Sold UCO December 12 Naked Puts

After closing my UCO position last week to move my account to IB, UCO dropped more than a dollar.  Call it skill or luck, but I’m happy I timed that right.  Now that some of my cash has been transferred I’m pushing my luck/skill again with UCO.  This morning, while UCO was trading at $12.62 I sold five UCO December 12 naked puts (UCOXE) for $0.50 each and received $246.50 after commissions.

As I mentioned, UCO has been sliding since I got out of it last week, but the current trading price seems to be at the low end of its trading channel.  Although that trading channel is pointing lower, I don’t think I’m risking too much with such a low cost if assigned.  While UCO can certainly go much lower than $11.50, I don’t see it staying low for a long time.  I’ll still be able to sell covered calls from the reduced price, if it doesn’t turn higher before expiration.  Also, since I only sold $6,000 worth of potential shares I can double my exposure at a lower strike if oil continues to fall past December expiry.  I’d end up selling a strangle (sell new naked puts and covered calls) if these 500 shares are assigned.

Along with the chart hinting that UCO has a chance to stay above $12 through expiration, oil inventory numbers came out this morning on the bullish side.  I added a reminder to my calendar for every week when oil inventories are released and have traded on it twice now and wish I had the time before.  I’ve notice the price of UCO moves a little after the report is released and over the next few hours tends to gain momentum.  This gives us small investors time to get in early and ride the wave.  Also, it tends to set the tone for a week or so and when selling out of the money options I’ve seen that even more than a week later I can make a profit from the time value evaporating.  Also a factor is the Thanksgiving holiday starting tomorrow.  I figured I’d help myself to a few “free” days of time value by selling today rather than waiting for next week.

This is my only position in my account right now, but I plan to ramp up again fairly soon.  The IB (IBKR) interface is much different than TD Ameritrade’s (AMTD) and I’m spending some time getting used to it.  I watched a couple of their demos yesterday for Trader Workstation and more than anything spent time just clicking on almost every button I could find.  I think I’m going to end up liking the desktop application.  The charts alone have so many bells and whistles that I haven’t even figured out half of them yet.  The set up for option spreads feels clunky to me so far compared to AMTD, but I’m sure I’ll get accustomed to it soon enough.

The other big news is that my registration is complete finally.  My company is officially registered as an Investment Advisor now.  I’m still debating linking to it from this blog since I want to draw a clear distinction between my personal trader’s journal and personalized individual investment advice, but will be happy to speak to anyone directly who is interested in using my services.  I’m only registered in Georgia right now, but can have as many as five clients in each state before I have to register there, which I’d be happy to do.