Sold XLB June 25 Naked Puts

I’ve been watching Materials Select Sector SPDR Fund (NYSE Arca:XLB) for a while – ever since my last naked puts finished out-of-the-money.  I entered a limit order yesterday and it finally hit this afternoon.  While XLB was trading at $26.25 I sold four June 25 naked puts (XLBRY) for $0.55 each and received $207.00 after commissions.  I picked the 25 strike because I can see potential support in that area.  I was tempted to go higher, but figured I’d lower my risk a little by taking the order farther out-of-the-money.

I have no other open limit orders in queue right now, but will try to get some others lined up by the end of tomorrow.  I’ve been fighting this rally for weeks and am starting to give in some on my bearish stance, although I continue to have the fear/belief that it might tip lower again before it continues up too far.  For put option orders I sell in the near term I will probably be write as credit spreads so I have more downside protection, but still have room for profit if the rally continues.  If someone else is considering an XLB play, a 26/25 vertical put spread might not be a bad route to take instead of what I did.  You might need to take an option assignment under $26, but with $25 as protection you’ll be able to decide if you want to roll the short put and take a profit on the long put or just buy the new shares if XLB flattens out.  Long term I think XLB has a lot more upside potential than downside risk.