Sold UCO October 11 Naked Puts

After babbling on about how I might play ProShares Ultra DJ-UBS Crude Oil ETF (NYSE Arca: UCO) after my September UCO naked puts finished in-the-money (ITM) on Friday, when I logged on to TD Ameritrade (AMTD) this morning I saw I had been given a gift.  For some reason I didn’t get the option assignment.  As I mentioned last week, AMTD’s rule is any option at least $0.01 ITM is going to be assigned.  I can only assume that rule is in place for when the option owner on the other end of the position wants to sell the shares (aka exercise the options).  Luckily for me they made a mistake and kept them or were only long the put options and had no shares they were protecting and had no reason to exercise them.

Since it didn’t happen this time and I do not own any shares of UCO I didn’t have to sell covered calls and could just start my position over.  While UCO was trading at $11.34 this morning I sold to open three October 11 naked puts (UCOVJ) for $0.75 each and received $212.75 after commissions.  I moved up to three options versus two like last month since UCO was a little cheaper and had slightly lower downside risk from this level.  It’s still a small position, but then again, UCO is an “ultra” ETF that aims for twice the return of the Dow Jones AIG Crude Oil Sub-Index.

If the dollar strengthens more than just for a few days oil (and UCO) will fall some more, but if the economy recovers (and it will one day, won’t it?) then oil will come back up to at least these levels.  I can dollar cost average down from here pretty easily with less than $3,100 at risk for me on this trade.

Changing topics, my SSO prediction was right.  We got the beginning of a pull back, but I was a day late and am not benefiting from the decline since I exited my position Friday (maybe a little exit remorse here).  On the other hand, at least I have a lot (in percentage terms) of cash available to get in if it goes much lower.