Last Week's Income Report: November 22nd, 2021
The bull market kept chugging along last week, with the S&P 500 advancing 0.3%. I expect trading to be light this week, as we head into the Thanksgiving holiday, with the stock market closed on Thursday and following an abbreviated schedule on Friday.
At Options Income Blueprint, we closed three more winners last week, generating $217 in cash. That brings our total income for the month to $428 and our year-to-date cash to $7,676.
Semiconductor maker Marvell Technology (MRVL) and residential solar energy system firm Sunrun (RUN) are two of the core Options Income Blueprint stocks. Core stocks are ones that we trade with great frequency because they throw off large amounts of cash.
So far in 2021, we’ve traded MRVL a total of seven times using a combination of puts and covered calls, earning a total of $422 in cash. On average, our trades have returned 1.1% and 58% annualized.
We’ve traded RUN six times this year, booking $704 in income. On average, our trades have returned 2.6% and 111% annualized.
The generous premiums and excellent rates of returns we generate are why we keep coming back to MRVL, RUN and our other core stocks time and again.
But today I want to talk about the trade that didn’t make us a ton of money, because it’s a success story of a different kind.
Sonos (SONO) is a relatively new stock to the Options Income Blueprint universe.
Our first trade on the designer and manufacturer of wireless home sound systems was in late August. We ended up closing that trade after just two days, earning 0.7% or 131% annualized.
Two weeks later, we entered a new position in SONO. With the stock trading at $38.90 on Sept. 8, I recommended members sell the SONO Sept Week Two (9/10) 38.50 Put for $0.40, or $40 per contract.
Unfortunately, right after we put on the trade, the stock began to falter. We rolled our put a few times to avoid assignment and give shares a chance to recover, but they kept falling.
By the first options expiration day in October, our 38 strike put was deep in the money. So, I recommended members accept shares, telling them that we would soon begin an active call selling strategy to get back to breakeven or profitability.
Now, since we had collected a total of $1.10 in cash from our initial put sale and subsequent rolls, our cost basis on the shares we were assigned was $36.90. SONO closed at $32.26 on Oct. 1, meaning we were underwater by about 12.6%.
As many of you know, I refuse to accept a loss on a good company. So, we embarked on an aggressive call selling strategy
Between Oct. 7 and Nov. 12, we sold and rolled calls to generate income. We collected a total of $1.71 in cash, thus lowering our cost basis to $35.19.
As you can see in the chart above, while we were selling calls, SONO was making a comeback.
On Friday, Nov. 12, our most recent call expired worthless. By Monday, the stock was trading at $35.32, with the company expected to report earnings in two days. Rather than risk holding a position through the announcement, I recommended members sell their shares at a small profit.
We walked away with a profit of $13 for a 0.4% return in 69 days, or 2% on an annualized basis. Typically, a 2% return is not something that would excite me. But when you consider how much we were down on the position, this was a big win for us.
I know many put sellers hate being assigned shares. Heck, plenty of Options Income Blueprint members felt that way when they started trading with me.
But when you are using a conservative income-generating strategy, capital preservation is of the utmost importance. Why walk away from a trade with a large loss when you have the ability to generate income each week and get back to breakeven or profitability?
I understand this is a hard lesson for many to accept. But when you do, your portfolio will benefit.