (FSLR)

Bank of America upgraded FSLR today, & at the time of my ‘trade’ (2.41 PM EDT), the shares were trading at $77.97 +5.29 (+7.28%) *See Screencaps*
With a cost basis of $34.63, I'm very pleased, but like most people, when the lure of easy money presents itself, I’m tempted to take advantage.

I hypothetically sold 2 May 18 covered calls, with a strike price of $90.00 At the time, the bid was $1.00 & the ask $1.19 I'll assume I put out an offer to sell 2 contracts at $1.07 & it executed. 200 shares x 1.07 = $214.00 less $10 commission = a net of $204.00



I would’ve been on this covered call sale like a rash today, if I didn't have to keep a very close eye on my income relating to healthcare.

I'm going to go ahead & 'call' this one
As I type, it's trading @ $73.00 $17 under the strike. The odds of it going up $17 by Friday are pretty slim. Here's a chart for the call starting on the the day I sold it.



Wish they were all this easy.
+204.00

FYI: In the original post, I stated......
"I would’ve been on this covered call sale like a rash today, if I didn't have to keep a very close eye on my income relating to healthcare"

The $204.00 I received in premiums wasn't my concern. My concern would have been the shares going over the $90 strike price & getting called away.

This would have resulted in a STCG of approximately $12,000

 

[FIRE'd@51]

I'm going to go ahead & 'call' this one
As I type, it's trading @ $73.00 $17 under the strike. The odds of it going up $17 by Friday are pretty slim. Here's a chart for the call starting on the the day I sold it.



Wish they were all this easy.
+204.00

FYI: In the original post, I stated......
"I would’ve been on this covered call sale like a rash today, if I didn't have to keep a very close eye on my income relating to healthcare"

The $204.00 I received in premiums wasn't my concern. My concern would have been the shares going over the $90 strike price & getting called away.

This would have resulted in a STCG of approximately $12,000

Why is this such a successful trade? You took in $204 in options premium and lost $1000 on the underlying 200 shares of FSLR.

Seems to me you would have been better off if the stock went above 90. You could buy back the short calls or buy and additional 200 shares of stock and deliver it if the calls were exercised, generating a short-term capital loss, all while enjoying an additional unrealized LTCG of at least $2400.

 

[ownyourfuture]

Why is this such a successful trade? You took in $204 in options premium and lost $1000 on the underlying 200 shares of FSLR.

1: Because I absolutely nailed predicting that FSLR (at least in the short term) was overbought.
2: I’ve already been ‘successful’ with this stock.

3: Since I hope to hold it for a long time, I sell fairly far 'out of the money calls' just like I did here.
4: The $1000 I ‘lost’ on the underlying shares is a moot point. I’m still up 110.00% on my 200 shares in under 15 months. All stocks fluctuate over time.
5: And lastly, because *hypothetically at least* I have $204.00 more than I'd have had If I had done nothing.

Seems to me you would have been better off if the stock went above 90. You could buy back the short calls or buy and additional 200 shares of stock and deliver it if the calls were exercised, generating a short-term capital loss, all while enjoying an additional unrealized LTCG of at least $2400.

What you suggested if the stock had gone over 90 makes perfect sense.
But it didn't.

 

[FIRE'd@51]

And lastly, because *hypothetically at least* I have $204.00 more than I'd have had If I had done nothing.

Doing nothing wasn't your only choice.

What was the delta of the 90-strike call at the time you sold it?

About 20? If so, selling the calls effectively reduced your stock position at that instant by 40 shares. An alternative would have been to sell 40 shares of FSLR. Wouldn't that be a better benchmark for your "hypothetical trade" than doing nothing?

 

[NYEXPAT]

Going short Bitcoin today at $8,082.08 with a price target of $6500.00.

