The first days after options expiration are always fun for me. If things have gone well at expiration, I have half of my portfolio’s cash ready for new options trades. I try to sell options 1-2 months out with the goal that I have something invested at all times. Selling all options to expire in the same month would leave me with nothing invested some months and knowing me, I’d feel rushed to get into positions that I shouldn’t have traded on. I target keeping enough cash reserves to cover 50% of the underlying stocks should they be assigned to me. That protects me a little bit in a market slump. Extending my reserves much more than that has gotten me in trouble in the past with margin calls. I’ve learned my lesson.
Once I learned my lesson on not over extending, the week after expiration started being more fun. It’s that brief period where I have enough cash to trade on whatever I want without fretting over getting in over my head.
April was good to me. I only have $11,720 in cash to cover my future put writing, but I also have two stocks, NYX and AAPL, that I plan to sell covered calls on and plan to make a good deposit next week to up my cash position even more. The timing might not be absolutely perfect since the Dow has climbed 15 of the last 16 sessions. You have to wonder if we are due for a pull back, even if it’s temporary. If I can wait a few days and use a little discipline, I might be able to time my option selling to sell my calls near the top and my puts near the bottom of the dip. That’s always the fun part – wishful thinking.
What’s not fun is that NYX is down in pre-market and I haven’t re-written my new covered calls yet. What helps soothe that feeling is that I bought my April AAPL calls back near the end of the day Friday and now AAPL is up pre-market. Maybe the good and bad will take care of each other and the fun will continue.