After making the trades this morning I took a break to see where the market would go. I also spent a little time actually doing my job. I know – what a thought. I got a little worried about where the markets were going over the next few weeks and decided to throw some orders in a prices that might not hit for a few days. Two of them hit after 3:30 today and I could’ve done even better than I did on the premiums.
While AA was trading at $9.64 I sold to open four AA December 10 covered calls (AALB) for $0.75 each and recieved $287.00 after commissions. My cost, even after subtracting option premiums I’ve received is still in the $20s after starting with $35 strike naked puts. AA has to increase by more than 10% from its current levels for this to be a bad trade. AA closed above its 10 day moving average after it hit that same level as a ceiling yesterday. The 20 day moving average is closer to $11.50 and falling. AA hit $6.85 just three days ago. Continuing this rally without a slight pull back along the way would come as a surprise.
While CELG was trading around $50.70 I sold to open two CELG December 55 covered calls (LQHLK) for $1.75 each and received $338.49 after commissions. If these get shares called away I’ll have a profit on this series of trades that started with $60 strike naked puts. CELG has to increase nearly 12% from current levels to make this a bad trade. If it does make a move like that (same for AA) I’ll be ready to exit this position and move on. I think CELG is down more than it should be, but I have to get out at some point and this trade would work it for a profit which is better than I can say for most of my account. Worth noting also, the 10 day moving average is close to $55 on CELG. That could be a speed bump for it.
My margin balance came down to $8,032.89 with these two trades and I finished the day up $450+, even with locking in the losses earlier on USO and QCOM. QCOM closed above my sale price and USO closed below my sale price. In hindsight, QCOM would have been better to sell covered calls on. I might get back in on USO with an option trade on another oil ETF soon. I’ll be selling those out of the money for sure and will consider hedging from the beginning too.