Urgent Action Needed For BXMT & Update
Hey Moneymaker!
I have great news, but we also have to walk you through some urgent action needed for one of our cashflow codes.
Even if you didn’t participate in that cashflow code, this will be a learning session on how we navigate short-term problem positions so we come out ahead.
As we enter the spring season, there is a lot going on this week…
This Friday is the last day of trading for April options and we have a huge windfall coming our way.
Right now, we have these put option contracts opened that we sold, which look to expire worthless.
- IRM April 21, 2023, $42.50 put
- VRE April 21, 2023, $15 put
- DLR April 21, 2023, $80 put
- BXMT April 21, 2023, $125 put
- HD April 21, 2023, $260 put
- VICI April 21, 2023, $32.50 put
That means these obligations would be over, but more importantly, created a projected windfall of $715 in cash flow for every 1 contract sold on each.
So that means if you sold 5 contracts of each, that’s $3,575 in profit you collected from my cashflow codes.
But, just like in real estate, there’s always a situation with a tenant not paying on time, which requires action.
We have a similar situation with one of our cashflow codes right now.
BXMT April 21, 2022, $20 put
We initially collected $40 of instant cash flow for every contract sold to open.
Right now, shares of Blackstone Mortgage Trust (BXMT) are trading at $17.50.
That means shares are trading below our breakeven price at $19.60 and theoretically we’re in the red by $2.10.
What that means is that shares slide lower than what the overall market expected during our time frame, it happens and is expected.
Not ideal, but that’s why I have this cashflow trick up my sleeve that buys us more time and collects even more cashflow.
As you know, every option contract has an expiration.
It’s no different if you’re wholesaling a contract on real estate, there’s a date you promised the homeowner you’d close by.
But the difference with my system is even though we made a promise, we can keep flipping those promises longer out in time and keep collecting income.
Which is exactly what I’m going to do with the BXMT April 21, 2022, $20 put option contract.
Do this before 3:45 pm Friday, April 21st
***That’s if you sold-to-open the cashflow code of BXMT April 21, 2022, $20 put
Because if you don't, you will be assigned shares of Blackstone Mortgage Trust (BXMT). This isn't a bad thing if you have the capital to own shares because it does pay a 14.00% dividend to shareholders.
But if you don't have the capital or want to make more instant cashflow, then we must roll our position forward in time.
Here's how it's going to work if you have it open.
Originally, we sold-to-open BXMT April 21, 2022, $20 put for $0.40 per contract.
Right now, that put is trading at $2.40, which means we are -$2.00 ($2.40 – $0.40 premium collected).
Here’s the trick and how simple it is…
We are going to roll that position into the July 21, 2023, $20 put for $3.00 per contract.
This is a great strategy because it will collect $0.60 extra while we extend our time for BXMT to rebound.
To make this adjustment, we are going to do this in two separate orders.
So first we're going to close out the BXMT April 21, 2022, $20 put, with a buy-to-close order.
Here’s a video walking through everything:
Here are the instructions written out…
Action-to-Take: Buy-to-Close BXMT April 21, 2022, $20 put
Here’s what I do while in a brokerage account if you’re not just copying and pasting the cashflow code. (Remember, depending on what brokerage platform you’re using, it might look different than my video. But these instructions should help.)
Step 1: I type in the ticker symbol BXMT
Step 2: I open the options chain for the April 21, 2023 expiration cycle.
Step 3: I locate the $20 “PUT” strike, which is located in the April 21, 2023 expiration cycle
Step 4: I double-checked the ticker symbol, expiration, strike, and options contract type (BXMT230421P00020000)
Step 5: I click on the “OFFER” price to open the order entry menu. (The offer price will be higher than the bid price) The order entry MUST say “BUY” & “SINGLE”
Step 6: I select how many contracts to Buy-to-Close or BTO (If you have one contract that was sold, then it's going to be one. If it's 3, then it's going to be 3. If not, then you will not close out this position completely.)
Step 7: I enter my price at $2.40.
Step 8: Click “Confirm & send” to review the order. This is where I double-check again to make sure it's correct.
Step 9: Then I press “send”
Step 10: Confirm it's been filled. In Thinkorswim, the red (POS) tag will be gone.
Now we are going to roll this by selling-to-open position the BXMT July 21, 2023, $20 put.
Action-to-Take: Sell-to-Open BXMT July 21, 2023, $20 put.
Here’s what I do while in a brokerage account if you’re not just copying and pasting the cashflow code. (Remember, depending on what brokerage platform you’re using, it might look different than my video. But these instructions should help.)
Step 1: I type in the ticker symbol BXMT
Step 2: I open the options chain for the July 21, 2023 expiration cycle.
Step 3: I locate the $20 “PUT” strike, which is located in the July 21, 2023 expiration cycle
Step 4: I double-checked the ticker symbol, expiration, strike, and options contract type or what I call the “cashflow code” (BXMT230721P00020000)
Step 5: I click on the “BID” price to open the order entry menu. (The bid price will be lower than the ask price) The order entry MUST say “SELL” & “SINGLE”
Step 6: I select how many contracts to sell-to-open (remember from the quick-start series, this strategy is to “selling-to-open” or “STO… not buying.)
Step 7: I enter my price at $3.00. Since prices are trading at $2.75 and $3.30… $3.00 is the middle of the market and will likely get filled at that price. So that’s why I chose that.
Step 8: Click “confirm & send” to review the order. This is where I double-check again to make sure that it matches the exact cashflow code, quantity, buying power effect and that I’m selling-to-open.
Step 9: Then I press “send”
Step 10: If the order isn't filled at that price, cancel and replace at a lower price of $2.90. You'll now order is filled when the red (POS) tag is next to strike.
Originally, the margin needed for this contract was $635 in buying power for every put contract.
Because prices have gone lower, the margin needed is higher, and now $709.
For cash-secured, the broker held $1,960 for a cash-secured account for every put sold.
Now, the broker will hold $1,700 for a cash-secured account for every put sold.
Next steps…
Ok, so this alert covered A LOT…
Read this multiple times… write down your questions as you go.
And then, submit them on this page in the question box. I’ll answer them in an upcoming Q&A podcast. Those podcasts are sent to you each week, and I’ll do my best to get to everyone’s specific questions.
Josh Belanger
Editor, Weekly Cashflow Triggers
