Today ended up being an easy options expiration for my taxable portfolio. I only had three separate options expire today on VXX, VNQ and BA. This is how they each played out along with my next steps:
- One VXX February 22 covered call – This worked like clockwork. I’m long 200 shares, long two June $50 puts for protection and short two June $70 calls that don’t really have more than a 1% chance of coming back into play. I’ll probably close those out next week just to be done with them now that they look like they are worth less than $0.20. I’ll sell new covered calls on VXX as it continues to move south. I was going to do it today, but opted to wait for the April options to post. If I sell April covered calls that aren’t assigned I’ll have one more chance to sell calls at the June expiration before I dump my shares and long puts. Overall VXX killed me last year, but this year I’m turning it into a money maker by doubling up on the calls. I might sell two calls next time, but I like leaving room for some growth if the unthinkable happens and it actually goes up for more than a couple of days. One reader’s comment from months ago and again two weeks ago called for VXX to hit $24. That might be a high target the way it’s disintegrating over the past year.
- Two VNQ February 55 covered calls – It’s a shame I sold these calls at such a low strike. It didn’t seem low at the time, but VNQ didn’t look too healthy at the time and I wanted to maintain a profit. I accomplished that goal and will end this short series of trades with a profit of $328.70, but could’ve had even more since VNQ finished the day more than $3.50 out-of-the-money (OTM) and I sold these calls for $1.05. I’ll have to stay out of it for 30 days now to avoid the wash rule. Maybe I’ll be able to time it right for a re-entry in the second half of March like I’m about to do on UCO.
- One BA February 62.50 naked put – I sold this put far too low. BA finished today over $10.50 above my strike, but at the time the risk felt very calculated since I had 100 shares long to go with it. At least my covered call was assigned at the same price where my naked puts were assigned which means I didn’t have to take a loss on the underlying shares and get to sell new puts again next week when the April options are posted. BA has been on a fantastic run for the past two months and will correct some eventually, but the downside still seems fairly limited and I don’t think selling one new OTM put is much of a risk.
I’d love to see a dip on Monday for the market so I could squeeze in some orders at slightly better prices. My wash rule limitations on UCO and JPM are over after the weekend and I plan to get back in on both again. UCO has fallen back to where I’ll probably sell some puts at the same price where I exited with my covered calls last month. I’m basically starting right back where I was with one month of time value lost in my UCO addiction.
I’ve been taking smaller probability risks this year by selling longer term options and/or selling farther OTM. After being burned every year by one or two bad trades I’m trying to limit that risk this year and haven’t even been taking as many risks as I should. I’ve noticed I seem to be selling puts so that I always take a full profit on the option, but maybe I should aim for some that have a little more risk (and reward) and might only end with a partial profit or small loss. I hate to change to a different strategy until we get a correction. Since I’ve been light stepping this long it’s probably not the time to change without at least a decent dip in the market.