Sold QQQ Naked Put

After waiting for many months, I realize I should’ve waited even longer before selling covered calls on my IWM and MDY shares. Both calls are trading in the money now. The good thing about that is I can start selling more naked puts with less risk of losing on every position when the market eventually has more than a day or two lower.

While QQQ was trading at $118.79, I sold one QQQ February $117 naked put for $2.55 and received $254.32 after paying $254.32 in commission. I haven’t made a trade on QQQ in a long time and didn’t want to sell a new SPY naked put while at all-time highs. QQQ has been fairly range bound since August. I expect this consolidation phase to end within a couple of months with QQQ moving higher, but if it continues, I want to buy in on the low end of the trading channel. QQQ has stayed between $115-119 for all but a few days for nearly four and a half months.

Selling this put with QQQ at the high end might not be the best move, my cost per share if I’m assigned the naked put will be only $114.46. I’m comfortable with that and might add another naked put on a move closer to $115. I stand to gain 2.22% (or 11.22% annualized) on this trade and have a 3.63% cushion before I lose a penny.

Mid-cap and Small-cap stocks are going through the roof this week. I missed a good opportunity there and want to get back in (already assuming my covered shares will be called away next week), but would prefer to do so on a down day. These last few days are starting to look like a blow-off top, but it could be simply another leg higher has begun to take a big step.

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