 

[ownyourfuture]

*Posted April 20th*
My 'hypothetical' trade is to sell two May 18-2018 65$ covered calls on Pinnacle Foods (PF) @ 1.00$ (hold 240 shares)
Total = 200$ less 10$ commission = net $190.00

Reason: Shares are up almost 10.00% today because……………..
On Thursday, activist investor Jana Partners revealed that it has big plans for Pinnacle Foods Inc. ( PF) after disclosing a 9.1% stake in the packaged foods manufacturer. In a regulatory filing, the New York-based hedge fund said it is keen to explore a range of options with Pinnacle, including a potential sale. “We are aware that Jana Partners has made a 13D filing regarding its investment in Pinnacle Foods,” a Pinnacle spokesperson said in an email to Reuters.

Option(s) will expire worthless today.


+190.00

Summary & Total Gain/Loss

FSLR (2) May 2018 90.000 CC +204$--- +204.00
PF (2) May 2018 65.000 CC +190$--- +394.00

 

[ownyourfuture]

This is actually a 'real' trade.
Bought 10 shares CCK in my IRA (Only had about 600$ cash available)

 

[Fermion]

My hypothetical trade is to buy June 2019 Merck calls, pretty much any strike below $65, depending on how large of a hypothetical yacht you want to buy. Name the yacht Keytruda

 

[NYEXPAT]

Going short Bitcoin today at $8,082.08 with a price target of $6500.00.

Covering my short today at $7630.00 (+5%). I still like the trade, but am losing patience and really do not have time to check up on it, when I can be trading real time positions.

 

[Fermion]

My hypothetical trade is to buy June 2019 Merck calls, pretty much any strike below $65, depending on how large of a hypothetical yacht you want to buy. Name the yacht Keytruda

And just as expected, ASCO data rolling in showing great success in quite a few indications using Keytruda.

I would not be greatly surprised if the Merck calls I not so hypothetically purchased on Thursday are up 30% next week.

Might have to make a not so hypothetical additional estimated tax payment

 

[NW-Bound]

You made me look up Merk and Keytruda to see what it's all about.

Learned that Keytruda was considered successful when it extended the life of lung cancer patients to 16.7 months when used in conjunction with the usual chemo treatment, compared to 12.1 months with chemo alone. Patients with a certain biomarker would get life extended to 20 months.

I am sure it is very hard to come up with a drug like this, but it underlines how cancer is extremely difficult to treat and to extend the patient life for a few more months. And the drug costs $150K/year.

 

[Fermion]

I guess the ones with the biomarker are more exciting, since as a front line treatment, it would extend median overall survival by 8 months more than chemo. The other good part is the side effects are much much less than chemo so you get a better quality of life. I think also some of the people in the trial were VERY sick already so that may play into the overall survival some.

Is it perfect or a cure? No. It is a stepping stone though and making forward progress. Very expensive to investigate these drugs in the trials and when a major one fails...look out below. See Celgene as example...fell from $140 to current $79, mostly because of a couple of drug failures.

 

[ownyourfuture]

I only own 60 shares, but since this is hypothetical, I'll sell covered calls on 200 shares (2 contracts) of Five Below (Five) today.
Reason: Shares are up about 7.00% today, for no apparent reason. Must be the retail sector.

The option: July 20th 2018 85$ Strike


The bid is $1.20 & the ask is $1.40
I'll assume I sold the calls for $1.25
Total Premiums Received: $250.00 less 10$ commission = $240 net

 

[ownyourfuture]

Covering my short today at $7630.00 (+5%). I still like the trade, but am losing patience and really do not have time to check up on it, when I can be trading real time positions.

Nothing wrong with 5% in about 2 weeks!

 

[ownyourfuture]

And just as expected, ASCO data rolling in showing great success in quite a few indications using Keytruda.

I would not be greatly surprised if the Merck calls I not so hypothetically purchased on Thursday are up 30% next week.

Might have to make a not so hypothetical additional estimated tax payment

Merck is up a little over 2% today, so while it might not be 30%, you certainly would have done ok. I'm surprised it wasn't up more ?

