Buying More Long Term Option Contracts, Macy’s and ExxonMobil — May 29 Trade Log
Friday came to be a mixed up trading session, a lot of highs and lows in our portfolio and many things happening; futures were predominantly negative before the session, still it didn’t set the mood for the day, at least not for all indices. We followed the IWM mostly on the trading session, we had faith that the upcoming weekend would spark an aggressive selloff so we could get rid of our contract, it was a negative day, still, not the selloff we were expecting it was not even a bad day for the major indices, S&P and NASDAQ managed to end up positive, the DOW slightly negative almost even and the SmallCap 2000 didn’t even reach -1%.
Many things happened on Friday but it wasn’t enough to spark anything for the markets, FED Chairman Jerome Powell talked once more and again announced that more stimulus was on the way, Trump had scheduled a conference call regarding the China, he was expected to talk about the Hong Kong special treatment they were leaving behind, markets were expecting this so it did not spark any unexpected movement.
We reduced our losses on the position and decided we would hold the contract onto the upcoming week. Pretty heavy riots have sparked all around the US ever since the weekend started and have kept spreading across the country in response to the murder of George Floyd, indices futures are trading positive but this may have repercussions on this weeks trading. Only time will tell how markets will react to this new pill.
Most of our swings were still cooking on Friday’s session, AMD for example was just starting to return and performing as planned we left the trade running to avoid cutting profits short. The contract was indeed performing well.
The Ford PUT contract was not a very well placed trade, before entering the position we did not analyze the volatility or range of the underlying, slowly we came to a realization that profiting from this position was a lot to ask for, even more after a bad entrance point. Since we are not losing much we are being patient, and waiting to cut losses to the minimum that the underlying permits us, once again, this was not a well thought of trade and we are facing consequences.
Our LEAPS were Friday’s star performers, unlike the AMD contract we never saw them change price aggressively, they maintained their value throughout the whole day and balanced the Unrealized P&L for the portfolio. Since this strategy was working out for us, we bought a few more following the same criteria, undervalued and consolidated stocks that have the financial muscle to make it out of this crisis. We bought these:
ExxonMobil and Macy’s.
Exxon may have a more logical backup, since oil prices are extremely damaged and the stock was hit on the market crash it has not made a complete recovery but that doesn’t make it a strong company and in the energy sector one of the most renowned stocks. Energy, like the financial sector, will have a slow recovery, but 2 years from now a big company like this will most likely be still standing and growing after it recovers its pace from before the pandemic.
Macy’s is a dicier play, big retailers are in a challenging position with the social distancing measures taken by governments around the world, JCPenney is a clear example who just filed for Chapter 11 bankruptcy. Still these stores are big employers in the US and the government will not allow that all big employers fail to survive this crisis, even from before the pandemic, Macy’s was restructuring the company and had already closed numerous stores to adjust the lower demand from its clients. In the department store industry they are also one of the biggest employers, so they are a target for government aid in case of financial distress.
