Update – SPXL Q1 2018 Earnings Season Play (2 min)

Hello FrugalBallers!

I wanted to provide an update on this play.  While I was expecting this earnings season to add to the current bull market, many economic developments that transpired over the last 2-3 weeks have caused many investors to pause and take profit.  However, this past week or so we have seen quite a reversal in sentiment thanks in part to renewed investor confidence from upbeat news (Warren Buffett’s Apple investments, not overly bad / not overly good jobs data, and earnings beats).  So, that said, here’s where you would be if you followed my advice:

  1. Buy SPXL – As of the time of this writing, SPXL was trading at $44.30.  So, if you had bought SPXL, you would be roughly flat, which is inline with where the S&P500 is trading at.  Would I still hold? Yes, because I’m still overall bullish and with the positive news we’ve received recently, this probably can run a bit.
  2. Sell SPXL Put Options & Buy SPXL Call Options – Since SPXL was trading at $44.30, the value of the Put Options should have decreased.  Last I checked, the price was $0.25, which means you made $0.78 cents per share per contract!  I personally bought to close this position at that price because I will take that return any day.  On the flip side, if you had also bought the SPXL call options with a $51 strike, those last traded for $0.06, so you are down $0.10 per share per contract.  Depending on how many contracts of each you sold or bought will determine your net profit (or loss).  I personally will keep the call options in play and let them expire worthless, because there is still time (about 6 days) for it to make a comeback.  That would be amazing, but I’m not holding my breath.

Out of these plays, it seems that #2 was the winner here (as long as you didn’t buy too many calls).  Overall, if you followed one or both of those plays, you’re either flat or up, so good job!

Until next time… Happy Investing!

Cheers!

Will

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