Closed Short and Long SPY Puts

I started looking at what naked puts I’d likely be assigned next week and how much cash I still had in my account and decided I should close out my short and long SPY puts to help avoid going on margin during a bear market.  These SPY puts are the ones I got into this week and made the mistake of selling puts to go along with the higher strike puts I bought.  I made money on the trades overall, but could have made more if I didn’t sell the puts in an effort to cut my costs.

While SPY was trading at $88.00 I sold to close my two SPY November 110 puts (SPYXF) for $23.00 and received $4,588.48 after commissions.  I turned around and watched SPY drop some and while it was trading at $87.31 I bought to close my two SPY October 99 (SWGVU) for $12.70 and paid $2,551.49 with commissions.  The time value on both was close to the same, just under $1.00.

• The original puts (SPYXF) I bought for $1841.49 and sold for $4,588.48 giving me a profit of $2,746.99.
• The second leg (SWGVU) I sold for $498.50 and bought back for $2,551.49 giving me a loss of $2,052.99. 
• When I put these together I end the position with a realized profit of $694.00.  I’m happy to have a profit like this in five days, but I’m upset with myself for cutting my hedge by selling the Oct 99 puts.  I’d have had another $2k profit. 

It doesn’t slip past me that I missed out on $2k profit which is more than the loss I was trying to avoid if SPY rallied and the puts I bought ended worthless.  I’m a novice at buying options and this was a great lesson.  At least it ended in a profit.  Too bad I didn’t hedge smarter.  I’m eyeing the DIA for a new hedge now and I’m letting my XLB puts sit a little longer.  I’m sitting on a paper profit of $920 on the XLB puts I bought and the puts I sold are at the money with 4 1/2 trading days remaining.  I have a $400 paper loss on them now, but if XLB doesn’t drop more than another $0.75, I’ll close those for even money while I take a good profit on the puts I bought.