I’ve intentionally not traded this week. Since I’ve been selling so many longer term options lately I thought I should take a step back, let the dust settle and see how (a little) time affects my current portfolio. With volatility currently so low compared to the past couple of years the option selling trades aren’t jumping off the screen for me, so I’m being patient or at least trying to be. I’m still entering orders, they just aren’t hitting yet since I’m pricing all of them for at least a little dip before they hit. I have one on MVV that expires today and isn’t close to hitting any more. I have another on UWM I just entered that is set to last through next Wednesday. I entered the order $0.25 above the last trade’s price along with a couple of my clients’ orders. Surprisingly, one of theirs hit instantly. The other two contracts are still up for sale and I wouldn’t be surprised if they don’t even hit by the time the order expires. Then again, a nice dip this afternoon or early next week is all it needs to bring the bid up to it.
I didn’t even realize it until I started writing this post and double checked my positions and saw that my BA covered call was assigned at $67.50 at the end of the day on Tuesday, 2/8/11. This one was kind of interesting because the week before I made this covered call trade we discussed it in the comments section of another post. I opted to aim higher with my strike than was being advised and now it looks like I should’ve gone even higher since BA is $5.00 above the covered call strike that was assigned and I missed out on the dividend too. The dividend wasn’t my goal as much as the premiums were (two puts and one covered call for $564.84 total). I still have one put set to expire worthless that’s $10 out-of -the-money (OTM). I might get back in on BA when the April contracts are posted.
I’m still not fully invested like I planned to be by now, so next week I feel I’ll have to get off my tail and start ponying up for some more risk. For now, this is what’s in my Interactive Brokers account with a balance of $114,135.58:
- SSO
- Two January 2012 $55.00 short puts
- One June 2011 $50.00 short put
- One Sept 2011 $45.00 short put
- MDY
- One January 2012 $175.00 short put
- UWM
- One January 2012 $45.00 short put
- One January 2012 $40.00 short put
- One January 2012 $35.00 short put
- One January 2012 $30.00 short put
- EEM
- Two January 2012 $50.00 short puts
- BA
- One February 2011 $62.50 short put
- VNQ
- 200 shares long
- Two February 2011 $55 covered calls (ITM)
- VXX
- 200 shares long
- One February 2011 $32 covered call (OTM)
- Two June 2011 $50 long puts
- Two June 2011 $70 short calls (one covered, one naked, both OTM)
- SNRV
- 500 shares long (sadly had 1,500 shares at one point and sold $3.00+ ago)
Have you any opinions on ENTR down at these levels? I sold a half position of March 10 Naked Puts at $0.70 (currently at $0.80). I think it’s very oversold at the moment and am considering selling some longer term Naked Puts – the Aug 7.50’s last traded at $0.68
I don’t really follow ENTR enough to give a solid opinion. At a glance, it looks like they are right in line with their trend line of higher lows (maybe just below) since last June. With a forward P/E ratio of only 10.72 it seems the downside should be limited. Its PEG is only 0.61. Ford Equity Research rates them a strong buy. That’s a lot of good signals.
Now you’ve got me thinking of selling one or two puts just to toy with it. I might wait until tomorrow (2/16) though to see if it holds support. Maybe I’ll go ahead and enter a higher limit order for May 10 puts.
I just sold a new CSX put I’ll write about this afternoon, so I might add another trade to today’s post.
Yeah, I simply can’t understand why the stock is so low at the moment. There’s very high short interest so, unless they’re seeing something that I’m not, there could be a huge short squeeze on the cards.
I’ve been watching CSCO like a hawk lately. It’s now a week since their earnings so I don’t see the slide going on much longer. I may put in an order to sell some March or April Naked Puts in the next couple of days.
SKX announced earnings today too and have plumetted after hours. My short February 23 Calls will expire worthless but my long Jan 2012 17.50 Calls will also drop in value. However, the value change should cancel each other out.
Unbelievable, look at SKX today after being down 8%+ after hours and pre-market.
It’s a big short squeeze and I’ve just sold some March 23 Call Options at $1.05 each. I could have made an extra $60 had I waited as they’re trading at $1.20 now.
However, I’m happy with the move given that there is a $5.50 difference between the long and short strikes of my options and my basis is now $4.86 (if the Feb 23 Calls expire worthless tomorrow – I imagine they might be pinned to $23).
ABT has just announced an increase of dividend to $0.48 payable to shareholders of record April 15.
That brings the yield up to 4.1% which should mean that downside is limited.
I’m assumming my Feb 47 Naked Puts (sold at $0.65) will be assigned and have just sold May 47 Calls at $1.20 (after commission).
That means I’ll get a return equivelant to the Premiums ($1.85) if assigned 5 weeks early. Otherwise, I’ll collect the dividend lowering my basis further.
I considered selling additional Naked Puts but decided to wait for a potential pullback first. I’m going to have this as a CORE holding.
I’ve been thinking about CSCO also. The April 19 puts might not be bad or even buying some April (or later) $20 strike calls could work maybe. ABT is an interesting idea. Maybe the March $47 strike puts would be good if the downside is limited ($45 could be a good floor) and if assigned you’d be set up to get the dividend a few weeks later. Either that or do a buy/write with the May $46 or $47 strike. If it’s ITM you could be assigned early and pocket the extra month of time value or you could end up holding on for the dividend and be happy with the bonus. You know the markets are closed over here on Monday (Feb 21), so Tuesday or Wednesday you might see one of these from me. Let us know if you end up moving on it.
I’ve just checked and, as expected, I’ve been assigned 200 ABT at $47. I’m also short the May 47 Covered Calls.
On any pullback, I’ll sell a couple of new OTM Naked Puts as well – as I don’t see it pulling back too far.
I’m still trying to figure out an exact strategy but am thinking that if I can add about 2% in Premiums per quarter to the 1%+ dividend per quarter, I’ll be quite happy even if the stock does nothing. That’d be a 12% annualized return in addition to any potential stock increase – so long as the shares aren’t called away.
Looking at May expiry, I could sell 48 Calls for the 2% Premium. If the shares are called away, my return for the quarter would be about 5.4% (stock increase + premium + dividend).
I’ll continue to do the higher risk trades such as ENTR and AZZ but will add a few low-beta, dividend payers to my portfolio to use a similar strategy.
My AZZ Covered Call also expired in the money and they were called away from me at $40 – they closed at $43.20 but my basis was $34 so I’m quite happy with that return for a few months. I’ll look into selling further Naked Puts on any pullback.
I currently own 300 MDR and am short the May 21 Calls. With MDR currently trading at $23.88 and the Calls at $3.60, I’ll probably close this position out rather than waiting for a further $0.72 profit over the next 3 months. I originally bought MDR last month for $19.66.
Barron’s offered some bullish comments on ABT in the 2/22 edition. Looks like it helped to give it a bounce this morning. I was thinking about opening a small position, but the premiums aren’t as good now. Maybe we’ll get a little retreat to open the door for me.
Yeah, ABT is one of the few green’s I see on my screen today.
I’d like a pullback to close to $18 on CSCO to give a decent premium on those March Puts. I’m also looking at F but don’t know where the bottom is and don’t want to ‘catch a falling knife’…