Took Some SSO Risk Off

After yesterday’s resistance held the $SPX  from any gains beyond 1,220 I thought I should remove some downside risk just in case we trade back to the low end of this two month trading range again.  If we get a pop higher than 1,220 I can easily get back in with a new naked put, but this isn’t exactly the ideal area in a trading range to add exposure.  While SSO was trading at $42.23 this morning I bought to close my one SSO October $42 put for $1.30 and paid $130.72 with commissions.  Originally I received received $245.35 after commissions, so I got out with a net profit of $114.63.  All of the premium I paid was time value that could’ve been my profit next week if SSO stayed flat or climbed any.

While I was starting to write this post I kept seeing the $SPX move higher as if the sell-off was done.  I debated closing the single SSO covered call I have for a few minutes and saw $30-40 in time value vanish almost in between blinks.  Eventually I concluded I should remove some upside risk too in case we get a break out.  While SSO was trading at $43.07 I bought to close my one SSO October $42 covered call for $1.95 and paid $196.44 after commissions.  SSO made it a few cents higher before reversing course again.  I didn’t time either of these two trades great, but got out of both with a profit and a cleaner list of positions to manage.  Originally I received $199.65 for selling this call, so buying it back today gave me a net profit of $3.21.  These days I’m just happy to have a profit.  Since the option was $1.07 in the money I gave up $0.88 in time value that would’ve been more profit if I waited out next week (if we lived in a magical world and SSO stayed flat).

I’m still long 200 shares of SSO and now have no options on it for either side.  I’d like to leave it long to see if I can ride a good wave into the end of the year.  I might change my plans if earnings don’t start picking up after AA and JPM didn’t light up the night with great earnings news.  Rather than sell my shares or add an option as insurance to SSO, I might sell in the money puts on SDS or DXD for the front month to try to catch a quick trade.  With premiums so rich right now this might be a reasonable trade.  We’ll see.  I’m waiting for a better sell signal that today showed.

Speaking of JPM, I’m holding onto the JPM put I bought yesterday for another day, just in case.  So far I have a $285 paper profit on the puts since JPM dropped $1.60 today.  I’d love to see a bigger drop in JPM tomorrow morning so I could sell my puts for a bigger profit and then hold onto the shares for a bounce higher down the rode.

What do y’all think – are we heading back into the trading channel or are we going to see a break out?