I only had three options finish in the money today (one on MON and two on SLB) and made changes to both positions to give me more downside cushion and increase my chances for a bigger profit by the end of the series of trades. I could’ve exited both positions with a little profit today, but decided to add a new leg for July expiration for each since the premiums are pretty good and I think the downside is fairly limited.
On Monday I’ll be buying 100 shares of Monsanto (MON) from my June 85 naked puts that’ll be assigned officially this weekend. While MON was trading at $80.17 I sold one MON July 80 covered call (MONGP) for $4.00 and received $389.24 after commission. My average cost is going to be just above $75.00 per share after I subtract all of the premiums from my actual purchase price. I could’ve done a little better on my new MON call, but am glad I have the new option in place before the weekend, just in case the price continues to fall. I think MON will rise from here, but I’m not in this for guessing. I like to have part of my profit (the premium) locked away. If MON returns to the path its chart points to of holding support near $80, I’ll have a safe profit to pocket at July expiration.
Schlumberger (SLB) played out a little differently since my naked calls and naked puts were reversed from typical option strangles. My naked call was in the money as was my naked put. Usually the put strike is below the call strike which allows both to expire worthless. I’m taking the option assignment on the June 60 naked put and in the last half hour of the trading day I rolled my June 55 calls which will become covered calls since I’ll be buying 200 shares at $60 from the June 60 puts. If I didn’t change my original SLB option strangle I started with weeks ago I could’ve closed out my call for a profit and my lower naked put would’ve expired out of the money too. Instead I altered my position during the past few weeks and sold the June 60 put while SLB was trading higher to increase my probability of finishing the series of trades with a profit. Ironically, SLB dropped from there and my rolled put ended up costing me profit.
My belief that SLB won’t fall too much more got me to roll the call instead of closing it out. While SLB was trading at $55.60 I bought to close my two June 55 calls (SLBFK) at $0.60 and paid $121.50 and at the same time sold to open two July 55 covered calls (SLBGK) at $3.10 and received $608.49 after commission. That reduced my cost per share on SLB down under $52.00. I’m not so naive that I believe SLB can’t return to the $40s and that’s why I sold in the money covered (ITM) calls. I wanted more downside cushion and got it with the ITM calls. If SLB drops into the $40s I don’t think it’ll be too deep or for too long. Selling covered calls, even from the $40s at the $50-55 strike will keep me with a profit on the trade and that’s if it goes against me. If it stays flat or goes up I’ll net ~$600.
The rest of my June options expired out of the money today. Here are the June options left in my account at the end of the day today.
- MON Jun 75 Put – expired worthless
- MON Jun 85 Call – expired worthless
- MON Jun 85 Put – 100 shares will be assigned at $85 per the above notes
- NDAQ Jun 17.5 Put – expired worthless – plan to rewrite, but not sure yet at which strike
- NVDA Jun 9 Put – expired worthless – might not rewrite unless NVDA drops some, I could change my mind by early next week
- SLB Jun 45 Put – expired worthless
- SLB Jun 60 Put – 200 shares will be assigned at $60 per the above notes
- XLB Jun 25 Put – expired worthless – might rewrite new puts, although I’ll probably start by looking elsewhere
Probably the coolest part of this June options expiration is that although the Dow and S&P are virtually flat for the month my account is up. Most of that credit goes to time decay of the options I sold. Especially while the markets are trading range bound and somewhat flat, selling options seems to be the best game in town.