Sold New VIP Naked Puts

Just after 3:00 pm yesterday my order to sell VIP naked puts hit.  While VIP was trading at $29.32 I sold two VIP August naked puts (VIQTF) and received $438.50 after commissions.  I raised my limit order during the day hoping to catch VIP as fear built and the premiums rose more than they should.  In the last hour of trading my order hit and VIP went back up for the next 45 minutes before closing at 29.30 for the day.  VIP can drop another 3.5% before I take a loss on these new naked puts.  With nearly two months to go before August options expiration I expect VIP makes another run up above 30.

I rarely sell in the money (ITM) naked puts, especially during a bear market, but this time I’m taking a fairly calculated risk.  VIP is at the bottom of its trading range and I already have 200 shares I’m long with covered calls sold on them.  By selling this short straddle (sold puts and calls on the same stock, same strike, same expiration) I am guaranteeing one of the legs (aka one side of the two options I’ve sold) will end with 100% profit.  On one leg I won’t take 100% profit, but will hopefully be able to take a partial profit.  I’m not as concerned about the upside of taking a partial profit since I’ll let my 200 long shares get called away this time.  To the downside the covered calls give me a better cushion if I have to keep my current 200 shares.  If the naked puts are assigned it will move my cost for the shares to $32.50 for 400 instead of $35.00.  Subtract from that the premiums I’ve received and I have a high probability of exiting this series of trades with a profit.