I have to admit, I was psyched when I saw the futures were down this morning pre-market. With all of my options expiring worthless I was sitting on half of my account’s cash unspoken for and ready to buy in at lower prices. I hoped we’d get a pull back and that my Dow Jones chart from the weekend was wrong. Instead the Dow went low enough to find support along the same trend line I drew that has worked for weeks and I missed a good entry point.
Instead of spending the day complaining about it I checked the stocks where I had options expire on Friday and decided to revisit two of them today. I started with EEM. As I’ve mentioned in the past, I’m using EEM for some international diversification and try to keep an open position in it unless I see it trading near the upper end of its trading channel. This morning it actually dipped closer to the lower end of its trading channel and I took the opportunity (although I missed the bottom) to sell new naked puts. While EEM was trading at $41.28 I sold two EEM May 41 naked puts for $1.65 each and received $329.07 after commissions. With a strike of $41 it’s in that no man’s land that makes me always debate if I should sell two or three contracts. Two is a smaller position than I’d usually like and three is a little bigger than I typically like. I like to aim for each position to roughly equal 10% of my account. Since this is an ETF I could reason going bigger, but since I got almost $330 for the trade I decided to start with two contract and then maybe add another one on another dip if we get it.
Once EEM was a done deal I moved down the list from last week’s expiration and started working on KFT. KFT was my steady stock last month and I expect more of the same behavior coming from it over the next couple of months with a tilt higher. While KFT was trading at $29.67 I sold three KFT May $30 naked puts at $1.20 each and received $358.61 after commissions. I rarely sell in the money (ITM) naked puts, but with KFT’s steady performance recently and its dividend yield of 3.89% I decided I wouldn’t be upset if KFT was assigned and I turned it into a long term position where I collected the dividends quarterly along with the option premiums each month or two. At the same time, if KFT can climb above $30 in nine weeks I’ll be quite content to be left with the May premiums and no actually shares.
I was planning to open a new position on SSO today too, but after I missed the lows of the day I decided to wait to see if SSO could get above the intraday high ($42.18) it set last week. I don’t have an order in to trigger when that happens, but do have an alert set up to notify me so I can reconsider the trade. There’s always tomorrow.