I almost took today off from work knowing I had a lot to focus on outside of my paid job. I had some long positions with covered calls expire out of the money and I had naked puts expire in the money which forced the underlying stocks to be assigned. The outcome was that I had seven stocks I was long (aka owned) and all of them needed new covered calls sold on them to keep with my trading model. I ended up taking in $2,623.24 in premiums this morning. All of that is extrinsic value meaning I sold no options in the money.
Two of my previous long positions (VIP and BNI) were called away, so that helped my burden of how much I had to cover this morning. Both were down today, so I’m happy to be out of them. For the rest of the long positions, I focused on selling covered calls quickly in case the market sold off fast again (which it did). By 10:30 I made seven trades in my taxable account and a few in my IRAs. For my taxable account, which I’ll detail below, I sold all October calls and in my IRA I sold all November calls. I have a longer time horizon in my IRA (obviously), so I set the strikes higher and had to go farther out to get the premiums I wanted, even with the higher than normal implied volatility on most equities’ options with the VIX hanging above 30 still.
While AA was trading at 26.88, I sold four October 27.50 covered calls (AAJY) at 1.30 and received $519.99 after commissions. I considered the 30 strike, but wanted to increase my cash position with the better money up front and will be very surprised if AA rallies that much and stays up in four weeks.
While CHK was trading at 41.33 I sold two October 45 covered calls (CHKJI) at 1.35 and received $258.50 after commissions. I stayed a little farther out of the money because I saw good premiums even that far out of the money and think CHK will make more of a recovery soon. I’m not so bullish to sell new naked puts on it yet though. I’ll keep an eye on it and sell more naked puts eventually I’m sure since I think the longer term move for CHK and natural gas will be up.
While DYRS was trading at 52.73 I sold two October 55 covered calls (DQRJK) at 3.50 and received $688.50 and commissions. I considered the 50 strike and really wish I had gone in the money like that since DRYS ended the day down at 51.38. It’s so volatile that I got a good premium at the 55 strike and the chart makes me think the downside is limited compared to the upside potential so I opted for less downside protection. The chart looks like DRYS could use 50 as support since it broke the down trend line on Friday that kept bringing lower highs. If it closes below 50 again this week I might sell some naked calls on it.
While FCX was trading at 73.94 I sold one October 80 covered calls (FCXJP) at 3.10 and received 299.25 after commissions. FCX was heading higher today, but closed down. I wanted to leave some recovery for it. I might sell a new call at a lower strike this week and maybe close this one early.
While JOYG was trading at 54.84 I sold one October 55 covered call (JQYJK) at 3.50 and received 339.25 after commissions. I considered the out of the money strike at 60, but decided JOYG might be ready for another breather before it makes a sustained come back. If the timing works for me, I’ll buy this call back when/if JOYG drops and get back in at a higher strike later. That’s going to take some luck on my side.
While QCOM was trading at 48.37 I sold two October 50 covered calls (AAOJJ) at 1.25 and received 238.50 after commissions. I’m expecting QCOM to find support at 45 and recover. The 47.50 strike might have been a smarter trade, especially if I want to increase my chances of getting out of the long position and heavier into cash at the October options’ expiration.
While USO was trading at 86.15 I sold one October 90 covered call (UNAJL) at 2.90 and received 279.25 after commissions. USO was already up more than $3 this morning when I sold this call. With the weaker dollar, oil’s price will rise. Picking the top and bottom haven’t been my strengths, so I sold out of the money (coincidence that my call’s strike is at the same point as my previous naked put’s strike that got me here). I wanted a good premium and didn’t want to leave my strike so low that I didn’t have a chance to enjoy the upside. Even though I think oil and USO will go up more, I wanted to make sure I got some premium in before something unforeseen happened and oil fell back down. I decided to pick a strike and option premium that gave me a mixture of both my lines of thinking.
In other news, and speaking of oil, most of my coworkers today said they had a hard time finding gas over the weekend. Atlanta’s gas stations are dry. My wife went out during lunch today to find a station and said it took her 30 minutes to find a station that had one pump running. I’m curious what others around the country are seeing. Ike and Gustav’s pain isn’t over for us yet down here.
ABC – Always Be Covered. Gas is available here in Minneapolis around $3.50/gal.
Hi Alex – Responding to your question about the availability of gasoline. I live in Huntington Beach, CA. We seem to have plenty of gasoline. In fact, the price has continued to decline since about mid July. In early July regular was about 4.34 if I remember correctly. You can now find regular for as low as 3.49 at local ARCO stations. I expect to find that same price at our CostCo station when I fill up tomorrow.
Bill
I paid $4.25 two weekends ago and most gas stations that have anything now are out of regular, but have premium closer to $5.00. It’s supposed to ease this week for us though.
9/27/08 update – I saw gas for $4.59 once last week, but figured it’d drop some by the end of the week. Instead of dropping it went dry again. I started looking for places that had some and only saw empty stations or long lines at the two stations that had it. I can probably go another 4 days without filling up, so I’m heading out today to try to find some while the usual business crowd is off the streets.