September 2009 Options Expiration

As I wrote about a couple of days ago, I had to make a decision on SSO and took the easy way out.  I just gave up on the bad trade.  I kept it simple versus trying to manage a short position that I apparently can’t predict.  I still think the S&P 500 index will give back some gains pretty soon which means SSO will be down now that I don’t have a vested interest in it sinking, but I’m tired of fighting the tape.  While SSO was trading at $35.36 I bought to close two SSO September 32 naked calls (SOJIF) for $3.40 each and paid $691.49 with commissions.  With my SSO September 30 naked put expiring worthless, I’m taking a realized loss on the series of trades of $232.49.

Aside from my two SSO options, I only had two other options.  My FCX September 55 naked puts were easy money with FCX more than $15 above the strike.  I recognize that I could’ve aimed higher, but wanted to be more conservative.  It worked, but with a much smaller profit than I could’ve made.  I’m going to hold off on getting back in deeper into FCX for now.  I’d like to see a little more of a pull back before giving it another run.  A $5 dip, still within its trading channel, could make the October 60 puts fairly attractive.

My UCO September 12 naked puts almost pulled it out at the end.  Earlier this week I was planning to take the option assignment and sell new naked puts with some new covered calls, as an option straddle or strangle while long the stock still.  Instead UCO rallied more than 10% in just a few days and made me think I was going to walk away with a full profit on those two options.  I was so sure UCO was going to stay above $12.00 I entered a limit order after lunch to sell new naked puts at the October $12 strike, but removed the order when I saw UCO turn lower and realized I could end up buying the 200 shares from my new naked options.  With only $2,400 at risk, not counting the premiums I took in from the options, I watched UCO’s slide for entertainment on an otherwise slow Friday afternoon at work.  Every five minutes for the last 30 minutes of the day UCO dropped by one penny. (I have to think the big money options players were working this one for the close.)  If I saw it move up before close I planned to open three new naked puts for October, but at 3:56, UCO dropped to $11.99 where it stayed until the final minute and then closed down at $11.96.  I’ll be taking the option assignment for UCO on Monday morning based on AMTD’s rules that state they’ll assign any options at least $0.01 in the money.  They used to give a $0.05 cushion which would have left me in the clear.  I’m not sure how I’ll play this now.  If UCO opens up at market open, I’ll probably just sell my 200 shares above $12.00 and start over with new naked puts.  If it stays flat or hangs out in the upper $11s, I’ll probably sell a straddle at $12 (sell October $12 calls and puts).  If it dips, I might sell the puts at the $11 strike and the calls at the $12 strike which would make it a strangle.

If nothing else, another options expiration has come and gone and I’ve survived to trade another day.