Covered Long Stock Positions – DIS & VIP

I mentioned my plan yesterday for my long plans and made the trades before lunch on Monday.

While DIS was trading at 31.44, I sold three in the money covered calls at the June 30 strike (DISFF) and received $692.75.

While VIP was trading (down for the day) at 30.33, I sold three in the money covered calls at the June 30 strike (VIQFF) and received $488.50.

I sold both of these in the money (ITM) to give me a better chance of exiting the overall series with a profit. ITM covered calls are essecially out of the money (OTM) naked puts. I don’t plan to hold it after expiration and am planning all of my profit from the premium, not the intrinsic value. I’m receiving a fat premium up front, but some of that will be used to wipe away the losses I’m taking on the stock itself. The original OTM naked puts combined with these ITM covered calls will still leave me with a profit on both and if the stocks fall deeper I’ll be sitting at a better place than if I had not sold the options at all and only bought the stocks outright.

I still need to write new naked puts on FWLT and DSX and I’m considering getting back in on CMI and CELG. All four were winners for me in April.

I would have loved to have taken yesterday off from work and gotten my holding cleaned up, but still feel I’m too new to start using my vacation days. With my boss sitting in the cube behind me a few hours a day, I’m struggling to find the time to research/chart stocks, not to mention blog. I think he’ll tire of this and go back to his office within a week or two, but it’s annoying now – having to work while on the job, that’s crazy talk.

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Comments (6)

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6 Comments

Comment by mule65

Alex, are you using any ETF’s yet? What do you think about naked puts on IWM? Great way to get safe exposure to small caps.
Comment by Alex Fotopoulos

I haven’t sold puts on any ETFs yet, but I think IWM looks like a great find. Decent premiums, good chart, good volume. I’ll start watching it. Since it broke below its 10 and 20 day moving averages today I want to see how it moves tomorrow before I place any orders. At least the 50 day moving average is still holding up.
Comment by Bill

Having to work while on the job is certainly crazy talk. I was lucky in my last job. Not only was I a manager and could close my door but the VP I reported to was in Atlanta while I was in Southern California. That was my last job two years ago (I “retired” at 59). Now I just watch my grandaughter and my stock/option portfolio. It’s much more satisfying.
Comment by Alex Fotopoulos

Bill, you are living life as it should be lived now. Congrats!
Comment by jgoldstein

Just an FYI regarding ETF’s. I have some naked puts on POT but the ETF that encompasses the DAXglobal Agribusiness Index is MOO. It might be worth looking into as it may be easier trading the index than individual issues in this market. The swings can be pretty intense!
Comment by Alex Fotopoulos

I love selling puts on POT, but it’s had such a fast run up already, I’m waiting for a pull back. I’d like to see it closer to 160 or even 180 before I sell new options on it. MOO is certainly worth considering, even if it’s only because I like the name.