Since I made the decision to go back to my old trading model of splitting my account over the two front month options expiries I’ve increased my exposure a little each week. I still am not fully invested, but I’m almost there now. That’s going to change substantially in a few days when March expiration comes and goes. As of this moment all of my March options are trading out of the money and set to expire worthless. With that in mind I need to add some new positions to keep my exposure high enough to keep up with the markets if not better.
I’ve considered SPY naked puts, but keep thinking we’ll have a pull back. That’s kept me out of some investments and put me in a place where I’m starting to trail the markets again. I feel I’m finally starting to capitulate and accepting more risk. I still expect a pull back in the markets in the not too distant future and plan to use that opportunity to get heavily invested since I don’t think we’ll have a ferocious fall for a while still.
I mentioned a couple of weeks ago that I had a limit order in place for Itron Inc (ITRI). That order never hit and I didn’t try to chase it higher as it continued to rally from the Barron’s article that touted it. ITRI finally started to lose some steam about a week later and I waited to see when this new slight dip might find footing. Yesterday seemed to offer some support and once again I missed my limit order to open my position as I pushed for a little more than the market was willing to give. This morning I became more flexible with my order and while ITRI was trading at $70.05 I sold one ITRI May 70 naked put at $3.80 and received $378.99 after commissions. I went with an at the money trade here because I only sold one contract and am considering ITRI as a long term hold if this option is assigned. If it dips I’ll consider adding one more option at the $65 strike, if not lower. I actually started off with a limit order for two contracts at the $65 strike, but by the time today rolled around I didn’t think those premiums were worth the risk of a position that would be worth more than 10% of my account. This is my first May 2010 expiration position. I don’t like to go that far out, but as I mentioned at the beginning of this post, I need more exposure and I like ITRI long term.
I missed my opportunity to open up a position on AT&T (T) while it dipped under $25 recently and decided not to continue to stay on the sidelines without getting some exposure to it, even while it’s off its lows already. A big threat could come from the loss of their (or I could say “our” since I’m on contract at T currently) monopoly on the iPhone service, but I’m in the camp that if Verizon gets a piece of that action everyone won’t ditch T. The rollover minutes plan is hard to pass up and aside from NY I believe most areas don’t seem to have data problems (at least according the rumors started by T marketing efforts). I can personally attest to Atlanta being a solid area. T’s P/E ratio is half that of Verizon’s and T’s dividend yield of 6.5% is a real draw too. Taking all of this into consideration I decided to sell some naked puts slightly in the money based on the idea that I won’t mind having the shares assigned and earning the dividend as I sell covered calls on it. While T was trading at $25.91 I sold three T April 26 naked puts at $0.72 each and received $214.63 after commissions. This trade added to my pile of options expiring in April which was high on my to do list for this week. After this week I’ll probably move most of my focus to May expiration to try to take in bigger premiums on each trade.