Yesterday afternoon I place a few limit orders late in the trading day for new naked puts on three different underlying stocks and ETFs – UWM, ITRI and JPM. All of them were sitting at levels that I would have been comfortable selling the options, but I wanted to try for a little extra. I don’t know if it was a touch of greed, caution or an attempt at patience. Anyway, it backfired on me as all three started off higher today and I missed what would have been good trades yesterday. I was eyeing UWM due to the good premiums and thought the chart (yesterday) showed a good entry point if only it would pull back a touch. ITRI was written up in this week’s Barron’s as a good pick (I agree) and I thought the risk/reward was worth it for yesterday’s stock price and option premiums, but now ITRI is a little higher than I’d like to work with for an entry point with lower premiums. I left my orders in on those two through the end of this week.
JPM did me a favor and although it started off high, it came rolled over a little and moved below yesterday afternoon’s prices. My limit order was for only one April 41 naked put and was still a little too high to hit and I debated lowering it. Instead I lowered my strike and made the order for two puts. While JPM was trading at $41.62 I sold two April 40 naked puts at $1.15 each and received $228.57 after commissions. My thinking is that the $38 range looks like a potential area of support and if that holds true I could risk more cash. That brought my order to two options instead of one. I lowered the strike because I was able to reduce my risk by $0.60 per share. I was planning to take the first option assignment and then double up on it with a new leg at a lower strike if it dipped enough, but with the $40 strike premium only $0.40 less than $41 strike I decided I’d rather have the slightly lower risk for what is still a decent premium. Now it’s laughable – since I changed my order and it hit JPM kept falling and my first order would’ve hit. The order I did place could have worked 10 cents higher.
I’m trying to walk that line of not being greedy with my trades and also not being so wimpy that I don’t end up trading when something isn’t a sure thing which they never are. I feel comfortable adding a little more financial sector exposure since my NDAQ covered calls are now in the money and my AFL naked puts are currently out of the money. All three could turn against me any day, but my AFL puts expire in two and a half weeks and most of you know I don’t mind staying long NDAQ at this level. As far as I can remember this is the first trade I’ve ever made on JPM. We’ll see if it joins the collection of regulars for me throughout the rest of the year.