I only had one option expire today. It was in my old account and worked out as I hoped it would with an assignment just in the money. I’ll be assigned my one DIS February $110 covered call and will sell my 100 shares of DIS at $110. I bought these 100 shares after being assigned a $115 naked put in January 2016 after selling the put in November 2015. This is the longest hold I’ve had on a single stock in years and I made a realized gain of $43.52 including premiums.
These shares were in my old account and once the shares are assigned this weekend, I’ll be able to close that account and turn my complete focus to my new account. That is, assuming the closing price I saw at 4:00 held and DIS didn’t settle lower after the close. I did see it was trading lower after hours, but Interactive Brokers and TD Ameritrade show the closing price at $110.06 today versus the $110.02 I saw exactly at 4:00. Sometimes prices settle lower, but I might have lucked out here.
As I mentioned yesterday in my post, I planned to sell an IWM naked put if the priced dropped a little today. The price didn’t drop and I wrote the put anyway. I decided the employment data and the bullish crossover of the 10-day moving average over the 20-day moving average was enough of a reason to make the trade, especially since I’m still under 50% invested, even after this trade.
While IWM was trading at $136.60, I sold one IWM March $135 naked put for $2.31 and received $229.90 after paying $1.10 in commission. I opted to sell the March put versus the April put for a better annualized gain and because I figured I should sell the closer expiration first and spread out some of my next trades farther out on the calendar. By mid to late next week, when I expect to get around to another trade, the March puts will only be about five or five and a half weeks out and won’t bring in the premiums I’d like for the risk.
You can see me walk through the trade in this video.
I made the first trade in my new account that was funded today. I bought an MDY put and sold 2 different MDY puts at a lower strike to pay for the long put. While MDY was trading at $306.01, I bought to open one MDY $305 put for $11.05 and sold two MDY $290 puts for $6.29 each. I received $152.69 for the ratio spread that hit at $1.53 after I paid $0.31 in commission. My order was for $1.45, but realized after I finished the video below that it hit for $1.51, only after I lowered the limit order to $1.45 from $1.50. That has happened to me previously with Interactive Brokers and is always a bonus to get more than you agree to accept.
I’m considering a naked put on IWM next, but with the chart set-up, I thought I should give it another day or two.
You can see my trade logic in this video that I recorded as I placed the order through it being triggered.
With my account in limbo during my transition to a new account, January was a bland month for my investments. That’ll change in February. Still, I managed to pull out a little gain thanks to my only position being Disney (DIS). I started the month by pulling out $75,000 to move to my new individual account. I left DIS in the account in an attempt to cut my loss and possibly even turn it into a profit. So far, it’s working, but I still have two and a half weeks to go.
I ended January with a Net Liquidation Value (NLV) of $17,884.22 and a Net Asset Value (NAV) of $17,883.79 according to Interactive Brokers (IB) after finishing December with an NLV of $92,244.41 and withdrawing $75,000. The difference in month end values, minus my withdrawal, gave me a gain of $639.81 (~3.71%) on paper for January and a realized gain of $0 since I had no closing trades. I received $78 in dividends from my DIS shares in January. Quicken reported that I have an account value of $17,883.78, a penny below what IB says I have. I didn’t bother to make an adjustment since I hope to have my DIS covered call finish in the money so I can sell my …
I posted a new video this afternoon on how to use my naked puts spreadsheet. This spreadsheet compares naked put option choices. My videos will show this spreadsheet whenever I write naked puts and figured it made sense to get this explanation out there before I start posting actual trade videos. Hopefully, I’ll get my first trade in this week in my new account since the check is scheduled to clear on Thursday. Even if today’s slide continues into Thursday, I think it’ll be a good time to start rebuilding my account, actually even moreso if we can get a few more days trading lower to help my entry points.
For those of you who downloaded one of the previous versions of this spreadsheet, this isn’t much different, but has some subtle changes that make it better (maybe I’m biased). If you’ve already tweaked an earlier version, I doubt it’s worth replacing it and having to make updates again. If you aren’t using a spreadsheet to compare your naked put choices, this is a great starting point (OK, I’m very biased).
I posted my first YouTube video this morning. You can view it below or directly on my new YouTube channel.
It’s not really catered to regular My Trader’s Journal readers since you all know these basic points, but I figured I should start with a high-level overview of options trading and single contract puts and calls. I didn’t cover spreads/combinations or Greeks or anything beyond what could fit in a very broad summary for a beginner.
My new account will be funded as of next Thursday, and I’ll try to get to trading and posting trades again soon after the check clears. In the meantime, I’d appreciate any “likes” you can give my video to get me started on the right foot. The same goes for subscriptions to my channel, all views, likes, and subscribers will help me grow the channel and ideally get some good dialogue going again in the comments section here and there.
I had no options expire on Friday, but did find the time to open my new account with Interactive Brokers on Friday so I can get back to regular trading with a full balance again.
I mailed my check for the new account in Friday afternoon’s mail, so it should get to IB by tomorrow or Wednesday and then I’ll have access to the funds the first full week of February (after the required 10 day hold on checks).
The only position I have in my account is with Disney (DIS). I have 100 shares I’m long and with one covered call that’s out of the money. I might even roll my DIS covered call lower or just sell it when me new account is funded, just so I can start clean again. Since I’m not doing it today, I might just wait to see how DIS moves over the next couple of weeks. The way the market is moving, I might have timed it well to be in cash right now.
Disney ($DIS) is the only stock I have in my account right now and have been trying to decide if I should exit with a loss or hold on for a gain. I chose the latter and plan to make this work through a covered call. While DIS was trading at $109.30, I sold one February $110 covered call for $2.45 and received $244.32 after paying $0.68 in commission.
My cost per share is $112.01 after deducting the $2.99 premium I received from my original short put that was assigned. If this February covered call is assigned, I’ll have a gain of $43.00. It’s not much, but it’s a gain. This total doesn’t include the $149 in dividends I received since being assigned the shares. At this point, I just wanted to get out close to breakeven for tax purposes before I start over.
Looking back on what I gained or lost on a trade is good for learning from mistakes and successes, but it’s not what should usually drive a trade decision, outside of a tax implication if I’m are close to a gain becoming classified as long-term. The more important deciding factor is how much can you gain with acceptable …
The chart below shows the daily prices for the past three months on the Dow Jones Industrial Average (aka $DJIA, $INDU, $DJI) after the index closed for the week at 19,963.80 on Friday, January 6, 2017.
The Dow has gained almost 9% since the election as animal spirits took over trader sentiment for a month and a half. However, the large cap index has failed to push above the round 20,000 barrier that has no significance other than it has four zeros and the press likes round numbers as targets. These large round numbers always draw a lot attention on the news, perhaps because it’s a way to draw in viewers and readers, but their efforts end up making the number matter, if only until the trading algorithms can work past it and a more worthwhile headline can take its place.
The normal trading pattern that occurs when nearing a round number is for the first one or two attempts to fail before the bulls can finally push above the otherwise meaningless barrier. …