After charting DRYS a couple of days ago and saying $10 should offer support they announced they were suspending their fat dividend. Had I not frozen in my seat I’d have realized that even with the BDI rising shorts would have a field day with this news and those in it for the dividend would have no reason to stick around. I considered buying protective puts or selling new calls, but did nothing. DRYS held a trend line until the end of the day and fell to its 50 day moving average. I predicted that could happen, but didn’t expect today’s price action. DRYS opened at $9.26 and later fell to $9.00 before finding solid footing. I didn’t panic at the low, but by the time DRYS was trading at $9.62 I sold three DRYS February 12.50 covered calls (OOCBV) for $0.70 each and received $197.75 after commissions. I felt I needed to get some money out of it in case it fell further. I might end up rolling these calls to a higher strike if DRYS actually finds footing, but I wouldn’t mind dumping 300 shares even at a price much lower than I could have gotten two days ago. Since I sold those calls DRYS rallied soon after lunch time to an intraday high of $11.43 (so far).
Before that I was checking the rest of my holdings. I noticed I hadn’t sold covered calls on two of my long position, CELG and TDW so I started eyeing the best strikes for them and sold calls on both. Then apparently my coffee kicked in and my eyes opened to realize that I had sold TDW covered calls earlier. Anyway, I started with CELG while it was trading at $48.56 I sold two CELG February 50 covered calls (LQHBJ) for $2.05 each and received $398.50 after commissions. I actually think CELG will come back up closer to $55 before hitting real resistance again, but felt that it was wise to take some up front profits in case I’m wrong.
That’s when I failed to double check my current holdings and went in to aim for new TDW calls. While TDW was trading at $36.95 I sold two February 40 calls (TDWBH) for $1.60 each and received $308.50 after commissions. I was checking my holdings to make sure I didn’t have any other positions uncovered that I wanted to cover and noticed that was my second set of calls on TDW. The other leg is for February 45 so I decided to let them both ride for now. If TDW comes back strong that’ll mean that oil is making a better showing and my USO naked puts will move back to being out of the money. If TDW does rally I think the highs from early November and early January (both around 45) will act as a ceiling. That’s my plan for now at least.
The biggest driving force for me to have made all these trades this morning was a reality check and going back to my 2009 Goals post. The reality is that I lost $10,000 of paper profits in the past couple of weeks and that was greatly due to greed. I held on too long to some positions without covering with puts or at least selling lower strike covered calls. Lucky for me, after being down over $3,000 this morning my luck (skill not even a consideration here) changed and I’m not up over $1500 for the day. That brings my loss since my January peak down to less than $7,000. I started the year with a balance of around $53,000 and only needed to get above $54,325 to reach my monthly goal. Selling calls and using puts to protect against big falls when I exceed that should be basic trades and I didn’t do it. Now I have, at least with calls. If everything can flatten out, time value will push me much closer to that level. Any rise in the underlying stocks will knock it out easily for me. Maybe one day I’ll learn.