Sold More VXX Naked Puts

I’m having a fantastic month so far which typically means my luck is about to run out.  (The IB portion of my account got above $100k today after finishing June just above $90k, plus a $3,000 deposit I sent in early this month.)  Before anyone says anything, I know that’s not an actual scientific/reasonable way to look at investing, but it does seem to go that way often.  Two steps forward and one step back is a healthy market in my opinion and we seem to be on our second quick step now.

I sell naked puts because I believe the markets will go up over time.  Dips and corrections are going to happen and with the markets in a current rally that’s getting close to the SPX 200 day moving average I think we might be due for another dip and increase in volatility.  If I’m wrong my long positions and other naked puts will continue to increase my account balance.  If I’m right about another dip on the horizon (within a few weeks if not sooner) my VXX options will become profitable for me.

With that belief, when VXX was trading at $23.58 I sold three September 20 naked puts at $0.65 each and received $192.86 after commissions.  Although I believe in VXX as a good long term position, especially as a hedge for other bullish options, I didn’t want to go overboard on my commitment to it yet since I could see it coming down even lower maybe.  If it does, I want to have more room to allocate some cash to new puts for bigger premiums or at lower strikes.  These three new puts give me five total with an underlying commitment for me of $10,800 if they are all assigned.  

I’m around 120% invested right now based on how much cash I have to back the long positions I own and the puts I’m short.  If VXX continues to drop I expect most of my current naked puts won’t be assigned and most of my covered calls will be assigned, both instances free up more cash for me.  Part of that cash can easily go towards VXX while I wait for the next correction to hit.

I still have UCO, MS, MSFT and INTC long, with no covered calls stopping bigger gains on a continued rally.  I might have to cut that train off soon though and lock in some profits.  I’d be more apt to do it if their call premiums were higher, but at some point I’ll have to take the profits unless I want to gamble on making profits as a buy and hold investor.