Sold New USO and AA Calls

Oil ETF USO has been killing me.  This is one I should’ve bought puts on a long time ago when I thought it was coming down.  I didn’t close my long position I had because I thought the drop would be brief.  If I had the mindset earlier that I’ve developed recently I’d have bought puts and tried to profit on them as I held my long position for the potential upside.  I didn’t do that until recently and made a small profit on those puts, but lost more on the shares falling.  Not too smart frankly.

Last night I decided I’d just exit USO and take my loss now since I think oil has more room to fall and I need the cash to cover my other positions that will be assigned this weekend with October options expiration.  USO was down less than I thought it would be this morning and saw an opportunity to squeeze a little extra cash out of the position.  While USO was trading at $60.23, I sold one October 59 call (USOJG) for $2.25 and received $214.25 after commissions.  I’ll probably regret taking this route if/when USO drops below $58 by tomorrow’s close.

I’m down big on Alcoa (AA) also.  I put an order in yesterday for new calls on AA.  While AA was trading at $12.09 this morning, I sold four November 15 calls (AAKC) for $0.55 each and received $207 after commissions.  I have two other sets of calls on AA at October 25 and 27.50 strikes.  Clearly those will expire worthless tomorrow, so I’m just starting early on the covered calls for November that I’d usually write the week after expiration.  I sold an extra strike out of the money to give me some more cushion for growth of the stock itself.  AA will need to rally more than 25% to get up to the strike.  That’d be a huge return if I had bought at this level, but I didn’t, so I’m just hoping for some recovery from my losses.  I sold the calls to try to bring some new cash in while I wait for the economy to turn.  I won’t be surprised to see AA up around $15 soon, but staying up there might be tough for another few months.  I’m confident volatility will still rule the market for weeks to come.