Sold QLD November 50 Naked Puts

It’s funny how things work sometimes.  A few days ago when I sold new EEM naked puts I commented that I was eyeing QLD naked puts too, but decided not to chase the 2x QQQQ ETF.  I thought it better to leave my limit order in and see if QLD dipped into it later.  Well, QLD took off from there and even into this morning made me doubt my patience.  I even went in and charted QLD and QQQQ again to see if I should raise my strike.  I saw QLD had not made it above its intraday high from a few days earlier.  I entered a trade trigger to alert me if it traded above that line in the sand.  If it broke higher, I’d get in with a higher strike or lower premium.  I figured I’d keep watching it and maybe I was smart to not chase.

Little did I remember that limit order I left in place.  While QLD was trading at $52.61 I sold two QLD November 50 naked puts (QLHWX) for $1.35 each and received $258.50 after commissions.  I left the order in place so I wouldn’t have to keep watching it and insure I’d get in on a little dip.  We still don’t know if this is a little dip or just the beginning of a larger correction though.  That’s always the trick and once I saw QLD fail to break above its previous intraday high I might have waited on my order.  I like that I still have more than 7% to the downside protection before I’m sitting on a potential loss on the trade.  With QLD being a double the daily return play on the NASDAQ 100 I have to think of it as only 3.5% downside cushion.

I’m more heavily invested as of this trade than I have been in many months.  If all of my short options were assigned I’d be 71% invested based on my assigned cost of the underlying stocks.  If I count the few double ETFs I have in my portfolio as twice their value I’d be a little over 100% invested.  I like to look at it both ways.  The former is reality – it’s what I have to have to avoid going on margin.  The latter is more of a beta comparison of how my portfolio should move if everything was assigned.  At least for the next four weeks I have more than $1,650 worth of time value to erode away.  This helps plus some of my options are still out of the money which keeps my overall beta less than one.  If my underlying stocks would flatten out or go up I stand to gain around 2+% over the next four weeks.  If they only go down more than 2.5-3% as a group I’ll stay flat.