I’ve been waiting for a correction as I’ve been wrong for the past 200 points up in the S&P 500 and it’s possible we’re finally getting it based on this week’s price action. The thought that it could be happening finally made me go back and double check I haven’t gotten in deeper than I thought I had.
With an account balance around $80k, I’m only around 40% invested if all of my naked puts were assigned. That number actually changes to a smaller number if all of my short options became long stocks. For example (while ignoring time value changes), if I bought each underlying stock at the strike price I’d pay $33,150 for the shares and would have $46,850 in cash still. That would make my stock holdings 41% of my $80k account. Then if the stocks all fell by 50% to $16,575, my stock position would only be 26% of my account since I’d still have $46,850 in cash and a total account balance of $63,425. If the stocks I own fall by 50%, you can be pretty sure I’d find a good use for the remaining $46,850 in cash (which of course would be higher since I’d be selling covered calls to bring in more cash on the way down) to invest for the ride back up.
To give a little cushion for what I hope is a decent little correction, I have ~$1,000 in time value for September options. All in all, I’m in a pretty good place being invested the way I am right now. Speaking of which, here are my current holdings. I’m short the following options:
- 2 – BA Oct 50 Puts
- 3 – DSX Oct 12.5 Puts
- 2 – FCX Sep 55 Puts
- 2 – SSO Sep 30 Puts
- 2 – SSO Sep 32 Calls
- 2 – UCO Sep 12 Puts
Interesting play on SSO. I think the etf is heading higher and own some 33 Dec Calls.