December Options Expire — Here’s What to Do

Dear New Money Club Member,

Happy quad witching day!

Quadruple witching happens every quarter. It’s when options and futures on indexes and equities expire (on the third Friday in March, June, September and December).

If this had been back in my days of trading on the floor, today would’ve be a busy day because positions that expire need to be rolled forward. Chances are we’ll see odd price action like a leaf blowing around. So, please don’t put too much weight on what happens today.

Now, the CBOE Volatility Index (VIX), aka the “fear” index, is still above our key 15 levels and trading at 22. In fact, this same time last year, the VIX was at 12.

But don’t be concerned because, despite the volatility, we’re able to thrive in any market.

That said … it’s been two months since we’ve posted an official loss. But that day has come today, which is bound to happen when trading options.

With that in mind, let’s talk about our two positions expiring today.

Portfolio Update

Two of our December expiring trades have fallen short of our profit targets:

  • Advanced Micro Devices Inc. (Nasdaq: AMD) Dec. 18, 2020, $102 calls (AMD201218C00102000).
  • Hostess Brands Inc. (Nasdaq: TWNK) Dec. 18, 2020, $15 calls (TWNK201218C00015000).

Unfortunately, we don’t have more time for these positions to play out. There’s nothing you need to do, and they will be removed from the model portfolio by Monday morning.

Now, taking losses isn’t fun and can be painful. But without the bitter, the sweet isn’t as sweet.

Remember, though…

The sweet part is making money, and losses are just part of the process.

Even though we closed out six winning trades in a row, we’re wired to feel pain more than euphoria. It’s easier said, but we’ll get through it together.

That’s because our limited-risk options allow us to trade profit opportunities with greater flexibility — and for much higher potential gains than buying stocks outright.

Note that we’ll have a brand-new batch of trades coming in a few weeks for another shot at quick profits. (So, stay tuned!)

OK, let’s recap the week…

On Monday, we sent an alert to:

Buy to Open the Axalta Coating Systems Ltd. (NYSE: AXTA) Jan. 15, 2021, $32 calls (AXTA210115C00032000) up to $0.60 per contract or better, for the day.

So right now, we’re holding:

  • Sandstorm Gold Ltd. (NYSE: SAND) Jan. 15, 2021, $10 calls (SAND210115C00010000).
  • Plug Power Inc. (NYSE: PLUG) Dec. 24, 2020, $35 call (PLUG201224C00035000).
  • Axalta Coating Systems Ltd. (NYSE: AXTA) Jan. 15, 2021, $32 calls (AXTA210115C00032000).

After-Action Report

This is our debriefing of every trade closed (or ones that expired) to analyze what happened, why it happened and how it can be done better — like what the military uses after missions.

Hostess Brands Inc. (Nasdaq: TWNK) Dec. 18, 2020, $15 calls (TWNK201218C00015000)

Date: October 19, 2020

Reason: Our system triggered a bullish signal after a $5.8 million New Money bet, which is a 1,800% surge in call options purchased that would only profit if shares rocketed higher.

Outcome: Expired worthless.

Notes: We took a shot, but this didn’t play out as I anticipated. Every time the buyers tried to push prices higher, sellers whacked it back down. Unfortunately, we will have stinkers like this every now and then. But don’t let them discourage your overall mission!

Advanced Micro Devices, Inc. (Nasdaq: AMD) Dec. 18, 2020, $102 calls (AMD201218C00102000)

Date: December 7, 2020

Reason: Our system triggered a bullish signal after an $11.4 million New Money bet, which is a 712% surge in new call options purchased that would only profit if shares went higher.

Outcome: Expired worthless.

Notes: This loss falls on my shoulders. This is a scenario in which we are right on assumption, but I didn’t pick the right expiration. The day after our entry, the position was in the green but then quickly sold off.

Short-term options can generate big, fast profits. But any pullbacks can quickly put you behind the Eightball. If we had more time, we’d be able to take a profit or manage the loss better than letting it expire. Unfortunately, that’s not in the cards for us this time.

That wraps it up for me this week. Have a great weekend, and I’ll have a new trade for you on Monday.

And hey, it could be the start of a brand-new winning streak…

To your wealth, freedom and options!

Joshua M. Belanger

New Money Club

P.S. Happy Hanukkah!