After operating in a daze the past couple of weeks I happened to notice the date today and saw April options expire tomorrow. That got me to jump. I started looking at each of my expiring options (NDAQ, INTC, T, JPM and UCO) and making decisions on what to do. Here’s how I’ve started and plan to proceed.
- NDAQ – I’m going to let my NDAQ shares get called away with my covered calls. I’m happy I sold the extra leg of naked puts as NDAQ hit its low, but it’s a shame I sold the covered calls so low. I had hit a point where the risk of further decline wasn’t worth the wait for me. I still end the series of trades with a profit and you know I’ll be back to NDAQ after the wash rule is no longer in affect for me after my loss on the underlying shares themselves.
- INTC – My naked puts will expire out of the money leaving me with a full profit. I’ll probably sell new INTC naked puts once the June contracts are available.
- T – Same as INTC. I look at it as a good long term hold and plan to be back for more soon.
- UCO – I’m still in the middle of a longer term UCO position anchored by the 10 October 12 strike puts I own. I have 13 UCO naked puts that are expiring worthless tomorrow and I entered a limit order today to sell new puts for May, but the order hasn’t hit yet. The trick with UCO right now is that it’s at the high end of its trading range I predicted. I’d like to see it come down some more to help my premiums, but I can’t risk letting it get away from me if it keeps rising. My current order is for only five new puts at the 13 strike. I’ll detail this story more when it trades.
- JPM – The June option contracts are already posted for JPM so I decided to dip into them today before my April options expire worthless. While JPM was trading at $48.12 I sold one JPM June 48 naked put for $1.86 and received $184.99 after commissions. I plan to add another contract, but after seeing JPM jump for two days I want to see if I might be able to get in at a little lower price later too. Since I’m a little ahead of the expiration I decided to take a nibble today and then add to it again later if the opportunity presents itself. If JPM continues to climb I’ll have to be content with the one contract.
With all of these positions expiring worthless (assuming nothing insane happens on Friday), I’ll be less than 65% invested again and back on the trading path. The quandary I’m in is that although I’m feeling bullish I recognize that the markets have been on a long, barely broken run for the past couple of weeks and at some point we should get a small pull back. Most likely that’s going to point me to making moves like I’ve done with UCO where I enter my limit order and try to have some patience. I don’t think any pull back in the next month is going to be too great, so if my May options continue to work for me I’ll be able to keep rolling every other month without much risk.
Love your posts for two major reasons: you seem to be the same kind of trader as I am, as I “channel trade” with naked puts and calls at support and resistance, respectively. Second, despite the hundreds (thousands?) of blogs and other postings out there, you are one of the very, very few who “call themselves out” when they either make a mistake or miss something they should have seen. Bravo for that.
However, I do want to give you a bit of well-earned advice, trader to trader: I am concerned that you want to get back into UCO with the naked puts, even though it’s at the high end of its trading range. Seems like your heart is leading your head on this one. Essentially, you’re chasing the position. Sooooo many more fish in the sea here; for example, SQNM is trading in a tight range for the type of stock it is. Securing the next month’s $5 put seems like a good angle when it drops to $5.52 (like it did the other day).
Anyway, keep up the good work. I’ve had back problems and had some extensive stays in the hospital (ruining my trading, I might add!), so I empathize with your position.
Thanks John! I ended up trading on UCO about the time your comment hit this morning. I’ll have my new post up soon to explain my logic.
If I read this correctly your dealing costs are only $1.01 on this transaction. I am in the UK and a similar transaction here, albeit 1000 shares per contract, would cost me $37.40. (£22.50 dealing charge plus £1.80 per contract) I am very envious of your dealing costs.
Yes Jim, for this trade it was $1.01. For two contracts it’s typically $1.40 and then $0.70 for each after. $1.00 is the minimum and on some there’s another tax of a penny. You can do much better in the UK than you are now.