Sold SSO September 32 Naked Calls

I’ve been neutral to bearish lately, so I decided to put my money where my mouth is and leg into an SSO short straddle. While SSO was trading at $30.95 I sold to open two SSO September 32 calls (SOJIF) for $1.05 each and received $198.49 after commissions.

Last week I sold SSO September 30 naked puts at $1.36 each, so with this order I have a little more than a $2 cushion on each strike before I’m sitting on a loss.  That means SSO can trade between roughly $28 and $34 and I can close my in the money option and exit the trade with a profit.  If luck comes my way SSO will close between $30 and $32 at September options expiration and I’ll finish with a full profit on each leg. 

I’ve been wrong on when the markets would turn lower, but feel I should be in a decent position to at least capture some profit from a sideways market for the next month.  If my earlier expectation that the S&P 500 is going to head lower soon comes true I’ll only be buying 200 shares of SSO.  I’d probably take the option assignment and sell new calls, but the new calls would be covered calls since I’d own the shares. 

I actually entered this SOJIF trade on Monday evening, after the markets closed.  I picked the $32 strike because that’s just barely above the highs SSO saw a couple of weeks ago.  I thought we might get a retest of that line, but was hoping (and still believe) the highest we might see SSO go is to retest the very short trend line of lower highs over August.  I used the 8/7 intraday high of $31.94 and the 8/14 intraday high of $31.66.  Today SSO made it up to that line and pulled back.  I missed the high trade of the day on SOJIF by 15 cents, but think I made a decent trade.  I’ll know within four weeks how decent.