New positions in Nike & SCHD
Updated: Nov 13, 2022
After a deceptively calm start to September, volatility is truly back in the market with the VIX surging above 30 for only the 5th time this year.
If you've been following this newsletter for awhile, you'll know volatility = opportunity.
A new position in Nike after the stock dropped 12% after earnings
Rolling Walgreens into earnings week
Dollar cost averaging into SCHD
New position in Nike (NKE)
Nike reported earnings on Thursday after the market closed, and although they beat expectations, the market didn't like what they had to say about inventory surplus and sent the stock down 12% once the market opened on Friday morning. I personally don't have any particular outlook on Nike as a company, but unless you think this is the beginning of the company going bankrupt, it's hard not to see this as an opportunity.
I initiated the following trade and sent out the alert to the founding batch of my course and we'll look to take this off at 50% of max profit.
Rolling Walgreens (WBA) into earnings week
There's no getting around it - Walgreens is a straight up losing position and unless they pull off an earnings miracle, I'm going to get assigned on this position. No reason to freak out though as I'm using this assignment to average down on my average cost per share. Again, unless you think every single Walgreens branch and Boots store overseas is going to close down, this is a buying opportunity. What I did do was roll my position from 7 Oct to 14 Oct for an additional $29 in premium.
That brings my total credit collected to $141 (Circle 3), but the option is trading at $372 (Circle 2).
Option premiums were so inflated this week and doubly so going into earnings, so I'm just collecting as much extrinsic value as I can to offset the seemingly inevitable assignment.
I know assignment is a scary term for many option sellers, but I always view it as an opportunity to buy an asset at a lower price.
That asset now comes with 2 cashflow opportunities:
either selling options against it (covered calls or strangles)
and/or collecting and reinvesting the dividends.
I went into quite a long explanation of my decision to accept shares last week, check that out in the link below.
Dollar cost averaging into SCHD
Finally, I initiated another position in SCHD, the Schwab dividend ETF.
Similar to Walgreens, I already own 100 shares of this at $78, and would like to increase my position size to 200 shares.
I sold a put option in the 18 November cycle at the $65 strike and received $122.
That means I'm promising to buy 100 shares of SCHD at $65 come 18 November if the stock is trading lower than $65.
So if this trade ends in assignment, I would have 200 shares at an average of $71.50, and that's a good thing.
Unlike all the other trades mentioned, SCHD is an ETF so the existential crisis of going bankrupt doesn't exist, I'm happy to keep picking up shares at lower prices.
I've actually been trying to dollar cost into SCHD since July - you can read about my previous trade when I tried to pick it up at $73. Compared to that, $65 is a steal!
This article is for educational purposes only. This is my own portfolio which is being managed according to my goals and risk tolerance. Your situation is likely different and you should do your own due diligence before investing in stocks or options.