 

[Fermion]

Merck is up a little over 2% today, so while it might not be 30%, you certainly would have done ok. I'm surprised it wasn't up more ?

I am in the Merck $60 June 2019 calls, purchased for $4.60 on Friday. This morning the calls were trading for $5.95 which is a 29% gain. I did not sell though and now they are trading for $5.60, so only a 22% gain.

I have a good feeling that Merck will retest last year's high of around $67 and perhaps even go to the low $70s before the 2019 June expiration. I probably won't hold that long.

 

[ownyourfuture]

I am in the Merck $60 June 2019 calls, purchased for $4.60 on Friday. This morning the calls were trading for $5.95 which is a 29% gain. I did not sell though and now they are trading for $5.60, so only a 22% gain.

Good job!
Up 22.00% over a single weekend

 

[ownyourfuture]

I only own 60 shares, but since this is hypothetical, I'll sell covered calls on 200 shares (2 contracts) of Five Below (Five) today.
Reason: Shares are up about 7.00% today, for no apparent reason. Must be the retail sector.

The option: July 20th 2018 85$ Strike


The bid is $1.20 & the ask is $1.40
I'll assume I sold the calls for $1.25
Total Premiums Received: $250.00 less 10$ commission = $240 net

Well this one would have blown up in my face. They reported earnings after the bell & wall street is impressed.

 

[ownyourfuture]

Well this one would have blown up in my face. They reported earnings after the bell & wall street is impressed.

Update

 

[Winemaker]

I wish I would have shorted Nektar Therapeutics on Monday. Down $24 to $54, coming back slowly, report at ASCO did not impress investors, but results were good. Maybe a good buy on the dip stock now. I owned it through a mutual fund that lost $2.75 from $74.50.

 

[Fermion]

I wish I would have shorted Nektar Therapeutics on Monday. Down $24 to $54, coming back slowly, report at ASCO did not impress investors, but results were good. Maybe a good buy on the dip stock now. I owned it through a mutual fund that lost $2.75 from $74.50.

Funny you mention Nektar! I did a real trade on that today, buying at $58 and selling at $62 for a $4000 gain on 1000 shares in about a 3 hour time period!

I then watched it climb to $63 and fall back to $59, at which point I did another real trade which was to buy 500 shares and simultaneously sell 5 Jan 2019 $65 calls for a net debit of $46.90. The options were going for that much! $12.10 for a $65 option on a $60 stock with expiration in 7 months.

As a comparison, When Merck was $60, the Jan 2019 Merck $65 calls were selling for $1.50. If you add in about half a year of Merck dividends, you still are only at $2.50.

Now obviously we have a difference of volatility and risk here, but when you can capture a $12.10 premium vs a $2.50 premium, it can make some sense.

Total profit on that trade will be near 40% if called away.

 

[Winemaker]

I took a $56.90 position today, will be happy with half your gain in twice the time!

 

[Winemaker]

I shoulda waited til the close to buy, down 11% from yesterday's close.

 

[Fermion]

I shoulda waited til the close to buy, down 11% from yesterday's close.

Nektar recovered a little bit. My covered call spread is down about $600 but hey if you are not losing money at some point on a biotech play you aren't doing things right

My prediction for Merck to rise and rise is slowly coming to pass. It closed at around $62.60 and the $4.70 June 2019 $60 strike calls I purchased are trading for about $5.90 now.

This is a tough one to not dive headfirst into. I have a really strong feeling that Merck will retest and pass the $66 previous highs, probably well before June 2019. Am I missing out on more gains by buying such long dated options? They do allow me to get LTCG if I held all the way until expiration but in reality I never do that...I will sell probably right when it hits $66 which probably will happen in a couple of months when they are upgraded again and raise full year guidance.

More pill bottle rattling by politicians could put a damper on all this...