I never take losses lightly. But there are cases when it’s simply time to throw in the towel and put your capital to better use elsewhere. We have reached that point with our Kroger (KR) and Walt Disney (DIS) positions. Both companies face a good deal of uncertainty over the next several quarters.
Kroger is scheduled to announce earnings tomorrow. While we are currently on track to have our shares called away, I do not want to risk holding a position through earnings in case the stock experiences a sharp post-earnings sell-off.
In addition to earnings, Kroger’s planned acquisition of competitor Albertsons creates far too much uncertainty and potential headwinds for the stock in 2023 for us to continue trading it. Therefore, I am recommending we close the position now and book the loss.
I also want to close the books on our Walt Disney position, as the company faces uncertainty related to inflation and the potential impact of a global recession. While I believe the return of Bob Iger as CEO is a great development, he has his work cut out for him.
Our current position is deep underwater. We could hold for another week and a half, but it’s tying up a lot of capital that I think can be put to better use in the upcoming Income Madness, which kicks off Dec. 6.
These losses hurt. But since April, when we put on these trades, we’ve closed 149 trades between Income Madness and Income Masters – 143 winners, five losers and one breakeven trade – netting around $5,253 in cash. While we still have a number of trades that are underwater, you can see that the income we’ve earned during this period more than offsets the losses we’ll be booking today.
Long story short: My timing on these trades was a mistake, but I hope you can see the benefit of this kind of trading long term. Because the wins really do outweigh the losses.
If you decide to stay in either position, please contact me via email with any questions.
DIS Dec Week Two (12/9) 100 Call
Current Stock Price: $94.10
Cost Basis: $125.27
- Buy to close the DIS Dec Week Two (12/9) 100 Call for around $0.32, but adjust as needed to close today
- Sell shares at market
Loss: $31.49, or $3,149 per 100 shares
KR Dec Week One (12/2) 48 Call
Current Stock Price: $48.78
Cost Basis: $52.99
- Buy to close the KR Dec Week One (12/2) 48 Call for around $2.15, but adjust as needed to close today
- Sell shares at market
Loss: $6.36, or $636 per 100 shares