Option Trades, Naked Puts & Covered Calls

I started off the week with a few trades this morning.  I went right back to the stocks I just had options expire on to start with before moving to the other list I wrote up this morning.

While AA was trading at 37.47, I sold three out-of-the-money (OTM) November 35 naked puts (AAWG) and received $362.75 after commissions.

While CMG was trading at 117.09, I sold one OTM November 105 naked put (CMGWA) and received $349.25 after commissions.

While MRO was trading at 58.14, I sold two OTM November 60 covered calls (MROKL) and received $498.50 after commissions.

These three trades plus the FWLT trade at the end of last week already give me enough potential new revenue for November, but of course it’s not a realized gain until after I’ve closed the position.  When I say enough new revenue, I’m basing that on maintaining the ~30% annualized gain I want to stay above.  I just took my rounded up account balance (70k) and multiplied it times 30% and divided it by 12.   That gave me $1,750 I need to net each month to keep a 30% average annual return.  Of course not every trade works out, so I’ll need to continue to sell new ones to give me a cushion for other losses.  Also, MRO has $2 of OTM cushion that could bring in another $400 in gains if it’s called away.

With the VIX off its highs, the premiums aren’t quite what the were a few weeks ago and could go lower if we go back to the volatility of a few months ago.  If volatility goes up, I’ll be selling more options to take advantage of the increase.  Either way I’m in a pretty good position right now.

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