When You See an Opportunity, Take It

The Georgia Senate run-off election was a tight one. In the end, it gave total control of Congress to a single party. That situation is not usually welcomed by the business community, who prefers some gridlock. Premarket action on Wednesday saw Nasdaq futures down about 230-points while the Dow Jones industrial average was indicated around 60-points higher. That dichotomy hadn't happened to such an extreme extent in decades. The overall trend continued through Wednesday's trading. End-of-the-day numbers saw the blue-chip index up 437.8-points while the tech-heavy index recovered a bit to finish just 0.61% lower. Value stocks, my favored type of play, were on fire. Many of my top holdings gained from 5% to 18% on the day. Quite a few scored double-digit advances. This clip is just a random example of the kind of day it was. I had cash to deploy as I'd sold some Boston Private Financial Holdings on the news of its acquisition agreement by SVB Financial Group the day before. Why did I sell? It is a mostly stock deal and SIVB looked fully valued to me. Banks were strong on the election news, though, and SIVB rose by 7.6% more afterward. Oh well, BPFH only gained an additional 1.32% on Wednesday after surging by about 35% the day before. In looking for what to buy next, I noticed Huntington Ingalls (HII) was quite weak in the premarket session. I owned an odd lot of the stock in an IRA account. HII had closed on Tuesday at $165.56. I placed an order to buy 74 shares, to round up my position for call writing purposes, in the extended session at the well below market price of $162.80. I was able to beat Murphy's Law into submission on that trade. I got filled just before the 9:30 opening. By 4 p.m. HII closed at $170.98 and never officially traded below $163.22 during regular hours. Walgreens Boots Alliance was up a bit on good news so I chose to add to my already large position in two of my personal accounts as shown below. WBA never went below $41.87 on the day and finished at $43.31. Once the market got moving the bargains quickly disappeared. I've learned not to chase huge moves, so I kept the rest of my powder dry hoping for a calmer market with better pricing. That didn't mean I was done trading. I was just done buying shares outright. Caleres , my largest holding, continued to surge. I'd previously sold some February and May covered calls at $17.50 and $20 strikes thinking it was unlikely to see the shares that high by then. Oops. CAL got as high as $16.26 intraday and it appears to have a lot left in the tank. My ultimate goal price for it remains $30 to $40. Rather than wait to see what happens next, I decided to roll out to a Jan. 21, 2022 expiration day while upping my strike price to a more appropriate $35. I moved multiple lots of covered calls as calendar spreads as shown above. Some of the pairings were for net credits. Some were for small debits, depending on the time left to the original expirations and the strikes involved. When I'm expecting big upturns, I don't want to be caught having to sell for less than what I think the underlying stock is really worth. I made another adjustment in both duration and strikes on some Michael's calls. I bought to close (BTC) some May and August $17.50 + $20.00 strike price covered calls while moving them both to Jan. 21, 2022 at $25. I paid a small debit to go from August $17.50 to January 2022 $25s. I got paid a slight credit (two cents a share) for going from an August 2021 $20 to January 2022 $25 strike. I have every reason to think MIK can reach $25 or better over the coming 12.5 months. Next is Nexstar Media Group , which has been a winner for me since buying at $83.87 per share. Wednesday morning saw it spike to about $115. I sold a lone covered call on 100-shares out to Aug. 20, 2021 at a strike of $165. That capped my upside through that date to $166.10, about $51.10 above NXST's quote at the time of the trade. If NXST manages to approach that greater-than-44% gain before expiration I could still roll the call up and out as I did with CAL and MIK. Finally, I used my last two trades of the day used Griffon July 16, 2021 expiration date puts. I usually wouldn't do these on a big up day, but I was regretting not having a larger position after seeing additional positive news from GFF this week. I liked, and wrote positively about GFF in early December, at $19.53. My end of 2021 target price was around $35. Then why be scared to sell puts with worst-case, forced purchase prices of either $16.20 or $17.90? I wasn't, so I did. Those break-even prices are lower than where GFF sat before the company's recent good news. That was it for my day. If prices pull back soon, I'll put the rest of my money to work. If not, I'm prepared to wait for better entry points. There were some strikingly good opportunities for my value-oriented holdings, which far outperformed the broad market. When things get this hot, there's no need to force the action.

When You See an Opportunity, Take It

Here's how I took advantage of several stocks on Wednesday.

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