Today I’m feeling a little vindicated in my theory that missed the mark a little yesterday. The markets were down some for the day. I’m pulling some profit back in on covered calls I sold yesterday. With the reality settling in that the path back up won’t be a straight vertical line I sold more covered calls on my remaining uncovered long stocks. In doing so, I lowered my margin balance down to $3,298.35.
Monsanto Co (MON)
My cost for MON is just under $90.00 per share thanks to the three options I sold for October expiration. I tried to wait for it to climb back to last week’s highs, but that didn’t happen soon enough for me and when I saw MON dip at the open today, I decided not to leave too much more to chance and lowered my limit order to get it to hit sooner rather than wait. While MON was trading at $85.97 I sold one MON November 90 covered call (MONKU) for $5.50 and received $539.25 after commissions. If this gets called away I’ll still end with an overall profit for this series of trades. If MON gets back down closer to $75 again I’ll sell new naked puts on it like I did for the October expiration that worked out for me.
Chesapeake Energy Corp (CHK)
I almost bought puts on CHK last week as it languished below 20, but then it rallied. I hoped for the rally to continue non-stop before I sold covered calls, but decided I should go ahead and cover today while I could get a decent premium over $6.00 out of the money. While CHK was trading at $23.72 I sold to open two CHK November 27.50 covered calls (CHKKU) for $1.35 each and received $258.50 after commissions. If this gets assigned I’ll take a large loss for the series, but I’ll be up nicely from where I am now. That is all I can trade on – not where I was, but where I want to go from here.
DryShips, Inc (DRYS)
DRYS is up nicely from its recent lows and I think has a lot of room to go still, but I’m expecting that return to those old highs to take some time. If DRYS gets up too high too fast I think its bull run could be short lived. With that in mind I decided to make two DRYS option trades. First I decided to sell covered calls that will force me to sell my shares if it closes above $30.00 at November options’ expiration. The second trade is to add to my position by selling new naked puts close to the DRYS low from earlier in the month.
My timing didn’t hit as planned. DRYS dipped before my covered call limit order hit and I sold new naked puts first. While DRYS was trading at 22.87 I sold to open two November 17.50 naked puts (OOCWW) for $1.30 each and received $248.50 after commissions.
DRYS went down to $22.30 soon after that and by the time I got back in to lower my limit order on the covered calls it was back up close to the same price. While trading DRYS was trading at $22.83 I sold to open two November 30 covered calls (DQRKF) for $1.15 each and received $218.50 after commissions. If luck goes my way DRYS will finish in between each option’s strike, 17.50 – 30.00 and I’ll be able to run the same trade again next month. If DRYS falls below $17.50 I’ll buy more shares at a far reduced price from where it is now and way below where I bought my first lot. If it goes above $30, I’ll be out with an overall loss although ahead of where I am now on paper and will have cash for other stocks.
* Unrelated to trading, I just noticed that yesterday was my 500th post on My Trader’s Journal. Nothing special about that aside from it being a nice round number which is always fun.