Sold AA and BA Naked Calls

Today was insane.  I saw the Dow down 120, then up 20, then down 150 and then up 30 by the end of the day.  I had a hard time focusing on my work and I’m sure more than a couple of coworkers noticed me charting all my stocks and then studying my spreadsheet for what I should do.  Once I took a deep breath and put all my options in a new excel spreadsheet I felt better and only made two trades for the day.  I compared what I’ve received in premiums plus the current price of the underlying stocks to the strike where I’d be forced to buy the stock (assigned) if the stocks closed below that price at June and August expirations.  I’m actually only down on a few and overall I’m still sitting on a paper profit for what I have sitting out there.

Not to be one to sit and hope for all of my positions to work themselves out on their own, I sold some naked calls to give me a better chance of ending June and August option expirations with more money than I have now.  That’s always my goal – what can I do now that will improve my chances of having more money in one or two months.  I started with Boeing (BA) and then move to add to my collection of Alcoa (AA) options.

While BA was trading at 64.85 I sold three BA August 75 naked calls (BAHO) and received $167.75 after commissions.  That’s a little more than $10 out of the money and probably not such a high risk move which explains the low reward I got for it.  I’ll take every $100 I can get though.  It all adds up.  I’m long 400 BA shares in my IRA and have covered calls on them at the 80 strike.  I’ve waited too long to really make the move I wanted there and decided to wait for options expiration in my IRA, but try to find a better opportunity for profit in my taxable account.  If BA rallies, I have a $10+ cushion in my taxable account and will make $4,000 back in my IRA.  That’s a risk I’m willing to take, especially when I look at the chart and the trend lines and moving averages standing between BA’s current price and the 75 strike.

AA is a different story.  I’m already short naked calls and naked puts on AA and have been sitting on a paper profit for weeks.  Once AA started falling I waited too long and my paper profit turned into a paper loss.  I started with $377.75 from my calls and then received $328.50 for my July 40 naked puts.  Today, while AA was trading at 33.89 I sold two AA July 35 naked calls (AAGG) and received $208.50 after commissions.  I’m calling these calls naked, but they aren’t quite naked or uncovered.  Since my naked puts are over $6 in the money I’m expecting the shares to be assigned at expiration, but if AA is above 35 those shares will be sold at the same time.  I’ll take a $1,040 loss on the underlying shares (200 shares bought at 40 and sold at 35 plus commissions of $20 for each option assignment) and will keep my $914.75 in premiums.  That’ll give me a loss of $125.25 IF AA is above 35 in two and a half weeks.  If it stays where it is then I’ve made a brilliant move and get to keep the premiums and the 200 shares and then can write covered calls to bring my position to a profit.