We skipped live trading this week, as I was concerned about a sell-off on an undecided election. Once again, I was wrong about how the market would behave following an election. Stocks are running up today in spite of what could be a prolonged vote tally.
We are putting on new positions in two old favorites — Bank of America (BAC) and Chewy (CHWY).
BAC is down today, as the lack of a clear presidential winner pushed investors into Treasurys, driving yields lower. I also think investors expect gridlock in Washington to keep any coronavirus relief package modest, regardless of who wins the White House.
The sell-off in shares is driving option prices higher, and we can capitalize on this.
Speaking of volatility, pandemic favorite CHWY is up 5.2% today, more than twice as much as the S&P 500.
On a personal note, an asymptomatic family member recently got a false positive on a COVID-19 rapid test called the Sofia, made by Quidel (QDEL). Two subsequent tests — a P.C.R. and a rapid test — produced negative results. Researchers found that among people without symptoms, the Sofia only detected 32% of the positive cases identified by the P.C.R. test and also produced more false positives. My point is that if you need to get tested, find out which one it is and do some research.
Current Stock Price: $23.90
Action: Sell to open the BAC Nov Week Two (11/13) 23.50 Put
Current Option Price: $0.40-$0.41
Recommended Limit: Set initial limit order at $0.40. You can go as low as $0.35, but please don’t start there and always use limit orders.
Expiration: After the close on Friday, Nov. 13
Potential Rate of Return: 1.7% in 10 days, or 62% on an annualized basis, if this option expires worthless
Current Stock Price: $67.59
Action: Sell to open the CHWY Nov Week One (11/6) 64 Put
Current Option Price: $0.34-$0.43
Recommended Limit: Set initial limit order at $0.38. You can go as low as $0.30, but please don’t start there and always use limit orders.
Expiration: After the close on Friday, Nov. 6
Potential Rate of Return: 0.6% in three days, or 72% on an annualized basis, if this option expires worthless