Last Month's Income Report: September 1st, 2021
August has traditionally been a poor month in terms of stock performance, with the S&P 500 showing an average negative return over the past 10-year and 20-year periods.
But not this year. Even with the Delta variant rearing its ugly head and investors concerned about the Federal Reserve tapering its asset-purchase program, the S&P 500 still managed to advance 2.9% for the month.
However, as is typically the case in August, we did see a late-summer dip in trading volume. While this can negatively impact liquidity in options chains, it didn’t slow us down one bit.
In fact, at Options Income Blueprint, August was our fourth-highest earning month so far in 2021.
We closed 11 profitable trades in a row last month. Those who sold just one contract of each earned $669 in cash, bringing our year-to-date cash total to $5,986.
Below is a quick rundown of August’s closed trades:
Let’s run through a few of last month’s highlights.
Marvell Technology Recovery Trade
The first highlight is our recovery trade in Marvell Technology Group (MRVL). While we booked a profit of just $7 on the trade, it was a different kind of success story.
When the semiconductor stock got caught up in the broader tech sector sell-off early this year, it resulted in the put we sold going deep in the money. Because I refuse to take a loss on a good company when there has been no shift in the fundamental story, I recommended members accept shares.
My plan was to recommend calls to sell against the shares to reduce our cost basis on the position. And that’s what we did until our shares were called away. We continued with the recovery trade, aggressively selling puts and calls as the position necessitated to bring in income.
Even though we had a paper loss, the options we were selling were generating excellent rates of return on our capital.
As you can see, our strategy worked. We eventually exited the position with a small profit. If we had given up early on, we could have booked a loss of up to 24% on the trade. It just goes to show you that patience pays off.
Citigroup Hat Trick
Next up is the fact that we closed, not one, not two, but three winning trades in Citigroup (C) in August.
C is a relatively new stock to the Options Income Blueprint universe. We began selling options on the financial services firm in late July. Since then, we have closed four successful trades, earning $186 in income.
While that may not sound like a great deal of cash, check out the rates of return we’ve been earning.
We’ve been able to close all of our Citigroup trades early, locking in profits and boosting our annualized rates of return.
2 New Income Stocks
We booked profits on a number of our favorite income stocks last month. This included online pet retailer Chewy (CHWY), vaccine play Pfizer (PFE), and solar stocks First Solar (FSLR) and Sunrun (RUN).
If you know me, you know I love trading the familiar. I have no problem going back to the well, so to speak, on my favorite stocks when there’s income to be made. Plus, trading the familiar can provide a real edge when you become intimately acquainted with how a stock trades.
But it’s also exciting to find new income stocks. We added two new names to our trading repertoire in August
First up was homebuilder PulteGroup (PHM). After finding repeat success with competitor D.R. Horton (DHI), I decided to recommend a trade on PHM. The stock had been trading in a range and its options were throwing off attractive premiums.
We picked up $0.87 from the initial trade plus one roll. We gave back $0.28 to close, booking a profit of $0.59, or $59 per contract, and earning 1.1% in 15 days, or 28% annualized. While that’s a bit on the low side for us, I expect we’ll have the opportunity to earn more cash from PHM in the future.
The other new stock we traded in August was Sonos (SONO), which designs and manufactures wireless home sound systems.
The stock rallied following Best Buy’s (BBY) better-than-expected earnings report, which was an indication that people have been loading up on tech products, particularly for streaming TV and working from home.
We sold the SONO Aug Week Four (8/27) 39 Put for$0.36, or $36 per contract. While that may not seem like a lot of cash, consider that we only needed to put up $3,900 in capital per contract. That was the amount required to cover the position in the event we were assigned shares at the put’s strike (39 strike price x 100 shares per contract = $3,900).
Had our put had expired worthless, we could have earned a 0.9% return in four days, or 84% annualized. However, the stock continued to rally the following day. No, we’re not day traders. But the profit we were sitting on was simply too good to pass up.
I recommended members buy back the put for $0.08. We booked a profit of $0.28, or $28 per contract, for a 0.7% return. But since the trade was only open for two days, our annualized rate of return jumped to 131%.
Like PHM, I expect Options Income Blueprint members will have more chances to trade SONO.
As we head into Labor Day weekend, expect trading to be exceptionally light. I will be looking to put on new trades after the holiday.
Like August, September has traditionally been a poor month for stocks. Of course, we could certainly see the S&P 500 buck the trend again. But I’m not too concerned. I am looking forward to a month of consistent income from selling options either way.